Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

by leave—I move amendments (1), (2) and (3) on sheet 8343 together:

(1) Schedule 1, item 1, page 4 (line 15), after paragraph 37(1) (b), insert:

(ba) its executive remuneration obligations; and

(2) Schedule 1, item 1, page 12 (line 18), before Division 4, insert:

Division 3A—Executive remuneration obligations

   37DC Cap on remuneration of accountable persons

     (1) The executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI remuneration for a period (the pay period) that would result in the remuneration of the accountable person for the pay period exceeding the remuneration cap for the pay period.

     (2) The remuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:

number of days in t h e period number of days in t h e reportin g period x 10 x AAWE

where:

   AAWE means the annualised average weekly earnings for the reporting period for the ADI.

     (3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:

number of weeks in t h e reporting period x AWE

where:

AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.

   37DE Cap on variable remuneration of accountable persons

     (1) In addition, the executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI variable remuneration for a period (the pay period) that would result in the variable remuneration of the accountable person for the pay period exceeding the variable remuneration cap for the pay period.

     (2) The variableremuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:

number of days in t h e period number of days in t h e reporting period x 5 x AAWE

where:

   AAWE means the annualised average weekly earnings for the reporting period for the ADI.

     (3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:

number of weeks in t h e reporting period x AWE

where:

   AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.

     (4) For the purposes of subsection (1), in working out the maximum amount of variable remuneration that may be paid to an accountable person during a period, any deferral of variable remuneration under Division 4 of this Part during that period is to be ignored.

(3) Schedule 1, page 31 (line 9), after item 15, insert:

   15A Cap on remuneration and variable remuneration of accountable persons

     (1) Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act applies in relation to the remuneration and the variable remuneration of an accountable person only if the decision granting the accountable person the remuneration or variable remuneration was made on or after 1 January 2019.

     (2) Despite subitem (1), if an accountable person's remuneration or variable remuneration is payable under a contract entered into before the day this Act received the Royal Assent, Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act does not apply in relation to the remuneration or variable remuneration until 1 January 2020.

     (3) Despite subitem (1), if:

     (a) an accountable person's remuneration or variable remuneration is payable under a contract entered into before the commencement of Part IIAA of the Banking Act 1959 as inserted by this Act; and

     (b) apart from this subitem, the application of Division 3A of that Part in relation to the remuneration or variable remuneration would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph);

that Division does not apply in relation to the remuneration or variable remuneration to the extent that it would result in such an acquisition.

Note: Because this subitem prevents Division 3A of Part IIAA of the Banking Act 1959 from giving rise to such an acquisition of property in relation to remuneration or variable remuneration payable under such a contract, compensation will not be payable under section 69E of that Act.

We've already talked about this this morning, and I certainly did in my second reading speech. The Nick Xenophon Party have indicated they won't be supporting the amendments before the Senate today to cap executive salaries. I am glad that One Nation is going to support the amendments to cap executive salaries. No-one can justify the salaries that are paid by shareholders to the bank CEOs in this country. Our banks are some of the most profitable in the world and our CEOs are some of the most highly paid CEOs in the banking sector on the planet. These amendments before us today, amendments (1), (2) and (3), will put a cap on both variable and fixed remuneration.

Fixed salaries are 10 times average weekly earnings, which roughly works out at about $850,000, double what our Prime Minister makes, so bank CEOs still make a lot of money. The variable component's half that, so it still takes them to well over a million dollars. As I mentioned earlier, this is in line with what the Israeli government capped their bankers' salaries at. They took some firm action. When that vote went to their parliament, it was 56-zero—56 MPs voted for it and zero voted against it. They got to the point where they all agreed that their banking CEOs were paid too much. There was no need for it, it was counterproductive and it only added to inequality in their country. They saw capping the salaries of bankers not just as an economic argument but as a moral argument. I argued in this place in my second reading speech that we have the right to do that as a government because bankers are an unusual breed and they have a privilege to operate in this country that is given to them by the Australian taxpayer. They have a licence given to them by the taxpayer, the voters and the government that allows them to operate and then they're insured against failure through the too-big-to-fail guarantees. They work in a very privileged environment and they literally are given a licence by the Australian people to print money.

I want to make this very clear: the Treasurer talked in his second reading speech in the other place about bringing bank executives more in line with community expectations. I have no doubt at all that, if you go outside these walls and speak to Australians, the expectation of nearly every Australian you speak to is that these salaries cannot be justified. They are excessive, totally unnecessary, inequitable and unfair, and they add to inequality in this country. If government can play an active role in setting minimum wages in Australia, why can't we also play a role in setting maximum wages, especially in an industry that's regulated by the government? It's part of our constitution. The Banking Act very clearly talks about governments issuing a licence to bankers and playing an active role in regulating this industry. As we know, if the financial system collapses, there's corruption or there's instability then it affects every single one of us.

Lastly, I have no doubt about the rotten culture, which everyone has acknowledged—even Senator Cormann tacitly acknowledged it in his speech in the second reading debate today—and the need for this legislation. Believe me, that is a big turnaround from four years ago, when we were having the FOFA debate in this place and Senator Cormann clearly said it was just a few bad apples in the banking industry. I'm glad he's come to the view now that there are some systemic issues and that this legislation is here today because of those systemic issues. I accept that it's more about prudential issues than it is about bad behaviour and adverse consumer outcomes, but nevertheless at least it is something.

We accept there's a rotten culture, and there has been in the banking sector. There have been numerous scandals. We've talked about them ad nauseam in this debate. The only way that you can fix that profit-before-people culture, that profit-at-all-costs culture, is to cap CEO salaries. It's the simplest and easiest way to do that, because the culture of an organisation starts at the top. If CEOs know they're not going to earn $10 million or $20 million this year based on massive returns, there'll be a lot less pressure throughout the organisation to constantly make profits and do all the kinds of things that we've uncovered in our Senate inquiries, like sell to people products they don't want, charge excessive fees and charges to their customers, rip off customers or carry out unconscionable conduct. That's our view. I won't talk about that anymore. I will simply ask Senator Cormann to at least address this when he responds to this amendment. Senator Cormann, do you believe that bankers' salaries are excessive and do you believe the government has a role in limiting them?