“It was literally myself and their general counsel hammering out the details over the phone,” O’Sullivan remembers. Taking on News Corp and winning earned ACSI a considerable amount of glory and respect in the global governance community. Even across the road at ISS Governance Research, lead analyst Martin Lawrence describes the News Corp backdown as “one of the biggest things to have happened in corporate governance activism to that point”. For O’Sullivan, the biggest highlight since then has been ACSI’s role in bringing about the new termination payment legislation passed in 2009. Departing executives of listed companies can no longer be paid more than 12 months’ base salary without shareholder approval. The law had previously stated a termination payment of up to ‘seven times total remuneration’ was allowable, without a need to strictly define ‘total remuneration’. “We helped convince [then-Minister for Corporate Law Chris Bowen] that the old rules were badly outdated.
They were a relic of the ‘horse-and-buggy’ days when 85 per cent of the average executive’s income was in the form of salary, and you didn’t have the very significant annual bonus component you now get along the way,” O’Sullivan says. While he’s happy for ACSI to take some credit for the new rules, he admits that to many they are known as “the Hegarty amendment” after Owen Hegarty, the Oxiana chief executive whose $10.7 million golden goodbye was roundly rejected by shareholders at the 2008 annual general meeting. The company then reduced his payment to $8.35 million, just below the seven-times limit, to avoid a shareholder vote. The ACSI chair laments that, true to form, corporate Australia has tried to circumvent the new termination payments legislation ever since. “We see that they’re now compensating through stealth, upping what the CEO gets paid while he’s there. We try to police it as best we can.” Thanks in part to ACSI’s efforts, O’Sullivan now rates as “not bad” the governance performance of Australia’s listed companies, but wryly notes that “the price of peace is constant vigilance”. ACSI’s aims to better its lagging focus on environmental and social factors.