Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

I table a supplementary explanatory memorandum relating to the government amendments to be moved to this bill. The memorandum was circulated in the chamber earlier today.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I move Greens amendments (1) to (4) on sheet 5757, revised 2:

(1)    Clause 8, page 5 (line 11), after “(3),”, insert “(3A),”.

(2)    Clause 8, page 6 (after line 7), after subclause (3), insert:

Limit on other party

     (3A)    The annual salary of any officer of any other party to the arrangement is not greater than $1,000,000.

(3)    Clause 8, page 6 (after line 19), at the end of the clause, add:

        (7)    In this section:

officer has the same meaning as in the Corporations Act 2001.

salary includes any remuneration paid, promised or guaranteed in any form, including though consultancy agreements and grants of shares or other interests, and including any payment made upon resignation or retirement, however described.

(4)    Clause 10, page 7 (after line 8), after paragraph (1)(a), insert:

           (aa)    a provision that a member of ABIP Limited must not pay any officer an annual salary greater than $1,000,000.

We have been in discussion with the government over many weeks—and, indeed, effectively, beyond this bill, I have been moving in the Senate and in conversations variously with the Prime Minister and other ministers for some years—about the need to cap what the Prime Minister calls ‘obscene CEO payouts’. But the government seems completely transfixed with fear in taking on its public responsibility to ensure that if it cannot figure out how to put a cap on the multimillion-dollar, self-regulated payouts of CEOs of corporations that are not receiving so much direct public largesse as is embodied in this bill, at least it should do so for those corporations which are receiving that largesse.

The Prime Minister himself has referred to some of the multimillion-dollar, take-home pay packages of corporate executives in Australia as ‘obscene’. And on Lateline last night the Treasurer was referring to the banks—because of the Commonwealth Bank’s increase in interest rates without justification, and of course we know other banks are following suit—as ‘selfish’, but when pushed by Tony Jones was unable to name any action at all to protect the public interest here.

Where banks act in that way, the public pays for it—$18 a month for mortgage holders involved, for example, in the Commonwealth’s interest rate hike, which the Treasurer called ‘selfish’. And where you have CEOs on multimillion-dollar payouts, which the Prime Minister calls ‘obscene’, again, it is the public that pays for them. We might be dealing with the private sector here, but it is the punter, the battler, the mortgage payers, the interest payers—that is, the average Australian citizen—who is paying for these obscene CEO salaries. It is not as if they are coming out of some other bucket; the public pays for them through bank fees or through increased costs of the goods or services which the public purchases in the marketplace.

The Labor government is effectively saying, on the one hand, that it must not interfere in the marketplace; but, on the other hand, this very bill is centred on an intervention in the marketplace—not in the public interest, although I have no doubt that the government and the minister will twist it in that direction, but in the interest of the banks, particularly the big four banks, and the developers. This is effectively legislation to take $2 billion of public money, and potentially another $26 billion or $28 billion in guarantees, and place it at the disposal of the big banks for developers in Australia, for example, shopping centre or real estate developers, who have had foreign loans but may have difficulty getting the foreign lenders to continue those loans at expiry date.

So we have a situation where the government says, ‘There’s a financial crisis. We will deal with it by offering public money to these big corporations, but we seek nothing in return. We will do nothing about the ‘obscene payments’’, to quote the Prime Minister, or the ‘selfish behaviour’, to quote the Treasurer. They are saying, ‘We are a Labor government but we are in the thrall of these big corporations against the interests of the average Australian, including the much-vaunted and very real Australian working family.’ I don’t get it. Other countries have been able to move in this arena. President Obama has been able to put in a cap of half a million US dollars. There have been moves in Europe, for example in Germany, to legislate. They have all run into the massive power of the big corporate lobbyists, but the public interest is very real.

I have made it clear publicly that the Greens have put to the government an amendment which would effectively cap the salaries of the CEOs of the big four banks, and anybody who borrowed through this potentially $28 billion or $30 billion largesse of the public being facilitated through this legislation, at $1 million a year. Let me put that in perspective: that is three times the salary package of the Prime Minister of this country. There is no-one in this chamber, including the minister, who is going to get up and argue that the work of the Prime Minister is less than that of the CEO of any of these banks, let alone the CEOs of the development corporations who are going to be the recipients of the largesse of the public funding in this Ruddbank legislation.

The government have come back with some amendments, which the minister will no doubt talk about, which increase transparency and possibly enable shareholders in companies that are involved to look at the salary caps. In other words, it gives no facility that is not already available, effectively, or ought not be available in the transactions that the banks and the developers will be involved in. The public should know about them, and the shareholders, of course, ought to have a say. But we have asked that the shareholders of this money, held in guarantee by the government, have their rights looked after, and this government is manifestly failing. We appreciate that the government has, after quite strenuous lobbying by the Greens, put in place some extra measures. But it would not go where it should have gone. The Prime Minister of this country, the Hon. Kevin Rudd, has effectively backed down from his strong words about obscene payments and is failing the public interest by not using this opportunity to cap the CEOs’ salaries.

I wrote to the Treasurer in the last 48 hours and put to him that if we simply made the caps apply to the developers, not to the banks, that would be a huge concession in the government’s direction, and I would like to talk about that. I have had no request for further talks about that. The government is effectively saying, ‘We are not going to entertain any caps in this country of Australia. They can do it in other countries but not in this one.’ Not only is the free market a myth—because here we are making available billions of dollars of public money, which ought to be going to schools and hospitals, for big developers through this facility—but it is a myth that we will maintain where it is in the interests of the big corporations but, of course, not where it is in the interests of the wider public.

The move to find some common ground has not been met by the government. I have to say—and I am sure the minister will give a good account of this—there has been a change in the feeling of fear that foreign investment would not be available since this legislation was first mooted and brought before the House of Representatives. I detect that the urgency by the big corporations, their ardour to get their hands on the public billions to ensure their interests, has lessened somewhat, because there has been no round of defaults from foreign investors in terms of rolling over loans to Australian developers. So the urgency for this legislation is somewhat less than when it was first put forward. Ipso facto, the government’s ardour for passing this legislation is nowhere near as great. I can tell the Senate that if the situation arises where there is a default on a foreign loan to a work-rich enterprise in Australia which threatens the jobs of workers, we will look at that. But giving, through this legislation, a blank cheque—and with no further say by the parliament, I might add—through the banks to developers, with no quid pro quo and no restraint on these obscene multimillion-dollar payments, is something the Greens are not going to back off on. I told the government, in this committee, before the last parliamentary break that we wanted some action from the government on this or we would not be supporting this legislation. The test is now with the government. It should support these amendments. If not, the Greens will not be supporting the legislation.

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

I understand that Senator Conroy, when he was dealing with this in the previous debate, indicated that the government would not be supporting the Greens amendments. That is still the case. As Senator Bob Brown has indicated, we have provided some amendments, which I will touch on in the context of his comments. The government amendments concerning executive pay we will deal with in due course, but in the context of Senator Brown’s outline of the arguments I will present argument in respect of the government’s alternative approach.

There are a couple of points I will make. I think I can deal a little later with some of Senator Brown’s more generalised critique of what the legislation before the parliament means. But some of it I will deal with now. Firstly, Senator Brown, I do not accept, and I strongly reject, the accusation you have made that the government, the Treasurer and I—I did have some responsibility for executive pay prior to becoming Assistant Treasurer—are transfixed with fear, in the thrall of, and twisting in response to, this issue. I strongly reject that. I do not accept it. Speaking for myself, I am not in the thrall of anyone—absolutely no-one. I learned that a long time ago in life. You call issues as you see them. You deal with them based on the evidence and the circumstances you are presented with. I am in no-one’s thrall, except possibly my children. So I totally reject your somewhat over-the-top descriptors and adjectives.

The second general point I want to make is that—and you have done this on previous occasions, Senator Brown, when we have been debating this issue—you refer to the bank guarantee in this country and the big four. It is in fact a bank guarantee that is provided to all APRA regulated institutions, which is not just the big four banks; it is all banks, including regional banks, credit unions and building societies. So it is not correct to paint the bank guarantee as a measure introduced purely for the big four banks. I have spoken about this on previous occasions. The reasons we have a bank guarantee have been well argued, and I will not take up the time of the chamber to reiterate those arguments.

Senator Brown, unfortunately, you continue to refer to the United States in the context of executive pay. I say ‘unfortunately’ because the circumstances in the US are very, very different. It is true that the Obama administration has put restrictions on executive pay with respect to some financial institutions, but they are the financial institutions that are receiving a public bailout. They are being extended hundreds of billions of dollars US in loans, quite directly, because of poor judgments made on their part—for a whole mixture of reasons. Again, we have discussed this on numerous occasions in the Senate. There is a difference. In the US, the Obama administration has not—and I emphasise this—imposed executive restraint on financial institutions, including banks, that have not been bailed out. So you are just wrong, Senator Brown. If you are a financial institution in the US and you have not been bailed out, the government has not imposed restrictions on executive pay. If you have been bailed out, it has imposed restrictions. Further, the Obama administration has made it clear that it will not be introducing caps on executive pay in the United States anywhere beyond those financial institutions that have been bailed out directly by the taxpayer. That is a clear distinction.

Secondly, Senator Brown, in a somewhat generalised description you said that there have been moves on executive pay in Germany. What moves in Germany?

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

You don’t know?

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

You don’t know, Senator Brown.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Yes, I do. You don’t.

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

What is the legislated change to impose caps on executive pay in Germany? I am advised there is none. You very generally said that there have been moves in Germany—off the back of what I would argue was a description of circumstances in the US that was just a touch misleading. Senator Brown, you name me any country—an advanced economy—in the last year that has introduced legislation to cap executive pay generally in the financial sector and in the broader company sector. You name me one. I do not think you can, other than that important but quite narrow example in the United States.

The government shares Senator Brown’s concerns to ensure that the regulation of executive remuneration does keep pace with community expectations. In that context, the government has undertaken a range of actions. It is not correct to infer that we have done nothing—it is simply not true. We cannot support the Greens’ approach to cap the salaries of officers that are parties to ABIP’s financial arrangements. I note that the Treasurer and Senator Brown have exchanged correspondence on possible executive remuneration arrangements to apply to ABIP and that Senator Brown is continuing a legislative cap on the salaries of officers of parties that receive financing from ABIP. But a salary cap is not acceptable to the government as it would undermine the policy intent of establishing ABIP in the first place and compromise its effectiveness.

A salary cap may significantly affect ABIP’s operations in terms of the range of parties to whom it may be able to lend, and it also raises some important legal issues regarding how such a cap would interrelate with the current contracts of officers of parties to ABIP’s financial arrangements, who would have to abrogate existing legal contracts. I do not believe that would be legally possible. Imposing a legislative salary cap is also inappropriate because the broader policy responses are being considered in the Productivity Commission’s review of this issue—in fact, I established this examination. We added Professor Fels, and the Productivity Commission will report by the end of the year.

Accordingly, it is not appropriate or prudent for the government to agree to the Greens’ salary cap proposal. In addition to the Allan Fels-PC examination of this issue I announced—and we have actually issued—draft legislation that deals, I think, very effectively with golden handshakes, or golden parachutes, as they are known. I do not have the time to go through the details, but, in that one-half of the executive pay equation where there was a level of abuse going on, this government—and, I might say, the first government in a long time—has publicly released the draft legislation, which does deal with this issue of executive pay, termination pay and golden handshakes. The government’s draft legislation has been widely welcomed by what would be termed the more sceptical in the investor community, in the research community. When I say ‘more sceptical’ I mean those who are more sceptical of some of the practices we have seen going on. It has been welcomed by that group—Regnan, for example. So it is not correct to say that we have done nothing.

If the ABIP bills are not passed in the Senate because of the executive remuneration issue, the government seeks the assurance of the Senate that it will move quickly to pass the ABIP bills if ABIP is required at some future time. We have attempted to meet the concerns of Senator Brown. We have presented amendments for later consideration, but in this context the government have decided that there are obligations regarding executive remuneration that we can impose on ABIP to continue to demonstrate leadership on this issue. The later amendments, which I hope will have the support of senators, will be presented and argued at that time. The Labor government will not support the amendments presented by the Australian Greens on this issue.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I just want to respond to a few things that the minister said. Firstly, I made it clear that lobbyists had clobbered moves in Germany that Angela Merkel had put forward. What he is finding is exactly consistent with what I said.

When it comes to this being not about the four big banks but about a range of institutions in Australia, no, that is not so. The ABIP is being founded upon contributions from the four banks. I note that this legislation does not come from this minister; it comes from the Minister for Finance and Deregulation. This minister is simply handling it on that minister’s behalf in this place. I quote from the Minister for Finance and Deregulation, against the background of the international credit situation. He said:

It is against this background that the government and Australia’s four major banks have decided to establish the $4 billion Australian Business Investment Partnership.

ABIP’s purpose is to help fill the gap left by the possible withdrawal of commercial lenders, particularly foreign banks, from Australian businesses.

ABIP will be established under the Corporations Act 2001 and will be a public company limited by shares.

The shareholders of ABIP will be the Commonwealth of Australia (Commonwealth); and Australia’s four major domestic banks—the Australia and New Zealand Banking Group Ltd, Commonwealth Bank of Australia, National Australia Bank Ltd and Westpac Banking Corporation.

The Commonwealth will have a 50 per cent shareholding in the company and the four major banks will each take a 12½ per cent share.

The government and the four major domestic banks will each provide initial loan funding to ABIP, as well as an amount for ABIP’s working capital.

The government will provide $2 billion and each of the major banks will provide $500 million.

Accordingly, on its establishment, ABIP will have access to $4 billion in undrawn loan facilities, less an amount for working capital (expected to be $4 million).

It is important to note that the financing provided by the four major banks will not be government guaranteed.

If ABIP requires additional financing beyond the initial $4 billion contribution, it will be able to issue up to $26 billion in debt to raise that additional funding.

However, it will only be able to issue such debt with the unanimous agreement of all shareholders.

That means, of course, the Commonwealth. The minister continued:

This could provide ABIP with up to $30 billion in financing.

ABIP will only issue debt when the initial $4 billion loan funding provided by the government and the four major banks has been exhausted.

So the government may end up guaranteeing up to $30 billion in financing.

The move by the Greens here is to simply require some quid pro quo from the CEOs and, in particular, those taking more than $1 million a year were they to draw on this facility. We have said to the Treasurer that we would be happy to go so far as to limit this to the developers who are unnamed, faceless, not specified in here and who would want to be guaranteed by public moneys for their shopping developments, for example, and who we hear are doing very well at the moment, by the way. I simply put it to the chamber—I am not going to get into a further debate because the government has no intention of having the internal fortitude to make a stand on this in the public interest—that those developers ought to have their salaries capped. The minister made the clear point that the Obama administration has been able to put caps on companies that have been bailed out by government loan injections.

We are saying that if that happens under this process where a developer does take government-guaranteed millions to keep finance going then let the cap come into play. There is nothing extraordinary about this. We are simply saying that, if the public largess—money that could be going to hospitals, for example—is going to be drawn upon to help developers who cannot get new financing when a foreign developer, for example, refuses to refinance a loan, let us make sure those developers are not taking home more than $1 million, three times the Prime Minister’s salary, while that loan facility of public money is being offered. The Rudd Labor government says, ‘Oh no, we cannot do that.’ Obama can but Rudd can’t. We are not going to simply say, ‘Oh well, we tried.’ We are making a stand on this issue.

I note, by the way, that the minister said he is seeking an assurance from the Senate that the Senate will move ABIP bills if they are required at some future time. Fair crack of the whip—to quote an authority. The government is now refusing to put any cap on the CEO salaries of developers in this country, many of whom are on the 200 richest list.

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

Fair suck of the sauce bottle.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Senator Sherry says it is a ‘fair suck of the sauce bottle’. I think that is another way of putting it. The government says it wants the Senate to come in here and pass these bills if some developer gets into trouble in the future but is not prepared to ask for some sort of restraint on that developer. Come off it! The Greens will deal with each situation on its merits. Let me forewarn the government that, if at some future time a developer gets into trouble and seeks a bailout important enough to rescue the workers who are employed by that development—and that is where we are concerned—but still wants to pocket multimillion dollar salaries under those circumstances, it will need to bring in a CEO salary cap for those developers.

We will always act in the interests of working Australians in a matter like this, but we are simply not going to, as the government intends to, accede to any developer who comes along on a fat, inflated, unfair, unwarranted, multimillion dollar—and, in some cases, tens of millions of dollars—development taking an amount of money off the people of Australia in circumstances where that developer will have failed and is calling on the public largess. This is the exact circumstance that worried Obama, where CEOs were being rewarded for failure. The government is saying to the Greens and, presumably, the opposition, ‘We want to guarantee in advance that you will reward CEOs who have led a development corporation into failure with a public guaranteed loan and with no requirement of a salary cap.’ The Prime Minister, the Treasurer and the minister are going to have to rethink that. Sure, in those circumstances, we will move to help the workers who are involved, but we are simply not going to throw away, as this government wants us to do, our responsibility to ensure that CEOs also pull in their belts under those circumstances.

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

I have two very quick points. Firstly, we have significantly—not totally but significantly—dealt with the issue of reward for failure with our draft legislation publicly released on golden parachutes. Secondly, the cap in the United States, as I indicated, applies to financial institutions that have been bailed out. I would note that where that has happened, Senator Brown, there is no cap on the institutions or businesses that those capped financial institutions lend to in terms of executive pay.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I want to respond to the minister and say: yes, there is a simple logic here. If we have developers who have led their companies into the situation where they need multimillion- or potentially multibillion-dollar loans diverted out of the public purse, away from hospitals, schools and so on, to continue their businesses, we expect that they are not going to be on multimillion-dollar take-home pay at the same time. If that circumstance arises, I am forewarning the government that, if it requires the Greens’ assistance on this, we will be seeking a fair go for the public. We will come to the aid of workers who are affected, but we expect a decent response from CEOs under those circumstances, and we expect that the government would expect that as well.

Question put:

That the amendments (Senator Bob Brown’s) be agreed to.

Steve Fielding (Victoria, Family First Party) Share this | Link to this | Hansard source

I move Family First amendment (6) on sheet 5785 revised:

(6)    Clause 8, page 6 (lines 16 and 17), omit “or such longer period as is specified in the regulations”.

To go back through this, the proposal is for the government and the four leading banks to set up a company with $2 billion of our money and $500 million each from the banks to lend to commercial property ventures that may be hit by the withdrawal of foreign lenders from Australia. Ruddbank, or the Australian Business Investment Partnership, as the government prefers it to be called, would be the lender of last resort. The company would also be able to borrow up to $26 billion—and I am coming to my amendment now. The issue that I have had all the way along the line is about prudence, good governance and making sure that there are good accountability and lending criteria, and it is also about how long this is going to be set up and lending this money out.

We have covered a couple of amendments previously from Family First. They were about the lending criteria being no less prudent than the lending criteria of investment grade loans, to make sure that we were not lending for dodgy projects and to make sure that taxpayers’ money was not being invested in areas that might be considered as bad investments. Because of our previous amendment, the words in the current bill are that lending is only to be for commercial property and not for other areas. That amendment has actually gone through and been passed, and it makes sure that the money is for commercial property, not for some other sector that the government may wish to have this money for later on down the track. I think it is prudent that they come back to the parliament to seek approval to go into areas other than commercial property.

This final amendment, amendment (6) on sheet 5785 revised, is to make sure that this is short term and not something that is going to blow out to 20 or 30 years. The amendment is to make sure, as the government suggested, that ABIP is short term and to make sure that the length of any of the loans is no more than three years. It is a pretty simple amendment to make sure that this is short term and that there are not 20-year loans sitting around, with ABIP all of a sudden going on in perpetuity. This amendment is to make sure that cannot happen. I know that there are other restrictions, but this makes sure that they are short-term loans to get through the worst of the global financial crisis. This is just another prudential measure, and it strikes at the heart of the bill and not at secondary issues. It comes down to good governance and prudence. I urge the committee to support this amendment, which will restrict loans to a maximum of three years.

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

The government will support this amendment, Senator Fielding, and thank you for your discussions and contribution in this area. As Senator Conroy indicated, the government will reluctantly support the amendment. Imposing a time limit on ABIP’s financial arrangements does have a certain appeal, in that it mandates an absolute end date for the finance ABIP can provide. However, it will limit the flexibility the company will have to operate in the market. Nevertheless, we support your amendment.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

For the good reasons Senator Fielding has outlined, the Greens will also support the amendment.

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

I have already indicated, when this bill was first being considered by the Senate, that the attitude of the coalition is that this is a fundamentally flawed bill. Whilst we accept that some of the amendments, this being one of them, may go some way to improving the bill, it is such a flawed process that we will not be supporting the amendment.

Question agreed to.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

by leave—I move Australian Greens amendments (5) to (8) on sheet 5757:

(5)    Clause 10, page 7 (line 9), omit “5”, substitute “6”.

(6)    Clause 10, page 7 (lines 10 to 12), omit paragraph (1)(c), substitute:

             (c)    a provision that each member of ABIP Limited (other than the Commonwealth) is to nominate one of the 6 directors and may remove the nominated director from office;

           (ca)    a provision that the Commonwealth is to nominate 2 of the 6 directors and may remove either or both of those nominated directors from office;

(7)    Clause 10, page 7 (line 13), omit “the director”, substitute “a director”.

(8)    Clause 10, page 7 (lines 20 to 26), omit paragraph (1)(f), substitute:

              (f)    a provision requiring enforcement resolutions to be passed by a majority that includes:

                   (i)    at least 75% of the votes cast by directors who were entitled to vote on the resolution and were not nominated by the Commonwealth; and

                  (ii)    the vote of the Chairperson of the Board of ABIP Limited;

These amendments are to improve the structure of the proposed board of the Australian Business Investment Partnership. Briefly, because the big four banks would each be putting in $500 million and the Commonwealth would be putting in $2 billion on behalf of the taxpayers, we want to see the board represent that input, such that the banks would have a representative on the board each and the Commonwealth would supply four representatives. We recognise that in the legislation, as it stands, each member of the board would have veto power, but we also recognise that when you are arguing cases—and the Commonwealth would presumably be arguing in the public interest, if it came to a dispute in the board—you are much more effective in doing that if you have colleagues with you. The Greens amendment simply improves the public representation on the board to a level that is commensurate with the amount of public money that is put at risk.

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

I indicate the government will be supporting these amendments and I thank Senator Brown and the Greens for their constructive engagement on this issue. It is important to note a few issues regarding the operative effect and the implications of the amendments. The government considers that the single government board representative who is the chair and the unanimous voting arrangements provide an effective and robust framework for safeguarding taxpayer interests. In particular, the government has every confidence that its proposed sole representative on the ABIP board and chair designate, Mr David Borthwick, will capably represent the Commonwealth on the board. However, we accept the amendments in the spirit in which they are intended.

Question agreed to.

by leave—I move government amendments (1) to (6) on sheet BJ219 together.

(1)    Clause 4, page 2 (before line 8), before the definition of ASIC, insert:

ADI (authorised deposit-taking institution) means a corporation that is an ADI for the purposes of the Banking Act 1959.

(2)    Clause 4, page 2 (after line 18), after the definition of Deed of Guarantee, insert:

disclosing entity has the same meaning as in the Corporations Act.

(3)    Clause 4, page 3 (before line 6), before the definition of Shareholders’ Agreement, insert:

modifications includes additions, omissions and substitutions.

(4)    Clause 10, page 8 (after line 7), at the end of subclause (1), add:

            ; (j)    a provision requiring ABIP Limited to comply, in relation to remuneration that it provides, with prudential standards determined under section 11AF of the Banking Act 1959:

                   (i)    to the extent that the standards relate to remuneration; and

                  (ii)    with such modifications of the standards, as they apply to ABIP Limited, as are prescribed by the regulations;

                      as if ABIP Limited were an ADI.

(5)    Page 8 (after line 19), after clause 10, insert:

10A  Remuneration information to be included in directors’ report for ABIP Limited

        (1)    Subject to subsection (2) of this section, section 300A of the Corporations Act applies to the directors’ report for a financial year for ABIP Limited as if ABIP Limited were a disclosing entity that is a company registered under that Act.

        (2)    The regulations may prescribe modifications of section 300A of the Corporations Act as it applies under subsection (1) of this section.

        (3)    Regulations made for the purposes of subsection (2) must not:

             (a)    increase, or have the effect of increasing, the maximum penalty for any offence; or

             (b)    widen, or have the effect of widening, the scope of any offence.

(6)    Page 8 (before line 20), before clause 11, insert:

10B  Termination payments

        (1)    Subject to subsection (2) of this section, Division 2 of Part 2D.2 of the Corporations Act applies in relation to ABIP Limited as if ABIP Limited were a disclosing entity that is a company registered under that Act.

        (2)    The regulations may prescribe modifications of Division 2 of Part 2D.2 of the Corporations Act as it applies under subsection (1) of this section.

        (3)    Regulations made for the purposes of subsection (2) must not:

             (a)    increase, or have the effect of increasing, the maximum penalty for any offence; or

             (b)    widen, or have the effect of widening, the scope of any offence.

Earlier in the debate I did refer to amendments that the government had circulated and intended to move. They deal with the issue of executive remuneration. I am moving amendments to the ABIP Bill to improve the disclosure and incentive arrangements in place for ABIP executive remuneration. These arrangements will ensure ABIP executives receive appropriate reward for good performance but equally are not rewarded for poor performance and that the remuneration of the executives is consistent with the interests of shareholders, including taxpayers. They impose higher obligations on ABIP than it would normally be subject to, with particular heightened transparency and rigour in the manner in which ABIP’s executive remuneration arrangements are determined.

There are three elements. Firstly, they ensure ABIP’s remuneration arrangements are consistent with the principles relating to executive remuneration to be issued by APRA, the Australian Prudential Regulation Authority, for all authorised deposit-taking institutions. APRA’s draft standards include proposed requirements that APRA regulated entities have a remuneration policy that aligns remuneration arrangements with the long-term financial soundness of the institution and its risk management framework and establish a board remuneration committee to review their remuneration policy periodically and make recommendations to the board on the policy on the remuneration of executives. Subject to consultation on this discussion paper and accompanying documents, it is expected that the final prudential standards and associated prudential practice guide will be released in September 2009 and effective from 1 January 2010.

Secondly, the arrangements impose an enhanced disclosure regime on ABIP’s executive remuneration arrangements similar to the requirements of a listed company. They will provide substantially more information to shareholders and parliament than would otherwise be the case. Without this amendment ABIP would only be required to disclose some aggregate information on executive remuneration which would not be discernible to any particular individual. These amendments will ensure that ABIP is required to provide comprehensive remuneration details for each member of the key management personnel as well as a range of comprehensive disclosures on director and executive remuneration. Applying this regime to ABIP will enhance the accountability of the ABIP management in setting remuneration and increasing transparency for shareholders and the broader community.

Thirdly, the arrangements subject ABIP’s executives to the government’s proposed reforms relating to termination benefits. In March 2009 the government announced reforms aimed at curbing excessive termination pay to company executives—the so-called golden parachutes. I have outlined those on a number of occasions previously in debates in the Senate. In the interests of time, I will not go through those details now. As ABIP is not a disclosing entity for the purposes of the Corporations Act, its executives may not be subject to the proposed reforms relating to termination benefits in the ordinary course. However, the government is proposing to extend the application of these reforms to ABIP as if it were a disclosing entity to make sure it is included in the government’s reform agenda in this area.

The government is keen to ensure that the regulation of executive remuneration keeps pace with community expectations. The government’s proposed amendments that we are now dealing with demonstrate leadership by promoting improved executive remuneration practices for ABIP both through improved disclosure and strict adherence to sound principles. The government has already taken a range of actions. I referred to those earlier and on previous occasions. While these amendments are ABIP specific, they complement the government’s broader actions in this area. They will provide a high standard of transparency, rigour and public accountability in ABIP’s executive remuneration arrangements.

Question agreed to.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I move the amendment on sheet 5793.

(1)    Page 10 (after line 3), before clause 16, insert:

15A  Additional functions of EFIC

        (1)    The functions of the Export Finance and Insurance Corporation (EFIC) include assisting ABIP Limited, as agreed between EFIC and ABIP Limited, in relation to:

             (a)    ABIP Limited entering into financing arrangements in accordance with section 8; or

             (b)    ABIP Limited borrowing money in accordance with section 9; or

             (c)    ABIP Limited doing such other things as are incidental to the matters mentioned in paragraphs (a) and (b).

        (2)    Without limiting subsection (1), the assistance may include all or any of the following:

             (a)    services relating to the management of financing arrangements;

             (b)    services relating to the administration of payments and repayments in relation to financing arrangements;

             (c)    services relating to accounting, financial management or asset management.

        (3)    EFIC may charge a fee for assistance that it provides in performing any of its functions provided for by this section or exercising any of its powers in connection with those functions.

        (4)    A fee under subsection (3) must not be such as to amount to taxation.

        (5)    Section 8 (other than paragraph 8(2)(a)) of the Export Finance and Insurance Corporation Act 1991 does not apply to EFIC’s performance of the functions provided for by this section.

The amendment relates to additional functions for the Export Finance and Insurance Corporation. I referred to this during my speech in the second reading stage. Following discussions I had with Mr Fahour, the interim CEO of ABIP, it was put to me, and I agree, that EFIC would be the most suited organisation to undertake a number of the key functions of ABIP rather than it being outsourced with potential conflicts of interest. Given the sort of work that EFIC does currently, it would be quite suited to undertake the role that is foreshadowed with ABIP. I commend the amendment to the chamber.

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

The government will support this amendment. I thank Senator Xenophon for his constructive suggestion. It would be up to ABIP to determine how it organises itself and performs its functions. However, drawing on EFIC’s skills and experiences in financial arrangements could present a useful value-for-money proposition for ABIP, so it is a worthy suggestion. As ABIP will be able to enter into financing arrangements only for two years it is particularly important that it be fully operational as soon as possible after the bill passes. In that context, EFIC could assist in achieving that goal.

Question agreed to.

Bill, as amended, agreed to.

Australian Business Investment Partnership (Consequential Amendment) Bill 2009

Bill—by leave—taken as a whole.

Bill agreed to.

Australian Business Investment Partnership Bill 2009 reported with amendments, Australian Business Investment Partnership (Consequential Amendment) Bill 2009 reported without amendment; report adopted.