Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Hansard source

What is the legislated change to impose caps on executive pay in Germany? I am advised there is none. You very generally said that there have been moves in Germany—off the back of what I would argue was a description of circumstances in the US that was just a touch misleading. Senator Brown, you name me any country—an advanced economy—in the last year that has introduced legislation to cap executive pay generally in the financial sector and in the broader company sector. You name me one. I do not think you can, other than that important but quite narrow example in the United States.

The government shares Senator Brown’s concerns to ensure that the regulation of executive remuneration does keep pace with community expectations. In that context, the government has undertaken a range of actions. It is not correct to infer that we have done nothing—it is simply not true. We cannot support the Greens’ approach to cap the salaries of officers that are parties to ABIP’s financial arrangements. I note that the Treasurer and Senator Brown have exchanged correspondence on possible executive remuneration arrangements to apply to ABIP and that Senator Brown is continuing a legislative cap on the salaries of officers of parties that receive financing from ABIP. But a salary cap is not acceptable to the government as it would undermine the policy intent of establishing ABIP in the first place and compromise its effectiveness.

A salary cap may significantly affect ABIP’s operations in terms of the range of parties to whom it may be able to lend, and it also raises some important legal issues regarding how such a cap would interrelate with the current contracts of officers of parties to ABIP’s financial arrangements, who would have to abrogate existing legal contracts. I do not believe that would be legally possible. Imposing a legislative salary cap is also inappropriate because the broader policy responses are being considered in the Productivity Commission’s review of this issue—in fact, I established this examination. We added Professor Fels, and the Productivity Commission will report by the end of the year.

Accordingly, it is not appropriate or prudent for the government to agree to the Greens’ salary cap proposal. In addition to the Allan Fels-PC examination of this issue I announced—and we have actually issued—draft legislation that deals, I think, very effectively with golden handshakes, or golden parachutes, as they are known. I do not have the time to go through the details, but, in that one-half of the executive pay equation where there was a level of abuse going on, this government—and, I might say, the first government in a long time—has publicly released the draft legislation, which does deal with this issue of executive pay, termination pay and golden handshakes. The government’s draft legislation has been widely welcomed by what would be termed the more sceptical in the investor community, in the research community. When I say ‘more sceptical’ I mean those who are more sceptical of some of the practices we have seen going on. It has been welcomed by that group—Regnan, for example. So it is not correct to say that we have done nothing.

If the ABIP bills are not passed in the Senate because of the executive remuneration issue, the government seeks the assurance of the Senate that it will move quickly to pass the ABIP bills if ABIP is required at some future time. We have attempted to meet the concerns of Senator Brown. We have presented amendments for later consideration, but in this context the government have decided that there are obligations regarding executive remuneration that we can impose on ABIP to continue to demonstrate leadership on this issue. The later amendments, which I hope will have the support of senators, will be presented and argued at that time. The Labor government will not support the amendments presented by the Australian Greens on this issue.