Bob Brown (Tasmania, Australian Greens) Share this | Hansard source

I can assure the minister that I have seen that statement and there is nothing new in it at all. There are no specifics and there is no movement and the Prime Minister has done nothing to move towards regulating excessive or greedy executive salaries. I move Greens amendment (1) on sheet 5676 as circulated:

(1)    Schedule 1, page 3 (before line 6), before item 1, insert:

1A  Paragraph 200F(2)(b)

Repeal the paragraph, substitute:

             (b)    the value of the benefit, when added to the value of all other payments (if any) already made or payable in connection with the person’s retirement from board or managerial offices in the company and related bodies corporate, does not exceed the amount worked out under subsection (4).

1B  Subsections 200F(3), (4) and (5)

Repeal the subsections, substitute:

        (3)    For the purposes of paragraph (2)(b), other payments includes:

             (a)    payments of the market value of shares or share-based payments that become exercisable in connection with a person’s retirement from a board or managerial office in the company or in a related body corporate; and

             (b)    payments by way of pension or lump sum, including a superannuation, retiring allowance, superannuation gratuity or similar payment.

        (4)    The amount worked out under this subsection is:

             (a)    if the period or periods during which the person held a board or managerial office in the company or in a related body corporate total less than 12 months—the amount that is in the same proportion to $1,000,000 as that total period is to 12 months; or

             (b)    if the period or periods during which the person held a board or managerial office in the company or in a related body corporate totals 12 months or more—$1,000,000.

1C  Paragraph 200G(1)(c)

Omit “subsection (2)”, substitute “subsection (3)”.

1D  Subsection 200G(1)

Omit “In applying paragraph (c), disregard any pensions or lump sums that section 200F applies to.”, substitute “In applying paragraph (c), the value of the benefit includes any pensions or lump sums that section 200F applies to.”.

1E  Subsections 200G(2) and (3)

Repeal the subsections, substitute:

        (2)    For the purposes of paragraph (1)(c), other payments includes:

             (a)    payments of the market value of shares or share-based payments that become exercisable in connection with a person’s retirement from a board or managerial office in the company or in a related body corporate; and

             (b)    payments by way of pension or lump sum, including a superannuation, retiring allowance, superannuation gratuity or similar payment.

        (3)    The payment limit is $1,000,000.

1F  Subsections 200G(5) and (6)

Repeal the subsections.

This amendment would empower shareholders to decide termination payouts for executives. My reasoning is as circulated. I would ask that that reasoning be incorporated into Hansard. I add that Senator Xenophon supports this Greens amendment.

Leave granted.

The document read as follows—

This amendment to the Corporations Act gives shareholders the power to restrict excessive termination payments for executives.

It requires shareholder approval for any termination payment, including vesting of unvested equity incentives, above $1 million.

Currently, the Corporations Act does require shareholder approval for termination payments above a threshold of seven times the total remuneration. But the provisions are not sufficiently tight to prevent any decent lawyer finding loopholes.

According to recent research by RiskMetrics, boards of most companies surveyed flouted the law to pay departing executives extremely generous packages.

For example, the RiskMetrics survey found the average CEO of a top Australian received just over $3.4 million as a termination payment or 201 percent of their annual salary on termination.

23 of the 33 CEOs surveyed received termination payments greater than $1 million.

The largest termination payment in the survey was paid to former Santos CEO, John Ellice-Flint He received $16.8 million, which included 2.313 million unvested options. The total package assumed that the options were vested at the time of termination. Mr Ellice-Flint’s base salary was $2,691,995. The payout was 625. percent of his annual salary. It also means that unvested incentives in the package (ie shares) if vested at that time were worth over $14 million. This payment was announced one day after the general annual meeting to avoid scrutiny, determined by the company directors at the board’s discretion.

The Greens amendment specifically closes the loophole which allows for the use of unvested incentives as part of the termination payment