Explanatory MemorandumCirculated by the Authority of the Parliamentary Secretary to the Treasurer, the Hon David Bradbury MP
Chapter 7 - Persons required to be named in the remuneration report
Context of amendments
7.1 Currently, the Corporations Act requires that the remuneration details for the KMP and the five most highly remunerated officers (if different) be disclosed in the remuneration report in relation to both the parent entity and the consolidated entity.
7.2 For large companies, the KMP are likely to include the five most highly remunerated officers. In addition, there can often be overlap between the KMP of the parent company and the KMP of the consolidated entity. This unnecessarily adds complexity to the regulatory framework.
7.3 The PC inquiry concluded that the requirement to disclose the five most highly remunerated officers should be removed, and confined only to KMP. In addition, the Government announced that it would also remove the requirement to include separate disclosures on the officers of a parent company, in order to further simplify the remuneration report.
Summary of new law
7.4 Under the new law, remuneration disclosures will only be required for the KMP of the consolidated entity.
7.5 This will simplify the disclosures in the remuneration report, to enable shareholders to better understand the company's remuneration arrangements. This measure will also reduce the regulatory burden on companies, while maintaining an appropriate level of accountability.
Comparison of key features of new law and current law
|New law||Current law|
|Remuneration disclosures will be confined to the KMP of the consolidated entity.||Remuneration disclosures apply to the KMP of the consolidated and parent entities (and the five most highly remunerated officers, if different).|
7.6 The Bill amends paragraph 300A(1)(a) by requiring disclosures in relation to the consolidated entity only (or if consolidated financial statements are not required, the company). [Schedule 1, Item 14, paragraph 300A(1)(a)]
7.7 The Bill also amends paragraph 300A(1)(c) by removing the requirement for the details of the five most highly remunerated officers to be disclosed. [Schedule 1, Items 15 and 16, paragraph 300A(1)(c)]
Application and transitional provisions
7.8 The proposed measure applies in relation to remuneration reports for financial years starting on or after 1 July 2011.