The government has called on the Productivity Commission to investigate, with Professor Allan Fels at the helm.
There is significant community concern about excessive pay practices, particularly at a time when many Australian families are being hit by the global recession, according to the government.
"The Rudd government is determined to ensure regulation of executive pay keeps pace with community expectations, particularly as job losses increase as a result of the global recession," the government said in a statement.
"This will be a broad-ranging examination that will consider the existing regulatory arrangements that apply to director and executive remuneration for companies that are disclosing entities under the Corporations Act 2001, including shareholder voting, disclosure and reporting practices.
"The inquiry will also examine international trends and responses to the problems of excessive risk taking and corporate greed."
The government also announced reforms to the regulation of termination payments or 'golden handshakes'.
Among other areas, the review is expected to consider trends in director and executive remuneration in Australia and internationally, including, among other things, the growth in levels of remuneration.
It should also consider the types of remuneration being paid, including salary, short-term, long-term and equity-based payments and termination benefits, and the relationship between remuneration packages and corporate performance.
The review will complement the work already being undertaken by the Australian Prudential Regulation Authority in relation to executive pay in financial institutions.
The Productivity Commission is required to provide a final report within nine months.
The topic of executive remuneration is by no means new, however, such an examination into the executive pay levels will no doubt spark much chatter among industry players.
While I understand many executives within this industry are faced with extremely difficult situations, there should surely be a consistent pay structure across the country.
Surely in these difficult times it is more important to keep a company afloat and workers employed rather than an executive or director's pockets full?
I do wonder, however, whether such a review of remuneration would occur in a bull market.
Do you think a review of executive and director remuneration is needed?
