Is the $4.9m Termination payment unlawful?
Posted: Sat Jun 24, 2017 9:28 am
A forum for members of CPA Australia run by members not CPA Australia
As part of the review that will look into all these matters, the termination payment should be investigated to ensure it complied with all relevant legislation.(2) Subsection 200B(1) does not apply to a benefit given in connection with a person's retirement from an office or position in relation to a company if:
(a) the benefit is:
(i) a genuine payment by way of damages for breach of contract;
http://www.afr.com/news/policy/industri ... 625-gwy2vk
CPA Australia's $4.9 million payout to Alex Malley 'extremely unorthodox'
June 25 2017 - 5:53PM
CPA Australia's $4.9 million termination payout for its former chief executive Alex Malley has stunned experts in the field, who have labelled it as "extremely unusual" and more than three times the normal package.
Employment barrister Stuart Wood said the payout, which was 3.6 times Mr Malley's $1.37 million base salary, was unheard of for departing senior managers, who usually received no more than a year's salary if terminated before their contract ends.
"I've been around for 25 years and I don't think I've ever seen a package the size of this," he said.
"For a manager, including a CEO, to come into an established business, it's most unorthodox to have a fixed-term contract without a notice period. And if you do, it is extremely unorthodox to have a notice period beyond a year because you might end up paying for nothing."
CPA chairman Jim Dickson said in a statement that Mr Malley's $4.9 million payout was made "in accordance with our obligations" and revealed "in the interests of full disclosure".
However, the organisation refused to reveal the basis for the payout, with a spokesperson saying "the terms of the separation, apart from the amount, remain confidential".
Entitlements 'wouldn't amount to much'
Mr Wood said it was possible that the amount included Mr Malley's accrued entitlements over his almost eight years as CEO, such as annual leave, long service leave and certain bonuses.
But he said "annual leave should be taken and paid out each year, long service leave wouldn't amount to much and it's hard to see why a bonus would be paid in these circumstances".
"The normal package for a CEO who has joined an established business and is not being terminated for misconduct is six to twelve months."
Last year, Mr Malley earned $1.79 million last year including $1.37 million in fixed pay, a $345,639 bonus, $35,000 in superannuation and $38,561 in other benefits.
For ASX-listed companies, termination payouts for senior executives are restricted to their average base salary over one year and require shareholder approval beyond that amount.
However, the Corporations Act provisions, introduced in 2009, do not cover officers at unlisted public companies, charities, or proprietary limited companies as is the case with CPA Australia.
Michael Robinson, director at remuneration consultancy Guerdon Associates, said it was "very rare" for shareholders to approve any termination package beyond 12 months' base salary but would not comment on the standard payout for private companies "as we just don't have the data".
Freehills emeritus partner Bob Baxt, specialising in corporate law, said the CPA board of directors was "obliged to act in the best interest of company, it can't act out of spite." He said it would be "very difficult" for members to establish a case against the board on this basis.
CPA's $4.9 million payout comes as the Financial Review revealed the organisation's financial advice subsidiary suffered a $5.7 million loss last year after paying out $3.8 million in staff expenses.
The CPA board has decided that Mr Malley's acting replacement, chief operating officer Adam Awty, will be paid as per his current role as COO. Mr Awty earned $949,395 in total remuneration last year.