Australian plans to clamp down on excessive "golden handshakes" or termination payments paid to company executives.

Treasurer Wayne Swan and the minister for superannuation and corporate law senator Nick Sherry today announced reforms that include mandatory shareholder approval for golden handshakes to departing executives if it exceeds their one year's base salary.

Under the current laws, termination payments can reach up to seven times a director's total annual remuneration package before shareholder approval is required.

The government will bring reforms to through the "Corporations Act" to empower shareholders to reject such payments more easily if they are not in the interests of the company, the shareholders or the community.

At present, a director with seven years' service and an annual average remuneration package  of $2 million a year over the last three years would be entitled to a termination payment of up to $14 million without seeking shareholder approval.

The government will also introduce legislation to broaden the scope of executives whose termination or bonus payments can be subject to shareholder approval including that of executives named in the company's remuneration report. At present only directors' termination payments must be approved.

In addition, the government will also broaden the definition of "termination benefit" to cover all types of payment and rewards given at termination.

However, the new reform will not apply retrospectively, and will not prevent existing termination payments.

''Under the laws in the last decade which we've inherited from the previous government, we have seen the retirement gold watch being replaced by a truck load of gold bullion" said Sen. Sherry.

''The executive handshakes were becoming more common and more obscene," Swan said, adding that there was significant community apprehension about excessive termination pay practices, especially at a time when many Australian families were being badly hit by the global recession.

"The outrageous attitudes that have been justified in the past few years simply can't be justified in the present scenario" he said and warned executives to match company performance with their remuneration.

Swan also announced a ''Productivity Commission'' inquiry to examine executive and director salaries and prepare a report within nine months.

Commentators are, however sceptical. they point out that the Productivity Commission will not reveal anything new, which is already known as it is very difficult to justify salaries or payouts which are excessive.

This has come in the wake of a number of exorbitant payouts being made to departing executives, often hundred times over their basic pay.

The Australian shareholders association welcomed the clean-up, with ASA chairperson, Helen Dent declaring that the reform was a step in the right direction.

The move comes at a time when US President Barack Obama plans to cut $165 million in bonuses being doled out to employees of insurer American International Group (AIG), which was bailed out three times by the government with public funds of $180 billion (See: Failed AIG's bonuses to employees draw flak)

The British government is also facing flak over awarding more than a minimum pension payment to Fred Goodwin, the former head of the Royal Bank of Scotland, under whose leadership the bank collapsed and reported a loss of £24.1 billion in 2008, the biggest loss ever reported by a British company. RBS was later bailed out by the government (See: British government becomes majority shareholder in RBS as investors reject stock offering)

Some golden handshakes

• The former CEO of AGL Energy, Paul Anthony received $5.1 million after announcing a profit downgrade which amounted to almost 394 per cent of his basic salary
  
• Formor Santos chief executive John Ellice-Flint after 7 1/2 years in the top job received a golden handshake of more than $17.8 million and in case he exercised all share options in May 2008, his personal wealth would have been over $116 million
  
• Former Publishing and Broadcasting boss John Alexander was paid $15 million last year as termination contract which was till 2009, which was almost 468 per cent of his salary, after PBL was split into Consolidated Media and Crown, a gaming company
  
• Owen Hegarty, former Oz Minerals CEO, received a bonus of $8.35 million which was almost 642 per cent of his basic salary
  
• John McFarlane, former CEO of ANZ Ltd whose notice equal to unexpired term of contract which ended on 30/09/07 received termination amount of 71 per cent of his basic salary
  
• Tony D'Aloisio, former ASX boss was paid $7.8 million when he moved to head the corporate regulator ASIC, which was almost 671 per cent of his basic salary
  
• David Turner, former CEO of Brambles Limited was paid 135 per cent of his basic salary as retirement payment
  
• David Murray, former Chief Executive Commonwealth Bank, served for 13 years, was paid $2.4 million as retirement payment which was almost 126 per cent of his basic salary.