Chris Pearce (Aston, Liberal Party, Shadow Minister for Financial Services, Superannuation and Corporate Law) Share this | Hansard source

by leave—I move amendments (1) to (3), as circulated in my name, together:

(1)    Schedule 1, item 1, page 3 (lines 6-7), omit the item, substitute:

1 Section 9

Insert:

total remuneration has the meaning specified in regulations made for the purposes of this definition.

(2)    Schedule 1, item 31, page 9 (line 13), to page 10 (line 25), omit the item, substitute:

31  Subsections 200F(3) and (4)

Repeal the subsections, substitute:

        (3)    This subsection applies if the relevant period for the person is less than 1 year. The amount worked out under this subsection is:

where:

estimated annual total remuneration is a reasonable estimate of the total remuneration that the person would have received from the company and related bodies corporate during the relevant period if the relevant period had been 1 year.

Note:   The relevant period for the person is defined in subsection (5).

        (4)    This subsection applies in every other case. The amount worked out under this subsection is:

             (a)    if the relevant period is 1 year—the total remuneration that the person received from the company and related bodies corporate during the relevant period; or

             (b)    if the relevant period is more than 1 year but less than 2 years—the average annual total remuneration that the person received from the company and related bodies corporate during the relevant period, worked out as if:

                   (i)    the relevant period were 2 years; and

                  (ii)    the person’s annual total remuneration for the second year were a reasonable estimate of what the person would have received as total remuneration after the first year of the relevant period had the relevant period been 2 years; or

             (c)    if the relevant period is 2 years—the average annual total remuneration that the person received from the company and related bodies corporate during the relevant period; or

             (d)    if the relevant period is more than 2 years but less than 3 years—the average annual total remuneration that the person received from the company and related bodies corporate during the relevant period, worked out as if:

                   (i)    the relevant period were 3 years; and

                  (ii)    the person’s annual total remuneration for the third year were a reasonable estimate of what the person would have received as total remuneration after the second year of the relevant period had the relevant period been 3 years; or

             (e)    if the relevant period is 3 years or more—the average annual total remuneration that the person received from the company and related bodies corporate during the last 3 years of the relevant period.

(3)    Schedule 1, item 37, page 11 (line 4), to page 12 (line 11), omit the item, substitute:

37  Subsections 200G(2) and (3)

Repeal the subsections, substitute:

        (2)    This subsection applies if the relevant period for the person is less than 1 year. The amount worked out under this subsection is:

where:

estimated annual total remuneration is a reasonable estimate of the total remuneration that the person would have received from the company and related bodies corporate during the relevant period if the relevant period had been 1 year.

Note:   The relevant period for the person is defined in subsection (6).

        (3)    This subsection applies in every other case. The amount worked out under this subsection is:

             (a)    if the relevant period is 1 year—the total remuneration that the person received from the company and related bodies corporate during the relevant period; or

             (b)    if the relevant period is more than 1 year but less than 2 years—the average annual total remuneration that the person received from the company and related bodies corporate during the relevant period, worked out as if:

                   (i)    the relevant period were 2 years; and

                  (ii)    the person’s annual total remuneration for the second year were a reasonable estimate of what the person would have received as total remuneration after the first year of the relevant period had the relevant period been 2 years; or

             (c)    if the relevant period is 2 years—the average annual total remuneration that the person received from the company and related bodies corporate during the relevant period; or

             (d)    if the relevant period is more than 2 years but less than 3 years—the average annual total remuneration that the person received from the company and related bodies corporate during the relevant period, worked out as if:

                   (i)    the relevant period were 3 years; and

                  (ii)    the person’s annual total remuneration for the third year were a reasonable estimate of what the person would have received as total remuneration after the second year of the relevant period had the relevant period been 3 years; or

             (e)    if the relevant period is 3 years or more—the average annual total remuneration that the person received from the company and related bodies corporate during the last 3 years of the relevant period.

The coalition has proposed these amendments because we believe they will improve this bill. I appreciate the remarks that the minister made, saying that he thinks I am a good bloke. I think he is a good bloke as well. I appreciate that. You are right when you say I am a good bloke. I must say it is true. It is one of the most accurate things you have said.

What I do not appreciate from the minister is his remarks in terms of understanding policy positions. I think it is important for the House to remember that this is the same minister who has quite an interesting policy history. I remember Fuelwatch, GroceryWatch and employee share schemes—three policies that the minister said were vital and were critical for the Australian people to have. Of course Labor walked away from all three policies after the minister realised that his particular bills and policies would not work. This is another example of where this minister is going along with the bill where he has not thought through the implementation and practical consequences. The reason we are proposing this—and I call upon the minister to apply his logic, because he is a logical person—is that, if this bill goes through without the coalition’s amendments, base salary and therefore total executive remuneration will increase.

If the minister is happy to see total executive remuneration increase, to see shareholders having to carry the burden of even higher fixed costs in the companies of which they hold shares—if that is his intent—then that is what is going to happen if he does not accept these very sensible amendments. If he wants to reduce the multiplier from seven years to one year that is fine but to put that multiplier against base salary will only increase base salary. The minister referred to the Senate Economics Legislation Committee. There was a lot of evidence at that committee inquiry, and the bulk of the evidence—by far the majority of the evidence—substantiated our position on this.

The government likes to quote organisations like the Business Council of Australia when it suits them. They like to quote the Australian Institute of Company Directors when it suits them. They like to quote the Australian Bankers Association when it suits them. But I notice the minister is not quoting them tonight. This is because, in their evidence, they all supported the coalition’s premise that, unless you make these amendments, executives are going to receive substantial increases in their base salaries. Therefore, the objective of this bill would be defeated. Moreover, the other dynamic is that this bill is in relation to termination payments—in other words, when the executive leaves. International experience reveals what is going to happen. I know the minister has had his problems with policy development—and I have given three examples—but I can tell him, I used to work in corporate life. Another thing that will happen here is that organisations will just put the bonus on the front end, on the way in. So, instead of having a golden handshake they will have a golden hello or a golden welcome cheque—a sign-on bonus—and, again, executive remuneration will go up.

If the purpose of this bill is to empower shareholders, to make sure that executives are paid in accordance with company performance, why would you take away the at-risk component? Why would you allow the guaranteed or fixed component, the base salary component—the salary that the executive gets regardless of the performance of the company—to increase? And why would you allow the opportunity for an executive to get a golden hello, which is not based on performance, even before they have started to work in the organisation?

Our amendments are logical. What we are saying is that our amendments will preserve the link between executives having their remuneration based on the actual performance of the company. That is aligned with the shareholders’ interests. At the end of the day, that is a very important point of corporate governance that must be maintained—executives’ interests being aligned with shareholders’ interests. If you are an executive in a business and you know, regardless of the performance of the company, that you are going to get a whopping base salary, what interest is there for you to make sure that the company performs? (Time expired)

See this speech in context