Helen Coonan (NSW, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Hansard source

I thank Senator Xenophon for yielding the call. The opposition will not be insisting on the amendment moved by Senator Xenophon and originally supported by the opposition. As Senator Sherry noted, since voting for Senator Xenophon’s amendment the shadow minister, Mr Chris Pearce, has had an opportunity to seek legal advice and has been offered a Treasury briefing. Although I understand legal interpretation may not be beyond argument, it does appear tolerably clear that, as drafted, the adoption of the sunset provision would have the unintended consequence of restricting the ability of companies to provide certainty to their executives during the next three years.

Executive service arrangements entered into over the next three years that provide a termination benefit within the one year’s base pay limit in accordance with the new provisions would not be effective if the proposed sunset provision were adopted and applied to a benefit provided after the triggering of the sunset provision. Accordingly, the effect of the amendment could be that some termination benefits, regardless of the amount of the termination benefit, would require shareholder approval now. This would create uncertainty in the workforce for executives and companies who provide for termination benefits under contracts of employment which extend beyond three years.

The effect of this as a matter of practice and as a practical matter would be that shareholder approval would be required to be sought by companies for most termination benefits that may be paid under new executive service contracts after three years, to provide certainty to both companies and executives. A further unintended consequence, of which the shadow minister has been made aware, is that the sunset provision only regulates certain termination benefits. For example, the sunset provision does not regulate genuine payments of pension and lump sums that are also subject to the new one-year’s base pay limit. As a result of this, executives and companies may seek to restructure their remuneration arrangements to avoid the operation of the sunset provision. The opposition certainly did not intend for the sunset provision to operate that way or to create other possible unintended consequences. For these reasons, and more abundant caution, and subject to the advice received we will not be insisting on the amendment.