Andrew Murray (WA, Australian Democrats) Share this | Hansard source

I refer the committee to sheet 4838 revised. I will now move R(1) on its own and will later move R(2) and R(3) together. I move:

R(1)   Clause 18, page 12 (after line 26), after subclause (1), insert:

          (1A)   In giving a direction under subsection (1), the responsible Minister must include in the direction a mandatory requirement for the Board or its members when considering a material corporate governance matter in relation to a company to vote on all such matters.

          (1B)   A material corporate governance matter referred to in subsection (1A) includes but is not limited to:

                     (a)   matters relating to the constitution of a company; and

                     (b)   matters relating to the election of directors of a company; and

                     (c)   matters relating to the remuneration of directors of a company.

I motivated during my speech on the second reading the consistent—and, hopefully, it will be persistent—line we have taken with respect to investment funds, which is that they essentially act on trust for others, either investors or beneficiaries or both. Where those investments are made, therefore, in our view their holdings are often subject to the principles that surround escrow. That to us means that investment funds should invariably exercise a determination to vote their shares in the companies and entities in which they have an investment. That is a view that is very widely held, and there are those, including me I might say, who think that such institutions should vote on all issues and all resolutions.

The key difference between those who believe that institutions should vote is often over the question of mandating. Although I believe that institutions should vote on all resolutions, I recognise that not all institutions have invested in or have the capacity of professional analysis. I think that that is to their discredit because on a cost-saving basis they have often got relatively weak analytical departments and tend to run on a particular assessment rather than holistic assessment. Leaving that observation aside, I have argued through the CLERP 9 process and elsewhere that voting should be mandated with respect to a number of key and critical issues simply because those shares are held on trust essentially for others, either beneficiaries or investors.

I have limited a motivation for a mandated activity to the three matters which I think are most germane and most pertinent to those with an interest in the corporation or the entity concerned—that is, any resolution which affects the constitution of a company; secondly, any resolution which affects the election of directors, because they are the people who run the company; and, thirdly, matters relating to the remuneration of directors of the company because that overall package is amongst the most controversial of all. We are moving here to require the responsible minister to include in the direction a mandatory requirement for the board or its members when considering a material corporate governance matter in relation to a company to vote on the matters we have outlined there.

Of course I recognise that it is probably within the broadest interpretation of the bill, soon to become an act, I guess, for the minister to indeed make such a determination. But, firstly, there is no guarantee that the minister will, particularly if they have a laissez-faire approach to the market, and, secondly, even if one minister will, there is no guarantee that a future minister would abide by that view if the board came to a different view. I think you are safer to put this into legislation, and that is what I have attempted to do. I can motivate it further if there are questions, but I think the amendment is plain on its face. It has had to be designed rather rapidly. As you are aware, Minister, the report came down last night. There was not a great deal of time to put this together, so my apologies to the chamber for it only being circulated today. I had no option, given the timing.