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

I indicate the government will be supporting these amendments and I thank Senator Brown and the Greens for their constructive engagement on this issue. It is important to note a few issues regarding the operative effect and the implications of the amendments. The government considers that the single government board representative who is the chair and the unanimous voting arrangements provide an effective and robust framework for safeguarding taxpayer interests. In particular, the government has every confidence that its proposed sole representative on the ABIP board and chair designate, Mr David Borthwick, will capably represent the Commonwealth on the board. However, we accept the amendments in the spirit in which they are intended.

Question agreed to.

by leave—I move government amendments (1) to (6) on sheet BJ219 together.

(1)    Clause 4, page 2 (before line 8), before the definition of ASIC, insert:

ADI (authorised deposit-taking institution) means a corporation that is an ADI for the purposes of the Banking Act 1959.

(2)    Clause 4, page 2 (after line 18), after the definition of Deed of Guarantee, insert:

disclosing entity has the same meaning as in the Corporations Act.

(3)    Clause 4, page 3 (before line 6), before the definition of Shareholders’ Agreement, insert:

modifications includes additions, omissions and substitutions.

(4)    Clause 10, page 8 (after line 7), at the end of subclause (1), add:

            ; (j)    a provision requiring ABIP Limited to comply, in relation to remuneration that it provides, with prudential standards determined under section 11AF of the Banking Act 1959:

                   (i)    to the extent that the standards relate to remuneration; and

                  (ii)    with such modifications of the standards, as they apply to ABIP Limited, as are prescribed by the regulations;

                      as if ABIP Limited were an ADI.

(5)    Page 8 (after line 19), after clause 10, insert:

10A  Remuneration information to be included in directors’ report for ABIP Limited

        (1)    Subject to subsection (2) of this section, section 300A of the Corporations Act applies to the directors’ report for a financial year for ABIP Limited as if ABIP Limited were a disclosing entity that is a company registered under that Act.

        (2)    The regulations may prescribe modifications of section 300A of the Corporations Act as it applies under subsection (1) of this section.

        (3)    Regulations made for the purposes of subsection (2) must not:

             (a)    increase, or have the effect of increasing, the maximum penalty for any offence; or

             (b)    widen, or have the effect of widening, the scope of any offence.

(6)    Page 8 (before line 20), before clause 11, insert:

10B  Termination payments

        (1)    Subject to subsection (2) of this section, Division 2 of Part 2D.2 of the Corporations Act applies in relation to ABIP Limited as if ABIP Limited were a disclosing entity that is a company registered under that Act.

        (2)    The regulations may prescribe modifications of Division 2 of Part 2D.2 of the Corporations Act as it applies under subsection (1) of this section.

        (3)    Regulations made for the purposes of subsection (2) must not:

             (a)    increase, or have the effect of increasing, the maximum penalty for any offence; or

             (b)    widen, or have the effect of widening, the scope of any offence.

Earlier in the debate I did refer to amendments that the government had circulated and intended to move. They deal with the issue of executive remuneration. I am moving amendments to the ABIP Bill to improve the disclosure and incentive arrangements in place for ABIP executive remuneration. These arrangements will ensure ABIP executives receive appropriate reward for good performance but equally are not rewarded for poor performance and that the remuneration of the executives is consistent with the interests of shareholders, including taxpayers. They impose higher obligations on ABIP than it would normally be subject to, with particular heightened transparency and rigour in the manner in which ABIP’s executive remuneration arrangements are determined.

There are three elements. Firstly, they ensure ABIP’s remuneration arrangements are consistent with the principles relating to executive remuneration to be issued by APRA, the Australian Prudential Regulation Authority, for all authorised deposit-taking institutions. APRA’s draft standards include proposed requirements that APRA regulated entities have a remuneration policy that aligns remuneration arrangements with the long-term financial soundness of the institution and its risk management framework and establish a board remuneration committee to review their remuneration policy periodically and make recommendations to the board on the policy on the remuneration of executives. Subject to consultation on this discussion paper and accompanying documents, it is expected that the final prudential standards and associated prudential practice guide will be released in September 2009 and effective from 1 January 2010.

Secondly, the arrangements impose an enhanced disclosure regime on ABIP’s executive remuneration arrangements similar to the requirements of a listed company. They will provide substantially more information to shareholders and parliament than would otherwise be the case. Without this amendment ABIP would only be required to disclose some aggregate information on executive remuneration which would not be discernible to any particular individual. These amendments will ensure that ABIP is required to provide comprehensive remuneration details for each member of the key management personnel as well as a range of comprehensive disclosures on director and executive remuneration. Applying this regime to ABIP will enhance the accountability of the ABIP management in setting remuneration and increasing transparency for shareholders and the broader community.

Thirdly, the arrangements subject ABIP’s executives to the government’s proposed reforms relating to termination benefits. In March 2009 the government announced reforms aimed at curbing excessive termination pay to company executives—the so-called golden parachutes. I have outlined those on a number of occasions previously in debates in the Senate. In the interests of time, I will not go through those details now. As ABIP is not a disclosing entity for the purposes of the Corporations Act, its executives may not be subject to the proposed reforms relating to termination benefits in the ordinary course. However, the government is proposing to extend the application of these reforms to ABIP as if it were a disclosing entity to make sure it is included in the government’s reform agenda in this area.

The government is keen to ensure that the regulation of executive remuneration keeps pace with community expectations. The government’s proposed amendments that we are now dealing with demonstrate leadership by promoting improved executive remuneration practices for ABIP both through improved disclosure and strict adherence to sound principles. The government has already taken a range of actions. I referred to those earlier and on previous occasions. While these amendments are ABIP specific, they complement the government’s broader actions in this area. They will provide a high standard of transparency, rigour and public accountability in ABIP’s executive remuneration arrangements.

Question agreed to.