Katy Gallagher (ACT, Australian Labor Party) Share this | Hansard source

I welcome the opportunity to contribute on this matter of public importance today as I believe the issue of the executive remuneration is one that the community is interested in, and it is a matter of significant public debate. In relation to the specifics of the MPI, which singles out one CEO and the board of Australia Post, I support the comments the Leader of the Opposition and others in the opposition team have made—that the level of remuneration is certainly out of touch with community expectations. I think the issue about not being transparent about the total remuneration package is an issue that certainly needs continued focusing on, and I certainly support Senator Paterson's comments there.

When spending taxpayers' money there comes with it the need to be transparent and accountable about that money, how it is spent and what it is going to. It is very easy to do that as there are standard ways in which that information is provided, whether it be through quarterly or annual reports of organisations. It is not onerous and it certainly is not red-tape regulation. It is a very important measure for instilling public trust and confidence in areas where taxpayers' funds are being spent.

I think we also have to acknowledge that some of the broader community concerns about executive remuneration have to be seen in context, where we have rising inequality and growing disadvantage, and where a lot of the political debates are around cuts and savings and what those cuts and savings are targeting. Vulnerable members of the community, whether they be low-income families or pensioners, people who have kids in school, or people who use the hospital system, we are all being told we need to tighten our belts and ensure that public money is being spent wisely. Then, people would read headlines about one public official, in a sense from a government business enterprise, earning that type a salary.

When I was reading on this topic today I found it interesting that both the United States and the United Kingdom have made changes to their remuneration reporting structures. From 1 January 2017, American companies are now required to disclose the ratio of pay of a CEO's annual total remuneration to the median annual total remuneration of all company employees. In the UK they are also subject to a variation of the CEO pay ratio rule, with relevant regulations requiring disclosure of CEOs remuneration, also with their employees. In Australia, companies do not have to disclose this ratio, although, as Senator Paterson said, they do disclose information about remuneration for executives. The author of the article, Associate Professor Julie Walker from the University of Queensland, makes the point that disclosing the ratio provides greater transparency around CEO pay and places some constraints on escalating executive remuneration. CEOs in the US are paid around 300 times the median employee wage, while in the UK the ratio is roughly 183 to 1.

I will mention briefly the issue of transparency. The salary information has been released publicly as a result of Labor's pursuit of the matter through the relevant committees. It is essential on issues such as these, particularly when it involves the spending of taxpayers' money, that politicians, senior executives of departments and general expenditure are all subject to appropriate scrutiny in the public's eye. This is also appropriate for the CEO of Australia Post.

I think it is fair to say that the rate at which several CEOs are paid in Australia is also seen as being too much and out of touch with community expectations. For example, look at the national average wage in Australia—it is approximately $81,000—and compare it with the salaries and bonuses of CEOs in Australia. Commonwealth Bank CEOs earn 67 times the average salary. The CEO of Fortescue owns 64 times the average salary. For Ramsay Health Care it is 56 times the average salary. For Wesfarmers' CEO it is 54 times the average salary. For Sonic Healthcare it is 54 times the national average salary. The list goes on and on. Even one of the lower-paid CEOs on this spectrum—at Nine Entertainment—still owns 12 times the national average salary. I think we have heard from constituents—I certainly have here in Canberra—that they believe these levels of remuneration are very difficult to justify and are certainly too high. I think there is something to that. It is something we should be aware of.

Coming back to the issue that has been identified with the CEO of Australia Post, I think it is important to note, as part of this debate, that we on this side of the chamber also acknowledge the challenges that Australia Post faces with its business. There has certainly been a big decline in revenue and an increase in competition, and obviously fewer letters are being sent. You need to balance these discussions; you need to have rational discussions—it cannot be just the shock and awe headline. You need to understand that you need to attract good people to the role of CEO—you need someone who is experienced, who can deal with the very significant business transformation that is occurring at Australia Post, and who can lead that organisation and take them through all of those challenges and still return a profit for the taxpayer.

I certainly do not underestimate the challenges that face the Australia Post CEO, and I think that when executive remuneration for a GBE is being settled appropriate steps should be put in place to have the job scoped and independently assessed on where it would fit within other executive structures. Again, it is not hard to do. Most governments run GBEs, and there are processes that can very easily be put in place that scope and weight a job and make recommendations to the board about appropriate remuneration. If that was followed in this case, it would be interesting to see how that final salary was arrived at. But we should give the opportunity to the board to explain the remuneration settings, not just for the CEO but for other executives in the organisation, and, indeed, to explain how board remuneration is set as well. That is something that I looked at pretty closely here in the ACT with GBEs like Icon Water, which went through a similar process a couple of years ago with concerns around the remuneration of the chief executive. They went through a process—I think a good process—to ensure that the remuneration level that was set was justified with an appropriate assessment of work-level standards conducted independently of the board. Again, I think we also need to acknowledge that this is a time when we are seeing flat wages growth, seeing jobs lost, seeing high levels of youth unemployment and seeing constant public dialogue about cuts to pensions, people having to tighten their belts and the need to rein in government expenditure. When that is 95 per cent of the public discourse in this country, and then people turn a page of the paper, if they do that anymore, or swipe their iPad, and see that someone earns $5.6 million, it just does not make any sense to them—and I completely understand that.

I think it is worth this chamber continuing to look at executive remuneration and look at how those decisions are taken and, absolutely, to make sure that there is appropriate transparency and accountability and really good processes in the boards of management for how executive remuneration is dealt with in their agencies—that there is a policy in place, there is independent review, and every single salary that is subject to a particular contract of employment is justified by a very thorough process which looks at the work that is being done and the adequate remuneration that should be paid for that job—nothing more and nothing less.