Treasurer, Wayne Swan, and Minister for Superannuation and Corporate Law, Senator Nick Sherry, have announced reforms aimed at curbing excessive "golden handshakes" – or termination payments – paid to company executives.

The Government will amend the Corporations Act to significantly lower the threshold at which termination payments must be approved by shareholders from the current level (section 200B) down to one year's average base salary.

The Government will also legislate to extend the range of executives whose termination payments can be subject to shareholder approval.

Currently only directors' termination payments must be approved, however the Government will legislate to expand the coverage of shareholder approval to cover all those executives named in the company's remuneration report.

Finally the Government will also broaden the definition of "termination benefit" to catch all types of payment and rewards given at termination.

The proposed changes to the law will not apply retrospectively. Existing contracts on termination payments will not be affected.

The Government has also referred the broader issue of executive remuneration to the Productivity Commission, which will provide a final report within nine months.

UPDATE:
The Government has clarified its intentions here:

1. The payment allowed without shareholder approval "will be reduced down to one times their base pay – not annual remuneration, base pay."

2. The new provisions will apply to all those executives named in the company remuneration reports, not just directors..

3. The definition of termination benefit will be changed to cover all payments other than statutory superannuation.

4. Breaches will be strict liability provisions resulting in criminal sanctions.