Arch Bevis (Brisbane, Australian Labor Party) Share this | Hansard source

I am very pleased to rise in support of the Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009. I think it is a measure long overdue. The people of Australia have for too long observed some at the top end of town who are only too keen to walk away from their corporate responsibilities with extravagant and vulgar parting handshakes at a cost to shareholders and at a cost to the consumers of Australia.

This bill goes a long way to putting some responsibility back into the corporate largess that is provided to some of our highest paid and most senior executives. Significantly, the key measures of the bill lower the threshold at which shareholder approval is required for a termination payment from seven times the annual remuneration package to one times the annual remuneration package.

When we talk about the packages that those in corporate world receive, we need to put some measurement on that, because I do not think most Australians would appreciate just how well paid some of the Australian business community are. The Business Review Weekly in April this year produced a list of some of the wealthiest Australians. That list also included their estimated annual remuneration. At the top of that list—not surprisingly—is Rupert Murdoch, who receives from News Corporation a remuneration of $28 million. But let me just go down the list and refer to a number of others: Frank Lowy from Westfield, with an annual total remuneration of $15 million; Westpac Chief Executive Gail Kelly, receiving $8½ million; Brian McNamee, Chief Executive of CSL, receiving $5.7 million; Bank of Queensland CEO David Liddy, receiving $2.7 million; and Origin Energy Managing Director Grant King, receiving $4.8 million. These are very large sums of money received as annual remuneration. It is interesting to compare them to the remuneration of the head of the government of the nation. The Prime Minister of this land receives a salary of about $330,000. There are plenty of CEOs in receipt of 10 times that and much more.

It is important that we put in place a mechanism that encourages executive remuneration packages to have realistic base salaries and realistic and proper termination payments. Some of the remuneration packages for our most wealthy raise as many questions as they answer and make you wonder whether or not the base salary is indeed a genuine indicator of what they receive. For example, on the BRW list of Australia’s wealthy, coming in at No. 8, not surprisingly, is Kerry Stokes. What is surprising is that Kerry Stokes, who—according to the BRWhad a personal value in 2008 of $990 million to his name, earned only $119,000 a year. One suspects there are some fairly substantial bonuses, entitlements and share allocations that Kerry Stokes receives.

So when we talk about establishing a fair and proper benchmark for payouts, a key to that is having a fair and proper base salary against which it can be measured. But Kerry Stokes is not the only person for whom that question is raised. James Packer, who was listed as our fourth richest Australian, with a value in shares of about $1½ billion and a total value of assets in 2008 of $3.6 billion, had a total remuneration of zero—and, obviously, James Packer is not short of a quid for tonight’s dinner. We need some regulation in this country to encourage some proper accountability of our CEOs and the remuneration packages they receive. This bill will help do just that.

The bill also expands the number of company officers for which approval is required to include the key management personnel of the entity where the company is a disclosing entity. This is at least going to provide shareholders with a greater degree of authority, and at the end of the day it is the shareholders’ money—it is taken from the customers of the business being operated but it is the shareholders’ money—that we are talking about here that is being distributed. The bill retains the existing requirements for the giving of the benefit to be approved by a resolution passed at a general meeting and for the details of the benefit to be set out in or to accompany the notice of the general meeting. It restricts the ability for a retiree or an associate of the retiree to participate in a shareholder vote that includes their own termination payment unless they are acting as a proxy on behalf of another person. And for those in the business community who have complained about this and thought it harsh, it does in fact operate prospectively. This is not retrospective legislation. It does not impact upon existing arrangements.

For too long we have seen payouts to corporate executives in cases where companies have done very badly and where the corporate executives have been shunted off not because they have done an outstanding job but frankly because they have done an appalling job. And we have actually seen golden handshakes in the millions handed out to individuals only to find that the share price rises after the golden handshake has been given and the deadwood has left. In most places of employment where you had not been doing a good job you certainly would not be given that sort of golden parachute—a handshake in the millions. If you happen to be amongst the lucky few in our land, however, that is possible for you. But whether you have done a good job or a bad job it is very hard to justify to shareholders, and I have to say a lot harder to justify to many of the workers in these companies and to the consumers who buy their products, payouts of the magnitude that we have witnessed.

I will quickly mention some of the cases that I think the Australian public would regard as excessive: the CEO of Santos Ltd, John Ellice-Flint, who received a handshake of $16.8 million on the way out the door; John Alexander from Consolidated Media Holdings, who picked up $15 million; Oz Minerals Ltd’s Owen Hegarty, who received $8.3 million; the ASX Ltd’s Tony D’Aloisio, who picked up $7.7 million; Challenger Financial Services Group’s Mike Tilley, who picked up $6 million; and Fairfax former CEO Fred Hilmer, who picked up $4½ million. And so goes  the list of people who have, in some cases, been paid even after shareholders have expressed a view that they should not be paid. These are very large sums of money that are being paid to individuals and not, in all cases, because the corporations have done well. I want to refer to one of those cases from a few years ago. I quote from an article in the Age referring to some of the failed business executives in the National Australia Bank:

Three sacked National Australia Bank executives who last year took the blame for more than $3.6 billion in losses—

let me repeat that: they took responsibility for $3.6 billion in losses—

from the United States-based HomeSide subsidiary have walked away with … A$8.3 million in termination payments from Australia’s biggest bank.

And at the time the NAB chairman, Charles Allen, described the payments as ‘a necessary step.’ I have got news for the NAB: most Australians would not regard it as a necessary step. They would regard it as obscene. To have people who have been found to have created a $3.6 billion loss being told that they are no longer needed but that there is $8 million on their way out of the door is simply indefensible.

One of the things that I find most difficult to reconcile is the attitude of these same executives, and the boards that approve these payments, to such unwarranted largesse at the top end of the town whilst at the same time they mete out treatment to most of their workforce that can only be described as unfair and harsh. We saw it so often over the course of the last four or five years of the Howard government; some of these large corporations to which I have referred were only too keen to force their workers onto individual contracts negotiated without the support or assistance of their fellow workers or trade unions. They were only too keen to drive down their employees’ conditions of service at the same time as they were putting their hands into the corporate till to pay one another millions of dollars as they left these organisations in, in some cases, a worse state of repair than they found them in when they walked in. It is a reprehensible set of double standards, but it was all too common to witness, particularly in the last four or five years of the Howard government. And I have to say it was encouraged by ministers on the other side of this chamber at the time. In fact, it became so bad and so embarrassing that in the final days of the Howard government I can even recall the then Treasurer having to speak out publicly against some of these obscene payouts to directors whose companies had gone backwards and whose share price had fallen through the floor but who were still happy to pay themselves exorbitant amounts of money in the millions.

Australians who have just gone through a difficult period of 12 months because of a global economic crisis and who have been concerned about their own jobs in ordinary Australia, as well as the investors who have seen their money in shares under pressure because of the global economic crisis, have said, I think quite rightly, that enough is enough. This government has heard that voice of the Australian people—the voice of the Australian investors and the Australian workers of those companies. And it has heard the voice of the consumers of their products who at the end of the day have paid the money from which these profits and dividends are derived. The Australian Labor government has heard that call and this bill is dealing with the problem.

The payout that people get at the moment can be seven times the annual salary without reference to a shareholders’ meeting. As I have commented, this bill will reduce that to one times. I want to give some examples of payouts compared to base salaries that we have witnessed in recent years. These are taken from a report by RiskMetrics Group, whom a number of members will be familiar with and who are often quoted in these sorts of debates. AGL Energy Ltd’s Paul Anthony had a base salary of $1.3 million, which is not a bad salary to take home in any event. The termination benefit paid to Mr Anthony from AGL was $5.1 million—a 394 per cent return on his annual income. The Commonwealth Bank’s David Murray had a base salary of $1.9 million, again, a tidy take-home pay, I would have thought. When he left, he managed to get $2.4 million—a 126 per cent return on his base annual salary.

I want to make further mention of David Murray and the Commonwealth Bank. Under his leadership, the Commonwealth Bank’s attitude towards unions in the workplace and conditions of employment reached a low for the Commonwealth Bank, an organisation which for so long has been highly regarded for its ethics both in the marketplace and as an employer. Under David Murray, they had no trouble at all putting the thumbscrews on the conditions and employment remuneration of so many of their workers, but it did not stop David Murray picking up $2.4 million when he exited the Commonwealth Bank.

I have already made mention of Mike Tilley from Challenger Financial. His remuneration package in 2007 was $1.5 million. He received a termination payout of $6 million—a 400 per cent return on his annual salary. Under our law, a payment of that kind when this bill is passed will need to be referred to the shareholders, and so it should. The shareholders are entitled to make judgments on these matters. I also mentioned earlier John Alexander from Consolidated Media Holdings and his remuneration. In the year in question, he had a base salary of $3.2 million. He received a determination payout of $15 million—a 468 per cent return on his annual salary. Fairfax’s Fed Hilmer received a payout that was 300 per cent of his annual salary. He walked away with $4.5 million. Orica Limited’s CEO Malcom received a payout of $4.78 million—315 per cent of his base annual salary. The two final ones that I will refer to are, firstly, Owen Hegarty, who had a base salary of $1.3 million. He got a golden handshake of $8.3 million—642 per cent of his annual salary; and, lastly, Santos Ltd and John Ellice-Flint, whose annual salary was $2.69 million, a substantial salary package. The golden handshake was $16.8 million—625 per cent of his base annual salary.

The Australian public have had enough of this largess. Many ordinary Australian investors, workers and consumers have had to do it tough in the face of the global economic crisis. Many have had to tighten their belts and have had to deal with all of the pressures that this government has also been tackling. Against that background, to see the sorts of obscene payments that have been made without reference to shareholders is simply unacceptable and unfair, and it cannot continue. This bill is a good bill. The government has the support of many of the shareholder associations. I have no doubt that the government has the support of the overwhelming majority of Australians in this respect.

It is disappointing to see members of the opposition stand and try and put up the feeble argument that somehow the government has overstretched on this point. At least the opposition have read the breeze well enough to know that the Australian public will not tolerate a continuation of their regime. At least they understand that the laws that they defended for so long in government are repugnant to the Australian people and they have not sought to maintain those laws, although every now and then you do get that glimmer of Work Choices and their hope that maybe they can return to those sorts of approaches when dealing with Australian workers. I suggest that those opposite do two things: gauge that public breeze a bit better than they have to date and, more than that, actually look at the decency of this proposal.

This proposal will ensure that shareholders’ rights are better protected. It will ensure that some of the closed shop, top-end-of-town largesse, which is indefensible, is at least brought into the daylight. It does not in any way alter the base salary that can be paid; nor, indeed, is it going to stop necessarily any particular given payout on termination. What it does is provide transparency and accountability when folk at the top end of town want to walk out from their senior executive position taking millions with them. They are not decisions that can be made by the mates down at the club on a weekend after the golf game or down in the cigar filled chambers of the Melbourne Club, or someone else; they are decisions that need to be made in the light of day before shareholders meetings. We are going to provide the opportunity for shareholders to do just that.

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