THE
sound of the media and politicians calling for the reduction of
excessive executive remuneration at the end of last year was deafening.

The
government moved swiftly to announce a Productivity Commission inquiry,
which will begin hearings in Sydney today. In the meantime, the
political and media caravan has moved on. Submissions to the inquiry
closed at the end of last month and have so far failed to attract
widespread media coverage, and little political comment.

Last year, Malcolm Turnbull suggested making the advisory vote on
remuneration binding, but did not release any policy detail. The
current resolution seeks approval of the remuneration report for the
past financial year. Simply changing this to a binding resolution would
not be workable, as it is retrospective in nature. A binding vote would
also be a very blunt instrument -- different shareholders may be
motivated by different concerns when voting against.

A binding vote on executive remuneration has not received much
support from industry submissions to the inquiry and, in particular,
groups representing shareholders and their advisers have generally not
been supportive of a binding vote.

These include proxy advisers RiskMetrics and CGI Glass Lewis, the
Australian Council of Superannuation Investors, corporate governance
advisers Regnan and the Australian Shareholders' Association. This
diverse group of stakeholders did identify a number of common issues
and recommendations.

Boards should be responsible for setting remuneration, with some
specific areas, including termination pay, subject to shareholder
approval.

Another area of broad agreement is that the advisory vote on
remuneration has been effective in bringing a greater level of
engagement by boards investors on this issue. But many of the industry
groups reported that disclosure provided in remuneration reports could
be improved by better enforcement of section 300 of the Corporations
Act.

There is also support for shareholder approval of schemes granting equity to both directors and senior executives.

Currently, the listing rules only require approval where new equity is issued to directors.

While executive remuneration has faded from the public focus, it remains a very significant issue.

Excessive executive pay should concern all shareholders regardless
of size, not simply because of the amounts paid, which are often
immaterial in terms of company expense, but also because of the links
between poor remuneration structures, poor executive behaviours and
unsustainable financial performance. Unfortunately, there is unlikely
to be a regulatory silver bullet to solve this problem.

Better disclosure, shareholder approval of some specific elements of
remuneration and improved board accountability might lack the headline
appeal of a binding vote, but are more likely to cause long-standing
change to the culture of executive remuneration.

Stuart Wilson is chief executive of the Australian Shareholders' Association