Shayne Neumann (Blair, Australian Labor Party) Share this | Hansard source

I support the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011. When I heard the member for Mitchell speaking about communism and socialism I thought I was back in the 1940s and 1950s. He never gets past history lessons—it is extraordinary. The member for Mitchell and so many of those opposite truly believe in Reaganomics, the trickle down, giving bits and pieces, cents and pennies to the serfs, while they suck up to the captains of industry. It really is quite extraordinary.

We are looking at transparency and accountability in corporate Australia. Those opposite parade and pose about being supporters of the market and free enterprise. Yet it took a Labor government to bring in trade practices legislation in 1974 and consumer and competition reform. Those opposite did not do it. Did those opposite want to open up the banking system? No, they did not. It took a Labor government to do that—to lower tariffs, to internationalise the economy, to float the dollar, to bring in superannuation, all the great reforms with respect to economic development. But the idea of those opposite when they were in power was simply to tax the Australian public and they never found a rort they did not want to support with respect to middle-class welfare. They always side with big tobacco, big distillers and big business.

We hear speeches from those opposite saying this sort of thing all the time, accusing us, through this legislation, of communism or socialism. For heaven's sake! We are trying to empower shareholders. We are trying to strengthen the regulatory framework to empower shareholders when their outrageous and egregious rorting of what the average person would think is overly generous executive remuneration takes place. That is what we are trying to do. I have heard the member for Mitchell speak. You would not think he was speaking in support of the legislation. You would not think those opposite actually support the legislation but in fact they do because they know very well that when you go to AGMs for public companies and to corporate boardrooms executive remuneration is always a topic of discussion.

We know that the Australian public does not like egregious executive remuneration packages and we know that particularly in view of the global financial crisis. We know what happened in America, across Europe and in this country at that particular time. Did we see a diminution in the payouts given to executives? Many of those companies failed. I am not going to start naming those companies here. It was on the public record. Australians, Americans, Europeans and people across the globe saw payouts from government, we saw bank guarantees and massive amounts of taxpayers' dollars propping up the corporate sector—banking, finance and business. Yet did we see the reciprocity of stringency? Did we see thriftiness? Did we see cutbacks generally from the corporate barons? No, we did not. We saw those people take the public money but they kept the private money for themselves in their profits.

Middle- and working-class Australia supported the corporate sector during the global financial crisis. Taxpayers did it. That is why we went into deficit—to support jobs and to support the business sector. Still there was no mutuality from the corporate sector. We did not see the same degree of frugality that was necessary.

Here we are making sure that mums and dads who are shareholders, small business operators, middle Australia, battling Australia, people who have been doing it tough in the past few months, in cyclones, floods and fires across this country, who are shareholders through their superannuation funds or privately in their family financial arrangements, have a better say with respect to corporate democracy and greater transparency and accountability, but those opposite cannot even see that. They make speeches in this place like the member for Mitchell, putting up straw men and hailing to the chief of Reaganomics.

The trickle-down effect is what those opposite believe in. We believe in free markets and we believe in free enterprise. We think that giving small business operators and mums and dads who are shareholders a greater say in corporate democracy will be good for the Australian economy, good for financial security and good for regulatory and corporate practice. That is why we are doing what we are doing. And, I say to the member for Mitchell, we are following the advice of the Productivity Commission.

As far as I am aware, the Productivity Commission is not affiliated to the Australian Labor Party. It is full of people who actually believe in free enterprise, who recommend in the main that we adopt free enterprise solutions with respect to economic prosperity and the economic development of the country.

In April 2010, the government announced reforms to strengthen the remuneration framework in response to the Productivity Commission's report. Does the member for Mitchell think somehow that the Productivity Commission is a bunch of closet communists or socialists? I do not think so. You can read any of their reports with respect to so many areas—for example, they handed down a draft report on aged care earlier this year. I cannot see that somehow that is full of communist rhetoric or is something Karl Marx would have loved. We have taken up this particular recommendation from the Productivity Commission and we have carried it out.

The Productivity Commission actually said that corporate Australia in terms of its governance and remuneration framework was amongst the best in the world and ranked high internationally. That is what they recommended. They made a number of recommendations which would improve that and this bill contains those measures. The Productivity Commission made clear that directors need to be accountable to shareholders for decisions with respect to executive remuneration, to address conflicts of interest, particularly with respect to setting the processes for executive remuneration. The Productivity Commission recommends things and we have followed up those recommendations. The point of the matter is this—and those opposite should really take note of this. The catalyst for this inquiry was the concern that executive pays had got out of hand. Some people in this place have actually listed some executive pays. Let me say this about the banking sector in this country—the big four—which, through the global financial crisis, benefited from the federal Labor government's management and its provision of bank guarantees. They have some of the highest paid executives in the country, with the Commonwealth Bank of Australia now at the top of that list. Their chief executive, Ralph Norris, earns a remuneration package of $16.2 million. He might have skills, talent and ability which deserve money in the marketplace, but if you were a police officer and your wife a part-time secretary and you were living in flood affected Booval, in my electorate, you would think that $16.2 million is a pretty large salary.

That is not the only example. There are people like Westpac chief executive Gail Kelly, who earns $9.6 million. We want to make sure that, if these types of salaries are paid, shareholders have a say in decision making about it and that it is not simply driven from above, with boards of directors running the show in a way that lets them set their own remuneration with little transparency, accountability or corporate democracy.

The chief executive of the Australian Shareholders Association recently welcomed this report, saying:

The Global Financial Crisis demonstrated the consequences of excessive risks taken by many companies and their executives. We saw corporate collapse and billions of dollars of shareholder value disappear into thin air from poor management decisions. However, executives were never really held accountable.

He also said:

We have long argued that the interests of directors and executives should be aligned with those of shareholders and the community. It seems somewhat difficult for the average Australian to comprehend how his or her job and financial survival can be constantly questioned, while senior executives can preside over huge losses and destruction of value, and at the same time receive a bonus.

This bill does address those concerns. It contains a provision to subject directors to greater scrutiny and accountability through the two strikes test, which people have talked about, if they do not respond to shareholder concerns on remuneration issues. The provision will give shareholders the opportunity to remove directors if the company's remuneration report receives a 'no' vote of 25 per cent or more at two consecutive annual general meetings.

New transparency requirements will apply to remuneration consultants—and I know the member for Mitchell is not happy about that—where there are conflicts of interest. The package eliminates those conflicts by prohibiting directors and executives who hold shares from voting on remuneration issues. I cannot see how that is a problem. If there are conflicts of interest in local government, people abstain. I have been on the board of numerous church and charitable organisations and, if there are conflicts of interest, people abstain. I cannot see a problem in that regard with respect to corporate Australia.

The bill will ensure that shareholders have the ultimate say in the composition of the board. Public companies will be required to obtain the approval of shareholders in order to declare, at a company meeting, that there are no vacant board positions. And that is the way some boards of directors run the show at times—you get your little group together and, if you are all of one mind, you can all look after one another. We want to make sure that that is open and transparent as well.

I think the bill demonstrates the proactive leadership of the government in this regard and I think the average Australian will think it is appropriate to empower shareholders in this way. I think the average Australian in my electorate—in Blair, in Ipswich or in the Somerset—will think that we are responding appropriately to the Productivity Commission report and that we are doing the right thing by investors.

I think that corporate Australia needs to have a look at community trust. I think there is a fundamental issue in that regard. I think corporate Australia really needs to have a look at that. We understand that there is a shift to incentive pay structures. We understand that—that is what is happening globally and, if Australian companies want to compete in the global market, that has to occur. We can understand wanting to hire the best person for the job and the need to pay that person appropriately—to structure the pay, the salary and the remuneration to maximise their performance. When I was in business myself, as a senior partner of a law firm, and I hired staff, I did that—I made sure I got the best person possible and I paid them the best salary I could to do so. It has often been described as a war for talent. We know that.

But we cannot pay egregious salaries in a way that betrays community trust. The instances of excessive executive payments and perceived inappropriate behaviour simply reduce the confidence of investors and reduce the confidence of Australian taxpayers, and the Australian community generally, in the corporate sector. We do not want corporate Australia to be criticised by the Australian public; we want the Australian public to support the corporate sector. We want that because we want to make sure that every kid who lives in my electorate and electorates across the country can have a job, get financial security and achieve everything they want in life. We want those kids to aspire to become teachers and doctors and lawyers and company executives and engineers and politicians and physiotherapists. We want them to achieve everything they want in life, but we do not want them to lose trust in the employment arrangements of corporate Australia, whether the employer is in banking, finance, superannuation or anything else.

This legislation is good. It is not about communism; it is not about socialism; it is about supporting community trust in the corporate sector in this country. It is about transparency and accountability. It is about good practice. It is about making sure that boards are accountable to shareholders in the way the Productivity Commission recommends. This is not about a betrayal of free enterprise and the market system; this is about strengthening that. It is only Labor that truly believes in free enterprise and it is only Labor that truly believes in the market economy. Those opposite say one thing but when they get into power they do something else. The whole history of the Liberal Party is about betraying the workers and the forgotten people that Robert Menzies claimed the Liberal Party should aspire to support. Their whole purpose has been to betray and to be on the side of big business, and that is why the member for Mitchell make speeches such as the one he made tonight. (Time expired)

Debate adjourned.

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