Key Points:
Do termination payments to non-executive directors
require shareholder approval? A recent court case raises the
possibility that they may not.
Most discussion about legislative controls on termination
payments focuses on CEOs and other senior executives. A new court case restates the relevance of those
controls to non-executive directors, and identifies a potentially
significant weakness in the 2009 amendments to the controls in the
case of non-executive directors "elected" to office by
the shareholders.
The case also warns that boards should check their corporate
constitutions before making termination payments to retiring
directors.
Background
The constitution of Queensland Police Credit Union (a public
company incorporated under the Corporations Act) allowed for the
election of directors. It also said that:
