Corporate law Essay Example | Topics and Well Written Essays - 2000 words

Corporate law - Essay Example The aspects that Corporation Law takes care of in relation to the activities of the companies are its formation and operations including fundraising and activities of the officer’s involved1. The Corporations Act already defines remuneration in Section 9 noting it to be â€Å"any benefit that is given to an officer or employee of a corporation is remuneration if and only if the benefit, were it received by a director of the corporation, would be remuneration of the director for the purposes of an accounting standard that deals with disclosure in companies’ financial reports of information about directors’ remuneration†1. This discussion intends to recognize the laws relating to director’s remuneration particularly in Australia. Moreover, the effectiveness of these laws safeguarding shareholders’ interests will also be determined in the discussion. Legal Issues Prevalent to Laws of Directors’ Remuneration There had been a public enquiry that was conducted by the Productivity Commission of Australia for the purpose of regulating the framework of the directors’ remuneration for the companies falling under the purview of Corporations Act. The commission was specifically requested to consider a few points namely; The Australian trend followed with respect to the remuneration of directors along with executives The strength of the regulatory framework in practice over the transparency, responsibility as well as oversight of the remuneration practices of the executives and directors The role of various bodies like the retail and institutional shareholders in various aspects of the remuneration practices like setting, development, reporting and consideration The possibility of mechanisms that would be helpful to enhance the alignment of the boards’ and executives’ interests with the broader community The strength of effects of the responses received internationally about the various issues of remunera tion that tend to arise out of the financial crisis globally2. There were certain changes brought about in the Corporations Act with regards to the remuneration of executives and directors especially in Australia. These changes were passed through the Corporation Amendment Bill 2011. The changes include the following points: The ‘No Vacancy’ Rule: This change was set with intent to be applicable for public companies following a board limit less than the higher limit specified in their organizational constitution4. Proxy Voting: This is set for all the companies. According to this, the proxy holders shall have to direct every alternative as directed for all the resolutions4. The ‘Two Strike Rule’: This sets for the listed companies which signifies that any vote for the directors in order to compete for re–election shall be needed in case a board proceeds with proposal for remuneration even after obtaining 25 percent or more vote at two successive gene ral meetings conducted annually4. Remuneration Consultants: This is for the companies that tend to disclose every detail in the report in connection with the remuneration provided by the company to the directors4. Voting by Key Management Personnel (KMP): This affirms that KMP as well as their close associates would be prohibited from partaking in the non-binding votes particularly in the case of listed