Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

by leave—I move opposition amendments (1) to (4), as circulated in the name of the honourable member for North Sydney, together:

(1) Schedule 1, item 9, page 9 (lines 4 and 5), omit "votes cast on a resolution that the remuneration report be adopted were", substitute "total votes that were entitled to be cast on a resolution that the remuneration report be adopted were cast".

(2) Schedule 1, item 13, page 13 (lines 6 and 7), omit "votes cast on a resolution that the remuneration report be adopted were", substitute "total votes that were entitled to be cast on a resolution that the remuneration report be adopted were cast".

(3) Schedule 1, item 13, page 13 (lines 9 and 10), omit "votes cast on a resolution that the remuneration report be adopted were", substitute "total votes that were entitled to be cast on a resolution that the remuneration report be adopted were cast".

(4) Schedule 1, item 19, page 17 (lines 29 and 30), omit "votes cast were", substitute "total votes that were entitled to be cast were cast".

On 24 March the member for North Sydney, the shadow Treasurer, outlined on behalf of the coalition, as the parliamentary secretary would be aware, that we supported this bill. He said that at the outset of his speech. But he also flagged back at that point that there was one issue on which we would be moving an amendment. He said at the time that the coalition would be moving an amendment—which was circulated some time ago; it is my understanding that it was circulated back on 24 March—to amend wording in relation to the 25 per cent trigger that the parliamentary secretary has just referred to. He said:

The intention of the amendment is to improve the representation of total shareholder views, because as the legislation stands—

as the shadow Treasurer said—

it is possible for a no vote to be triggered against a remuneration report by less than 25 per cent of all available votes …

On behalf of the coalition, the shadow Treasurer has consulted widely on this and, as a consequence, it is the view of the coalition that there would be an improvement if the amendments that have been circulated were passed. The effect of the amendments is to ensure that the 25 per cent relates to all available votes. As the parliamentary secretary outlined, his legislation as it stands has the 25 per cent threshold applying to votes cast at an annual general meeting. That could be a fraction of the total votes that are available. The coalition, as the member for North Sydney outlined, has considered this. Following consultations, we believe that it is important to make this change. We think that the measures within the bill themselves are improvements but we think that, when it comes to this test, the 25 per cent test should apply in the way that the amendments moved would provide. The amendments would strengthen it. That 25 per cent test should apply to available votes. The amendments seek to make that change and that change only. Having heard the parliamentary secretary's opposition to these amendments in his speech in the second reading debate, I will now give him the opportunity to repeat everything he said in the last five minutes of his speech. Now he has had a warm-up, so we will see how he goes the second time around.

David Bradbury (Lindsay, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

I am only getting warmed up. The member opposite in his response to the matters that I raised was almost as weak and insipid as these reforms would leave the position of shareholders, were these amendments to be adopted. Frankly, it is shameful that on the one hand the coalition want to pretend that they are supporting the empowerment of shareholders. They want to pretend that that is what they are doing. In fact, I heard the member opposite say that this would strengthen the two-strikes test.

Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

No, the bill.

David Bradbury (Lindsay, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

It would strengthen the bill. He did not provide any elaboration as to how it would do that. If we look at the history of what has occurred here, these are not some proposals that we have slapped together over a very short space of time. This is a very deliberative process that we have worked through, a very consultative process. I want to take this opportunity and a little bit of time to take the House through the process that we have been through, because it is important to understand why we are so opposed to these amendments that have been moved by the opposition.

The government announced the Productivity Commission inquiry in March 2009, so it was not yesterday. It has been going on for a long time. An issues paper was released by the Productivity Commission in April 2009, a discussion document in September 2009, and a final report to government in December 2009, which was then publicly released in January 2010. The Productivity Commission received 170 submissions, so people have had plenty of opportunity to contribute to this. There were 170 submissions received. The Productivity Commission conducted roundtables and public hearings over nine months. Government announced its response to the Productivity Commission report in April 2010. The government then released draft legislation on 20 December 2010 and consulted on that legislation through until late January 2011. More than 50 submissions on the draft legislation were received, and I personally met with many stakeholders about the issues and concerns that they held. The bill was finalised and then introduced into this House on 23 February 2011.

The amendments that have been brought forward by the opposition, as I mentioned earlier, strike at the very heart of this package of reforms. I have outlined how extensive a process this was. I note some comments made earlier in the debate by the member for Mayo in particular. He said some very nice things about the Productivity Commission. In fact, I think that they were warranted comments. He said:

What we do seek to do is empower shareholders more, particularly when the Productivity Commission, whose work I have a very high regard for, is making some sensible recommendations on how we do that.

The government agrees with that. We are not proposing to overturn some of those recommendations. Indeed, the member for Mayo went on later in his speech and said:

I do not think there is any doubt about the quality of the work that the Productivity Commission does for the Australian public; it is always there.

We agree. On this very question of whether or not the 25 per cent should be calculated by reference to votes cast or by reference to issued shares, the Productivity Commission had something to say. In their report, on page 391, the Productivity Commission said:

Normal voting protocols should apply, however, to the re-election of directors. (While some participants argued that sanctions should be triggered only by a majority vote based on issued shares, rather than votes cast, the Commission does not see a case for this departure from normal voting conventions.)

There it is from the Productivity Commission.

What the opposition are proposing here is to depart from normal protocols when it comes to voting at AGMs. One would have to ask the question: why, out of all of the votes that are considered at an annual general meeting, depart from protocol for this particular vote? I might remind the House that this is a non-binding vote. Why for this particular vote do we now see the coalition come forward and propose that we water down the calculation of that vote so that it would not be 25 per cent of votes cast but 25 per cent of issued shares? There is a good reason for that, and it is that those opposite are not committed to these reforms. They have had a range of positions in relation to these measures that we have brought forward. (Extension of time granted)

Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

Do it all again.

David Bradbury (Lindsay, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

The member opposite has invited me to do it all again. I am tempted. As tempted as I am, I will stick to new material. When I heard those opposite were going to move amendments, I was interested to see what they would be. I was absolutely stunned when I heard that what they were proposing was to move from 25 per cent of votes cast to 25 per cent of shares issued. I was stunned that they would do that, but when I heard that was what they were proposing I thought to myself: 'I have heard that before. I have read that proposal somewhere.' Not many people that I met with through the stakeholder consultation raised this particular proposal. I did not see it in many of the submissions that were made either to the Productivity Commission or on the government's exposure draft. But I knew that I had seen it somewhere.

I did a little bit of research and I found that it was actually in a submission that was made on the exposure draft from the Australian Bankers Association. I will read from page 2 of their submission in which the Australian Bankers Association said:

The 25% ‘no vote’ threshold is set too low. It ignores the 75% majority view and can be inflated by the fact that the percentage required is of the votes cast, not total eligible votes …

That was where I had heard it before. I have to say that it is not often that you would hold the Australian Bankers Association up as a beacon of honesty in this debate but, on this point, they have been much more honest than the coalition. At least the Bankers Association were upfront about it. They went on and said in their submission:

A majority vote is more appropriate. We recommend that the voting threshold be set at 50%, in line with other ordinary Board resolutions.

I understand the position of the Bankers Association, but what I do not understand is the sneakiness of those opposite who seek to conceal their distaste for the two-strike test behind this fig leaf that is their amendments. They want to move away from 25 per cent of votes cast to 25 per cent of issued votes so that every person who does not turn up at the AGM effectively votes in favour of the remuneration report. To put that in context, that would put us into a much worse position than where we are at the moment when it comes to shareholder rights. Under the current non-binding vote at least shareholders that do not turn up do not get counted as supporting the remuneration report. So the Bankers Association, understandably representing their interests, have made this point. At least they were honest about it. I say to the opposition: 'If you are serious about watering down this position, don't hide behind your 25 per cent of shares issued. Come out and tell us what you really think.'

The reason the coalition are so confused is that they have had so many positions on this issue over the last little period throughout this consultation. It all started when Malcolm Turnbull was the leader. I know that we do not like to talk about that because it is ancient history. But when Mr Turnbull, the member for Wentworth, was the Leader of the Opposition he said:

All you need to do is change the law and say the senior executives, the chief executive and say the next two or three people, they're 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.

He said that on the ABC on 27 February 2009. Mr Abbott backed him on it. The now Leader of the Opposition said at the time:

I certainly think that Malcolm Turnbull's suggestion that the shareholders ought to be able to vote down directors' fees and salary increases is a very good one. I think the Government can do that straight away. They don't need to go to the G20 for that. They don't need to form another committee, review or inquiry to go ahead with that, and they should—straight away.

He said that on Lateline, also on 27 February 2009. So we had a situation back in 2009 where the coalition were so gung-ho about this that they wanted a full binding vote. But now they will not even support some very sensible reforms supported by the Productivity Commission. (Extension of time granted)As I said, they were not happy with their original position and not only have they backflipped on it but if those opposite had listened to the debate they would have been a little bit surprised by some of the rhetoric in it.

Frankly, listening to some of the opposition speakers on this bill you would think that they were opposing the bill. They come in here and they want to send mixed messages. But they do not want to go back to their electorates and have to admit that they voted against this legislation. They do not want to do that because they know that the Australian community want us to take the action that we are proposing. If they come in here and send their mixed messages they can pretend somehow that they support these measures and dress it up behind this fig leaf of amendments. But in the end they have been exposed. They do not support this. They want a system in place that strips away any power that shareholders have. Shareholders will have less power than they currently have. We are opposed to those amendments and we will be recommending that all members do what is in the interests of shareholders and their electorates and oppose these amendments.

Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

I will just speak very briefly. We reject for the second time the opposition of the parliamentary secretary to these sensible amendments. I will not restate all of the obvious reasons why we believe—

Mr Bradbury interjecting—

Excuse me, Madam Deputy Speaker. You are in the chair. I listened—

David Bradbury (Lindsay, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

You were interjecting when I—

Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

I did not interject. It is a case of mistaken identity, I say to the parliamentary secretary.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

The member for Casey will hold up for a moment. I will indicate that I am indeed in the chair and people will not interject while someone has the call.

Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

The member for McEwen would defend me! These amendments were outlined by the shadow Treasurer on 24 March. We believe they are sensible amendments. The issue the parliamentary secretary will not address is that under the existing legislation a small number of shareholders could potentially dictate the envisaged result.

Mr Bradbury interjecting—

The parliamentary secretary, having spoken for 13 minutes, obviously still has not got to his critical point. We will give him another opportunity if he wants it. These amendments are well framed and they are the result of consultation. We have already outlined that we support the bill with all its seven schedules, but we think there is a flaw with respect to the 25 per cent trigger test. As it stands, a small number of shareholders could dictate the terms and the result. These amendments, we believe, rectify that. It will be the case, if these amendments are passed, that 25 per cent of all available votes will be required. We believe that is an appropriate threshold. I commend the amendments to the House.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak against the amendments to the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill that have been moved by the Liberal Party with all the energy and passion that the member for Casey has been able to muster today. The Parliamentary Secretary to the Treasurer has raised the central flaw in the opposition's amendments, which is that by watering down the 25 per cent threshold, by including all those who fail to vote as effectively voting in favour of the remuneration package, the opposition's amendments would make the 25 per cent no vote threshold extraordinarily difficult to achieve.

While the parliamentary secretary has talked about the overall turnout figure—turnout for the typical company is 58 per cent of shareholders—I think it might assist if I take the House through a few recent examples which the Parliamentary Library has drawn for me of ASX 100 companies where more than 25 per cent of shareholders voted against a remuneration package. According to the figures that were extracted for me, nine ASX 100 companies were in that position—that is, they would have received a first strike. But if the opposition's amendment were to get up, were it to be the case that it was not 25 per cent of voting shareholders but 25 per cent of all shareholders, only five of those companies would have met the threshold and got a strike. AGL Energy received a no vote of 29 per cent on its remuneration report, but because they only had a 40 per cent voter turnout it would not have met the 25 per cent threshold under the opposition's amendment. Aristocrat Leisure: 29 per cent of voting shareholders said no to the remuneration report, but because only 60 per cent turned out that would not have met the 25 per cent threshold under the opposition's amendment. Mirvac Group: 25 per cent of shareholders voted against the remuneration report, but only 65 per cent of shareholders turned out, so under the opposition's amendment that would not have met the test. OneSteel: a full 43 per cent of OneSteel shareholders voted against the remuneration report, but because only about half of OneSteel shareholders voted, if the opposition's amendment had come into play, it would not have met the 25 per cent test.

It is very clear where the opposition stand on this. They are on the side of overpaid directors, not on the side of shareholders. As usual, the modern Liberal Party have lined up in favour of the few, not in favour of the many. They like to come into this place and put themselves forward as a party of reform, but every time you look you see that the reforms they favour are Clayton's reforms. If you think Work Choices is good for workers, you will like the opposition's amendments. If you think Direct Action can deal with dangerous climate change, not only would you be unlike every other business leader and economist in this country but you would probably like this reform as well. If you think a budget can balance even when it has an $11 billion black hole, I reckon you would probably like the opposition's amendments today.

The modern Liberal Party are the Clayton's reformers of Australian politics. They come in here with toy amendments—things like tax receipts. While we in the Labor Party are putting forward real reforms—overhauls of mental health, the MySchool 2.0 website—the Liberal Party stand against reform. They are doing it again today. They come sliding into this chamber trashing the 25 per cent rule, wanting to remove the accountability that rule would provide to shareholders. Instead, they are raising the bar in such a way that would mean shareholders lose the opportunity to hold their directors to account. It is a reasonable package that the government is putting forward in this bill. It is a package that is aimed at giving more power to shareholders. It is a package that supports capitalism the way capitalism is meant to operate: empowering shareholders to hold directors to account. But the only people who do not want directors held to account are the modern Liberal Party. They are happy to see their mates unaccountable to shareholders. They are standing up for the few.

Question put:

That the amendments (Mr Tony Smith's) be agreed to.

The House divided. [11:40]

(The Speaker—Mr Harry Jenkins)

Question negatived.

David Bradbury (Lindsay, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

I present a supplementary explanatory memorandum to the bill. I ask leave of the House to move government amendments (1) to (4) as circulated together.

Leave granted.

I move government amendments (1) to (4):

(1)   Schedule 1, item 37, page 29 (line 26), omit “1 July 2011”, substitute “1 August 2011”.

(2)   Schedule 1, item 37, page 30 (line 3), omit “1 July 2011”, substitute “1 August 2011”.

(3)   Schedule 1, item 37, page 30 (line 5), omit “1 July 2011”, substitute “1 August 2011”.

(4)   Schedule 1, item 37, page 30 (line 10), omit “1 July 2011”, substitute “1 August 2011”.

Today I move amendments to the bill that demonstrate the government's preparedness to assist companies in managing their corporate governance responsibilities. The amendments respond to concerns raised by business. They seek to delay the application date of three of the bill's measures from 1 July 2011 to 1 August 20l1. These measures are the prohibition on key management personnel and their closely related parties from voting their shares in the non-binding vote on remuneration and exercising undirected proxies on remuneration related resolutions and the prevention of cherry picking of proxy votes.

The amendments are proposed as a small number of companies have requested transitional relief from these aspects of this bill. These companies are scheduled to hold their annual general meetings in July 20l1 and as such are due to finalise their meeting notice papers in May or June. As the bill remains subject to parliamentary consideration, these companies are seeking relief on the basis that they will not know at the time of finalising their meeting notice papers when the bill will be enacted and what its final form will be.

The amendments demonstrate the government's preparedness to assist companies in implementing sound corporate governance and the efficient provision of advice to their shareholders. As the delay in application affects only three measures, the broad policy purpose of the bill would continue to be applicable from 1 July 2011, the date on which the government has publicly stated its intention for the reforms to take effect. The full force of the bill, including the prohibitions on key management personnel voting in the potential first strike, would apply to the vast majority of companies that hold their annual general meetings during the October reporting season.

Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

These late amendments to the government's own bill—which were circulated on Tuesday, on budget day—are obviously, for the reasons the parliamentary secretary has outlined, mechanical amendments to assist with the smooth introduction of this bill. On this occasion the opposition is glad that the government has listened to concerns about the smooth introduction of this bill and these amendments delay three provisions—I think the parliamentary secretary said—for just one month.

Given that we are now debating this in May, I take it from the parliamentary secretary that the necessity for these amendments has arisen because it was his expectation that this bill would have been dealt with on 24 March. My recollection is that we got very close to finalising debate on 24 March, which was a long day, from memory, as we were waiting for things to return from the Senate. I take it that the length of the break—which I do not blame the parliamentary secretary for—in the sitting schedule from 24 March to 10 May, is the reason that it has become necessary to delay for one month. Taking his assurance that that is the case, I can understand how in those circumstances, with these measures due to come into effect very soon and with the bill to go to the Senate following our conclusion today, it has become necessary for him to move these amendments to deal with the implementation.

Question agreed to.

Bill, as amended, agreed to.