Executive pay power under threat

Company boards will face re-election if a quarter of shareholder votes are against their pay policies, under proposals by the Productivity Commission to curb excessive salaries.

In its draft report on executive pay the commission proposed a "two strikes and out" rule, according to a report in The Australian Financial Review.

If taken up shareholders would have the ability to spill the board if protest votes are ignored, and investors the power to hold directors to account.

"It adds up to a powerful package of reforms that would strengthen corporate governance, make boards function more effectively on shareholders behalf, and give shareholders a more in formed and influential say on pay,"  said inquiry chief Gary Banks.

The report also proposes that board remuneration committees be independent, executives be banned from voting on their own pay packets, and the annual value of executive shareholdings and take-home pay be disclosed.

It stopped short of introducing a salary cap or giving investors a binding vote on remuneration.

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