Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

As we flagged during the second reading debate, I will move the amendments which have been circulated on behalf of the coalition in relation to the number of votes having to be cast in order to trigger the so-called two-strikes rule, which can lead to a spill motion. I seek leave to move amendments (1) to (4) on sheet 7087 together.

Leave granted.

I move:

(1)   Schedule 1, item 9, page 8 (lines 4 and 5), omit "votes cast on a resolution that the remuneration report be adopted were", substitute "total votes that were entitled to be cast on a resolution that the remuneration report be adopted were cast".

(2)   Schedule 1, item 13, page 12 (lines 6 and 7), omit "votes cast on a resolution that the remuneration report be adopted were", substitute "total votes that were entitled to be cast on a resolution that the remuneration report be adopted were cast".

(3)   Schedule 1, item 13, page 12 (lines 9 and 10), omit "votes cast on a resolution that the remuneration report be adopted were", substitute "total votes that were entitled to be cast on a resolution that the remuneration report be adopted were cast".

(4)   Schedule 1, item 19, page 16 (lines 29 and 30), omit "votes cast were", substitute "total votes that were entitled to be cast were cast".

The government is proposing to introduce the so-called two-strikes rule. Under the new law, a two-strikes and re-election process would be introduced in relation to the non-binding shareholder vote on the rem­uneration report. The first strike would occur where a company's remuneration report received a no vote of 25 per cent or more. If this occurred, an explanation of the board's proposed action in response to the no vote would be required. The second strike would occur where a company's subsequent rem­uneration report received a no vote of 25 per cent or more. Where this occurred, share­holders would vote at the same AGM to determine whether the directors needed to stand for re-election. If the spill motion passed with more than 50 per cent of eligible votes cast then a spill meeting would take place within 90 days.

We are talking about a process which can have significant consequences for the companies involved. The government is proposing to calculate the 25 per cent vote on the basis of 25 per cent of the votes cast. The coalition takes the view that that is an inappropriately low proportion. In fact, as we understand it, there is no threshold below which the vote would be prevented from falling. Let me explain. If only 40 per cent of the votes available to be cast are cast—and 25 per cent of 40 per cent is 10 per cent—10 per cent of shareholders can start a process which can lead to a spill motion to be considered by the AGM. I do not think there is any limit as to how low this could go. I would be interested in getting the minister's clarification. What if only 20 per cent of the votes available to be cast are cast? With the 25 per cent, that comes to five per cent of shareholders.

I think our amendment is pretty self-explanatory. We think that a more appropriate threshold is 25 per cent of the votes available to be cast. This is still far from a majority of the shareholders in a company. To have these sorts of consequences, you would expect votes to be 50 per cent plus one. Because of what is being proposed here, 25 per cent seems to be the appropriate percentage, but it should not be 25 per cent of votes cast; it should be 25 per cent of votes available to be cast. Otherwise, as I have mentioned, too small a proportion of overall shareholders would be involved, leading to an outcome which was not properly representative.

As I mentioned, we think it is much more appropriate to use 25 per cent of total votes available, because that would be much more representative than what the government is proposing. That would still be a minority of the shareholders in a particular company, but it would be more than the government currently proposes, where there does not seem to be a limit below which a shareholder vote could fall while still triggering the two-strikes rule.

With those words, I commend the coalition amendment to the Senate.