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

I move:

That the committee not insist on the Senate amendment disagreed to by the House of Representatives.

The Senate has had time to reflect on the amendment proposed by Senator Xenophon. The amendment would have the effect of removing an important exception where the termination benefit represents a genuine payment by way of damages for breach of contract. It would require such payments be subject to shareholder approval irrespective of the amount of the payment. In practice, it would mean, as Senator Xenophon has acknowledged, that virtually all termination benefits, regardless of their size, would require shareholder approval. Even a legitimate payout of $1 would require the approval of shareholders at a general meeting. This is unworkable and, as such, the government does not support the amendment.

The government has introduced the Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 to improve corporate accountability and, in doing so, it has struck an appropriate balance between empowering shareholders and providing companies with adequate certainty. The bill allows companies to offer reasonable termination benefits below the specified threshold. The amendment, however, would create significant uncertainty. It would mean that adequately designed termination benefits below one year’s base salary could not be offered with any degree of confidence.

The exemption for a genuine payment by way of damages for a breach of contract is an important exemption which recognises that a director or executive may be entitled to compensation for the early termination of the contract for service. The removal of the exemption ignores the fact that termination benefits can legitimately represent compensation to an innocent party for breach of contract. The amendment has the potential to increase the need for litigation in order for a director or executive to obtain a reasonable termination benefit. Such litigation can be costly and time-consuming. Ongoing legal disputes may also have a negative impact on the reputation and value of a company. The government is not prepared to accept this unintended consequence.

It is appropriate that a sensible and mature approach be taken. I am pleased to say that opposition senators have been given the chance to reflect on the amendment. Treasury officials have been made available and I am pleased that the shadow minister has accepted the invitation to be briefed on the implications of the amendment. The bill is sound. It has been subject to extensive public consultation. It significantly strengthens the current regulatory framework relating to termination benefits to empower shareholders to reject excessive payments. These are very important provisions to ensure that regulations keep pace with community expectations. I ask and urge senators to support the bill in its current form.