Insurance executives are among those who will have their termination benefits capped to be equivalent to their annual base salary under new company legislation announced by the Federal Government.

The Government says the reforms are designed to curb excessive termination benefits being paid to executives.

Corporate Law Minister Senator Nick Sherry says the community “has been rightly offended by the excessive golden handshakes in firms where directors and executives are rewarded for poor company performance”.

The new law will require any payment beyond the equivalent of one year of base pay to be subject to shareholder approval, handing stakeholders greater power to reject big payments.

In February, Suncorp announced that retiring CEO John Mulcahy would get “approximately $2 million” – equivalent to a year’s annual salary – while former IAG CEO Michael Hawker last year received a payment of $1.9 million, which was equivalent to six months’ pay.

Credit Suisse analyst Arjan van Veen suggests the insurance sector already has adequate corporate controls in place.

“I haven’t seen any evidence of excessive payments in the local insurance sector,” Mr van Veen told insuranceNEWS.com.au.

It’s a different story in the US, where former AIG CEO Martin Sullivan last year received a severance payment of $US15 million ($21.8 million) among a final package worth $US47 million ($68.3 million).

Mr Sullivan had an annual salary of $US1 million ($1.5 million), according to business analysts Forbes.