Graham Perrett (Moreton, Australian Labor Party) Share this | Hansard source

Thank you, Mr Deputy Speaker. It is nice to see you after the break nice and comfortable in your seat. I rise to give my strong support for the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011, or, as I call it, the 'handbrakes for handshakes' bill. I say from the outset how proud I am to be speaking on a bill that addresses an issue that has long been a bone of contention for many Australians but, unfortunately, has been all too readily relegated to the political too hard basket.

Most Australians would agree that executives who put in the hard yards, who produce good results for their shareholders, their company and the community, and who treat their employees well deserve an appropriate remuneration. Certainly, in an increasingly global jobs market, Australian companies need the flexibility to compete for the best CEOs and executives. Our world-class companies need world-class leaders. Hopefully, they will be led by Australians, but sometimes the best person for the job might be from another country. Nevertheless, many Australians are fed up with the largesse of executive salaries and the gross excess of corporate greed.

For example, in 2010 the Commonwealth Bank's CEO, Ralph Norris, pulled in more than $16 million in total remuneration, including salary, incentive payments and bonuses, superannuation, shares and other benefits, or $43,835.62 per day. That is about $8,000 per hour before tax, rounded up. Woodside Petroleum's Don Voelte took home $8.3 million—up a ridiculous 210 per cent from 2009. I choose these two companies first and deliberately, but also we could look at Rio Tinto's Tom Albanese, who earned $9 million—a staggering 328 per cent rise on the previous year. I worked in industrial law for awhile, and you do not often find increases such as a 328 per cent rise slipping through Fair Work Australia. With average yearly earnings for ordinary Australians at around $60,000, even the most diehard free marketers opposite would have to agree that these numbers and increases are nudging towards greedy. People of faith, whatever their god or creed, might even suggest that for every individual there is actually a salary ceiling and that once one goes beyond this amount one can only be defined as avaricious.

Thankfully, my good friend the Parliamentary Secretary to the Treasurer, David Bradbury, has demonstrated the courage and the conviction to do something about excessive CEO pay packets. In the last parliament, the Labor government passed legislation to address excessive payouts for executives and company directors by giving shareholders greater veto power over the so-called golden handshakes. This bill implements the recommendations of the Productivity Commission to beef up the regulation of executive pay. It is about: (1) improving accountability, (2) giving shareholders more information and (3) eliminating conflicts of interest in the process. It amends the Corporations Act 2001 to strengthen the non-binding vote on remuneration. It introduces a two-strikes test—not a three-strikes test but a two-strikes test—that requires the board to stand for re-election when they do not adequately respond to shareholder concerns over two consecutive years. When a company's remuneration report receives a 25 per cent or more 'no' vote, they receive a strike. Two strikes in two years will trigger a spill resolution whereby the board will be required to stand for re-election within 90 days. That is: two strikes, not three, which would then mean that they are out of here.

Directors and executives will also be excluded from voting in the non-binding shareholder vote on their own remuneration and on the spill resolution. This provision strikes the right balance and sends a strong signal to boards that want to push the boundaries of executive pay. Those boards that approve excessive packages for directors and executives will run the gauntlet when it comes to the shareholder vote. No longer will they be able to use shareholders as a rubber stamp for outrageous pay packets.

This bill will also put a stop to directors and executives hedging their incentive remuneration. This will ensure that their remuneration is linked only to performance. This initiative ensures that management is rewarded for looking after the interests of shareholders and vice versa, not themselves exclusively. It will also simplify the remuneration report by limiting disclosures to the key management personnel of the consolidated entity only.

Recent surveys that have received a bit of media attention show that more and more Australians are investing in shares; therefore we need to make it easier for all shareholders—both the experienced investor and the novice—to understand a company's remuneration arrangements so that they can then make an informed vote.

The legislation before the House will also reduce the regulatory burden on companies, which is another example of the Labor government slashing red tape. The bill also seeks to eliminate the conflict of interest that can arise with remuneration consultants. It is sometimes the case that these consultants are asked to provide advice on the remuneration of officers who can influence whether their professional services are used again in the future. It could be seen to be in the consultant's interests to provide advice the executive directors want to hear concerning their remuneration, and obviously this does not pass the common sense transparency test. So, to ensure greater independence, this bill will require these consultants to first report their advice to non-executive directors or the remuneration committee rather than the actual company executives.

This bill will help address the growing community concern about the executive pay of our companies. Most importantly, it also sends a strong signal to corporate Australia that enough is enough. To be fair, all companies have had their chance to rein in corporate greed but some have failed to do so. The Gillard government have had no other option than to act and I am very proud that we have. I look forward to the next speaker supporting this legislation along with the rest of the opposition. I commend the bill to the House.

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