Termination Benefits for Executives of Australian Companies

Abstract

Over the last few years there has been increasing public concern about the size of termination payments to departing senior executives of publicly traded companies. When those termination payments are granted during or following a period of poor company performance, the controversy is exacerbated, with claims that management is being rewarded for failure. One commentator has observed that, for the public, this is very hard to swallow... It's just pure greed. This article provides a review of: the existing academic research into termination payments; public policy material relating to termination payments; existing Australian, U.K. and U.S. 'good practice' guidelines relating to termination payments; and publicly reported termination payments made to departing senior executives of publicly traded Australian companies, during the period 1999 to 2004. The article then concludes by outlining seven distinct issues that should be addressed as part of an informed debate in Australia about termination benefits.

Keywords: Corporate governance, executive compensation, termination benefits

JEL Classification: G34, J32, J33, K22, M52