What Are The Laws Of Directors Remuneration In Australia Are They Research Paper

What Are The Laws Of Directors Remuneration In Australia Are They Adequate, Effective And Efficient To Protect The Interests Of The Shareholders - Research Paper Example It is simply regarded as the salary of the directors that is paid by a particular company to the director. A director is viewed to be an administrative officer of a business entity and acts as a principal agent of a concern. The remuneration of the directors is not only provided in the form of salary but also in the form of bonuses, incentives and stock payments and other benefits. Different laws are applicable concerning director’s remuneration in diverse nations.It has been viewed that the remuneration reforms which formed by the Federal government of Australia attracted the response of various organizations as well as their respective directors and also made them to respond to make any sort of change in stakeholder engagement. However, the shareholders and the constitution frames by a company play a major part in determining the laws of director’s remuneration in Australia.1 In this discussion, the different laws concerning director’s remuneration in Australia will be taken into concern. Moreover, the laws are adequate, effective and efficient or not in order to protect the interests of the shareholders will also be portrayed in the discussion. Legal Issues Relevant To the Laws of Directors’ Remuneration in Australia The legal issues relevant to the laws of director’s remuneration in Australia can be processed under the recognition of Chartered Secretaries Australia (CSA). It has been apparently observed that the issue relating to directors remuneration received much attention in the year 2011. In this similar regard, this regulatory reform issue ranked third in the year 2012.2 Section 9 of the Corporations Act defines remuneration as any benefit that is provided to an employee or an officer belonging to a particular corporation. Moreover, the Act also described remuneration as compensation that comprises all employee benefits such as salaries, bonuses and wages among others. According to Chartered Secretaries Australia (20 09), the Australian Government newly released the Corporations Amendment Bill 2009 for public consultation. Under the guidelines of this law, it has been proposed that the termination benefits especially for the directors as well as the senior management officials will need approval from the shareholders. This practice would ultimately ensure higher remuneration scrutiny that includes greater responsibility and termination payments.1 The different legal issues that can be correlated with the laws of director’s remuneration in Australia are the ‘two-strikes’ rule, proxy voting, no vacancy rule, remuneration consultants and voting by key management personnel.3 The detailed analysis of the aforementioned issues has been described hereunder. The ‘Two-Strikes’ Rule According to the Corporations Act 2001, every listed company is required to make a remuneration report that should be submitted to a non- binding vote of shareholders at the Annual General Meet ing (AGM) of a company. The Act proposes to empower this requirement by forming ‘two strikes’ and re-election procedure. In this connection, the first strike would take place at the time when remuneration report of a company receives a ‘no’ vote of near about 25% or more. If certain situation arises, then it is the responsibility of the management officials of a company to convey the matter related to the board in order to take necessary steps or action. If a company does not convey any message relating to the matter, then the board would be liable to take necessary actions. The second strike would happen when the remuneration repo