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

That is right; the same standing order applies to the minister. What we are saying is that in the real world, Minister, what is going to happen is that shareholders’ interests will not be satisfied by this particular bill as it stands. That is what is going to happen, because in the real world a portion of executives’ pay is base salary but the vast majority of it is short-term and long-term incentives. That makes up their total remuneration package. What one wants is the vast majority of their remuneration package to be subject to performance. You do not want the base salary, the guaranteed component, not to be subject to performance—to be guaranteed pay every fortnight or every month—but that is what is going to happen with this bill. Instead of an executive getting 30 per cent base salary and 70 per cent based on performance, what will happen is that it will be the other way around. They will get 70 per cent as base pay—it will not matter how the company performs; the base pay will be ratcheted up—and the minority of the salary will be based on performance. How can that possibly be in the interests of shareholders? What shareholders want is their company to perform and the people who are running the business to be paid on the actual performance of the business. Minister, that is what happens in the real world and that is what is going to happen.

The same point is: how can it possibly be in the interests of shareholders for golden haloes to start happening instead of golden handshakes? You might think that you are going to get rid of this problem, but what is going to end up happening is that Australian executives are going to get paid more guaranteed remuneration in their hand every month as a result of this bill. Minister, what we are trying to do here is to say to you: ‘You want to reduce seven years to one? Fine; absolutely. But if you go to total annual remuneration what will happen is that you will keep the link between the performance of the company—therefore, the shareholders’ interests will be satisfied—and the executives’ pay, which will be based on the performance of the company.’ Your bill, Minister, is going to take that link away. There will be no incentive for the executives to ensure the company performs well, because what will be in it for them? They will have their guaranteed huge base packages. Base salaries will go up because executives will want certainty and companies will just pay them more. If companies do have to pay them a termination payout, the base salaries will be so huge that they will not need to go to the shareholders. They will have so much scope because the base salaries will be enormous and so they will not have to go to the shareholders. So in fact what you are doing is diminishing shareholders’ power—and I am sure that is not the intent of the bill. All we are saying is use your logic, look at this sensibly and say that this is a way in which the objectives that the government is seeking can actually be achieved.

I will end my remarks there. I will not speak on the bill again but I implore the minister to consider our recommendations in good faith.

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