Chris Bowen (Prospect, Australian Labor Party, Minister for Financial Services, Superannuation and Corporate Law) Share this | Hansard source

I would like to thank all the honourable members who have taken part in the debate on the Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009. The global financial crisis has highlighted the importance of ensuring that remuneration packages are appropriately structured. There is, quite understandably, increasing community concern about excessive pay practices, particularly at a time when many Australians are being hit by the global recession. Clearly, shareholders need to be empowered to reject excessive termination payments that are not in the company’s best interests.

The reforms in this bill will substantially improve the current framework relating to termination benefits in a number of ways. This bill will substantially reduce the threshold for shareholder approval, which will give shareholders the ability to scrutinise and reject excessive termination benefits. It will also expand the scope of individuals covered by the regulatory regime, improve the integrity of the shareholder vote, facilitate the recovery of unauthorised termination benefits and substantially increase the relevant penalty provisions.

The reforms have been the subject of extensive consultation, which the government has been responsive to. It is true to say that there were concerns raised in relation to the original regulations that were issued, but many of those issues have been worked through in a constructive fashion between the government and concerned stakeholders. The final regulations supporting the bill were issued by me last week following wide-ranging public consultation. The regulations provide a definition of ‘base salary’, clarify and expand the types of benefits that are or are not subject to shareholder approval and prescribe the circumstances in which a benefit is given in connection with a person’s retirement.

The government has responded to shareholder concerns by deciding not to change the timing of shareholder voting arrangements. We are confident that these reforms will ensure Australia’s continuing international competitiveness. Globally there are no consistent requirements covering the payment of termination benefits. Australia’s approach ensures that our regulatory regime remains at the forefront of international best practice.

I now turn to the amendment moved by the member for Aston and his comments in the second reading debate—and I am glad that he is in the chamber. The member for Aston said at the beginning of his remarks that the bill is in many ways sound. He then used his 20 minutes to argue that it was not sound. So I am not sure where he is coming from. I recognise that the opposition has many positions on some issues, but it is unusual for a shadow minister to outline many positions in one speech.

My attention has also been drawn to the comments of coalition senators in the consideration of this bill by the Senate Economics Legislation Committee—and I always read very closely the Senate committee reports on legislation that I am responsible for. The coalition senators said:

… we are aware that:

• this legislation is a kneejerk reaction to appease public opposition to ex gratia payments made to executives to remove them from office;
• the government is acting after the event insofar as companies are already reviewing their policies in this area …

They are critical of the government for going down this road. But perhaps most interestingly they say:

Coalition senators share the view of many that presented or submitted evidence to the inquiry that the bill has elements of regulatory overreach.

If that is the position of the coalition, that is fine; if that is where they stand, that is fine. But I find it very difficult to align the comments of the member for Aston and the coalition senators with the position of the Leader of the Opposition. On 27 February 2009 the Leader of the Opposition said:

We have proposed a very simple, concrete reform which would deal with this—

he is talking about executive pay—

and that is to make senior executive salaries only able to be increased or varied with the approval of shareholders.

He went on to say:

Now, at the moment the senior executives’ remuneration package goes to the shareholders and they can give an advisory opinion on it but it’s not binding. We say change the law so that the shareholders vote.

The Leader of the Opposition added:

All you need to do is change the law so the senior executives, the chief executive and say the next two or three people, their salaries must be approved by the shareholders. Yes or no, if the shareholders approve it well, it’s their company, they can pay their staff, high and low, what they wish.

So the Leader of the Opposition says: ‘Put it all to shareholders. Let’s put the whole lot to shareholders: the complete remuneration package, everything they get paid, including the termination pay.’ Then coalition senators say: ‘This is regulatory overreach. This is a knee-jerk reaction. What is the government doing?’ Who is running this party, Madam Deputy Speaker? I ask you. Is it still the policy of the opposition to put all remuneration of the directors and senior executives before shareholders? Is that still opposition policy? If so, will somebody please send an email to coalition senators? Will somebody please let them know so that they do not make ridiculous statements like this in dissenting reports on government legislation? Will somebody please tell the shadow minister so that he does not move amendments which conflict with his leader’s position? His leader’s position is that all remuneration should go before shareholders.

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