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

I move:

(1)   Schedule 1, item 8, page 7 (after line 29), after Part 2D.8, insert:

Part 2D.9—Limit on benefits for key management personnel

206N—Limit on benefits for key management personnelDespite any other provision of this Act, an entity must not give, or propose to give, a benefit in connection with a member of the key management personnel of the entity which in any financial year exceeds, or is capable of exceeding, an amount that is 30 times the average wage or salary of a full-time employee of the entity.

Note 1:   The recipient of the benefit need not be the member of the key management personnel.

Note 2:   Key management personnel has the meaning given by section 9.

(2)   If the benefit is given, or is proposed to be given, in connection with a member of the key management personnel of the entity for a period of less than 12 months in a financial year, the amount calculated under subsection (1) is taken to be reduced proportionately to reflect the number of days in that year to which the benefit relates.

(3)   In this section:

benefit includes the amount of the benefit or the money value of the benefit (if it is not, or not solely, a payment of a monetary amount).

entity includes related entities, so that the total or all benefits given by related entities in relation to a member of the key management personnel must not exceed the relevant amount. full-time employee does not include any person who is a member of the key management personnel or who holds a similar position, or any other person prescribed by the regulations.

(4)   For the purposes of subsection (1), the regulations may prescribe a method or methods for the calculation of the average wage or salary of a full-time employee of an entity.

The amendment is self-explanatory. There are definitions below that. It means that we as a parliament responsible for ensuring that the people of this nation share in its wealth put a limit of 30 times on the packages of CEOs that of the average worker in a corporation. I am not going to labour the point. It is so obviously self-explanatory; it is so obviously reasonable; it is so obviously decent; it is so obviously in keeping with Australians and the hard work that people do for corporations that there should be such a limit paid on the executive caps.

We are talking about this in an era in which stronger action is being taken in Europe, in an era in which we are seeing—and I know that the opposition argues—a greater international interchange of CEOs. Many of the CEOs that get these extra­ordinary packages in Australia come to Australia for a few years and leave again. The opposition argues—

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

And the government.

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

And the government, that they will be better skilled than Australians. I do not accept that. I do not believe it and, as I said in the second reading speech, I think there is a humanity involved in the payment in the qualities that you look for in a CEO. There is some parallel here in the endless argument about how well or otherwise members of parlia­ment are paid and there can be no justification—and I have heard none in this debate and will hear none—for packages as big as $16 million in one year being taken, raked off by CEOs of big banks in this country, while, as I said, there is a regressive tax at ATM level on the poorest people in Australia, put on by the banks and illegal if it were in the United Kingdom, but done here in Australia and raising enormous amounts of money. It is not enough to pay for those CEO packages, you would not think, but contributes to them at the expense of people who are having a real struggle—good Australians, people who have worked all their lives for this country and for these corporations, who find themselves in struggle street while bank managers and mining corporation managers take home packages way in excess of $10 million, and headed even higher in a country where the principle of a fair go and a reasonable relationship between CEOs packages and those of ordinary workers has been lost and needs to be regained. I commend this amendment to the bill to the chamber.

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

The coalition will not be supporting this Greens amendment. The level of executive remuneration is appropriately a matter for companies to decide. It is up to shareholders and their company boards to make these sorts of decisions. Parliament has a role in ensuring that a proper framework is in place to ensure transparency of decision-making around executive remuneration matters. While we have concerns about some aspects of this bill, hence the coalition amendments on the Notice Paper, this is what this bill is trying to do. But there is no role in the coalition's view for government, or the parliament for that matter, to interfere in the level of remuneration by imposing a legislation pay cut.

The Greens proposal in our view is completely irresponsible. To go down this path seriously undermines our international competitiveness when it comes to attracting the best and brightest to run our companies. We do want to attract the best people to lead Australian companies so that those com­panies reach their full potential, which of course helps Australia to maximise our potential in terms of economic growth. This is obviously an area where it is easy to go for the populist proposal that can readily generate a superficial level of public support. But when you actually scrutinise the implications of this and what it would mean in terms of maximising our opportunities across Australia, this would actually be a very, counterproductive amendment if it were passed by the Senate and, as such, the coalition will oppose it and recommends to the Senate that it do likewise.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting the Minister for Tourism) Share this | Link to this | Hansard source

On behalf of the govern­ment, this is not an unfamiliar amendment. We have had it brought to the Senate on at least three or four occasions that I can recall in dealing with these matters, though I think on this occasion we are dealing with a proposed cap from the Greens of approxi­mately $1.98 million. On previous occasions, I can recollect, it was approximately $5 million.

Shareholders take on the risk of investing capital and they share in the company's profits and losses. As the owners of a company, the government believes they do deserve more say over the remuneration of company executives. I suppose the key argument before us in dealing with this amendment and the legislation is how that is achieved. Giving shareholders a greater ability to spill the board, that is, remove them, over the remuneration of company executives, is a tough measure. It is a tough measure by any international standards that I am aware of.

But we also have to be economically responsible. Companies are important to the Australian economy and it is the role of the owners of those companies, the shareholders, to hold directors accountable on rem­uneration matters. It is not the role of government to hold the executives directly responsible; it is the role of shareholders.

The Productivity Commission reports states that a cap, as is being proposed here—and which of course was obviously a matter of consideration by the PC; it was certainly presented by a number of the submitters to the PC—

... would disadvantage some firms over others and have undesirable commercial consequences for Australian companies relative to their competitors

and that is on page xxvii, page 27.

The Productivity Commission also points out in the report:

There is no single right answer to structuring pay. Board discretion remains central to ensuring that pay structures are appropriate for each company's circumstances over time.

That is on page 189. It continues:

A salary cap would place Australia's public companies at a disadvantage against international competitors and private companies particularly in relation to hiring and retaining their executive talent.

Under the government's reforms directors will need to be able to stand in front of the shareholders and justify their decisions in relation to the pay packets of executives or face the risk of being removed from the board. The government wants to make sure that Australia has a system that rewards talent, hard work and good performance and gives shareholders the ability to have their say if they believe that an executive is being paid too highly. Importantly, the two-strikes test strengthens the non-binding vote while maintaining the fundamental principle underlying Australia's corporate governance framework that directors are responsible for, and accountable to, shareholders on all aspects of the management of the company. The Labor government will not be support­ing the amendment moved by Senator Brown on behalf of the Greens.

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

There we got the same old argument that we do not have the best and brightest in Australia and we need to import them from overseas—jack up the salaries, give more millions on top of the millions already, attract the Don Voeltes and other people from elsewhere because we do not have the talent in Australia. What rubbish! What utter hogwash! If Senator Cormann and the opposition want to have a plebiscite they should have one on the Greens' wish to put a cap of $5 million on CEO salaries. If you want to spend millions more dollars of taxpayers' money, try us on that one.

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

Are you proposing that?

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

I bet you and Mr Abbott will not do that, will you? Of course, you will not.

Michael Forshaw (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Order! Senator Brown and Senator Cormann—

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

Is that what you are proposing?

The TEMPORARY CHAIRMAN: Senator Cormann!

Senator Sherry interjecting—

The TEMPORARY CHAIRMAN: Minister! Has everybody finished? Senator Brown, you will direct your remarks through the chair and Senator Cormann, you will cease engaging in across the chamber discussion.

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

I think we have touched a nerve here.

The TEMPORARY CHAIRMAN: Not mine, but you carry on.

No, you have had to defend him. We are not going to hear such a positive mood for my challenge. Let us have a plebiscite, if the opposition want one, on pegging these obscene CEO salaries at $5 million, which is 75 times the average income of workers in this country. If they want to do something about making this country a fairer place in the future, they should try that on. Of course, they will not. They repeatedly come in here to advocate for the already rich—the super-rich, the millionaires and the barons—against the interests of the average worker and the future of the average Australian.

This is a more modest amendment. I have heard the government just reject it. It is the right thing to do. The Greens feel very strongly about this matter and feel very justified in bringing this worthy amendment before the chamber.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting the Minister for Tourism) Share this | Link to this | Hansard source

There is one relatively brief point I want to make about this issue of international competitiveness. Whether Senator Brown or indeed anyone else likes the fact or not, it is a fact that many areas of the economy in Australia—and I can think of many sectors, including the mining sector and the finance sector—are interlinked with the rest of the world. Whether people like that or not, it is just a fact of life that we are in an internationally competitive world. It is appropriate that in some areas of the labour market there is movement to and from Australia as part of that world economy, and that is true in financial services, tourism and mining. That is just a fact of life.

No matter how some people might criticise that or be concerned about it, it is part of the international capitalist economy in which we live. Part of that, of course, is the movement to and from labour markets and on occasions—I would not argue or suggest on all occasions or anywhere near it—you need to take into account the pay and conditions in that international labour market itself. That is just part and parcel of a modern Australian economy and a modern world economy.

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

The minister mentioned financial services now need to be there with the rest of the world, so is he going to join other members of the G20 in supporting a Tobin tax so that financial services have minimal tax applied so we can help feed the million people starving around the world? I do not think we are going to hear that from this government. I do not think we are going to hear from the government or the opposition that there will be agreement to back financial packages going to CEOs that may come through in the UK or Europe. We as a parliament here are charged to set rules for our own country. Sure, there is international trade in lots of things but there are lots of restrictions on that as well, legislated by the coalition and legislated by the opposition. That is what we are here for. We are here to ensure we do the right thing by Australians, and this amend­ment does the right thing by Australians.

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern and Remote Australia) Share this | Link to this | Hansard source

I was working away in my office watching the in-house broadcast of these proceedings on the TV, as I always do, and I was occasioned to come down here by the ultimate hypocrisy of the Greens yet again. Here is Senator Bob Brown railing about the multinationals, the millionaires and the billionaires and how the Greens are opposed to them. I reflect on the flood levy tax, which the Greens supported quite vociferously, and wonder why then Senator Brown was not so concerned about the multinational billionaire companies. You will recall that with the flood levy, which the Greens supported, the only people who were taxed were individual Australians, not companies—not the big mining companies that earn so much money and send all the profits overseas, as we keep hearing Senator Brown talk about. When I asked Senator Brown during that debate why he was exempting those multinational billionaire companies, as he calls them—the companies that send all of Australia's profits overseas, as he says—from the flood levy but imposing that flood levy on ordinary Australians, did I get an answer from Senator Brown? Of course I did not, because it just demonstrates the hypocrisy of the Greens political party. I do not want a rerun of the flood levy tax debate, but I do want to ask Senator Brown again why it was that he was imposing a tax on the local butcher and baker but not imposing the same tax on Woolworths and Coles, who are the principal competitors of the local butcher and baker. Did I get an answer to that? Would I get an answer now perhaps, Senator Brown? Perhaps you will tell me why your party's hypocrisy knew no ends when it came to the flood levy tax. That was an important debate, as is the debate before us today.

What Senator Cormann has indicated on the bill and amendment is sensible and is the way I will vote when this bill comes to fruition, but I do want to know, on hearing all the pious words, all the anger and all the enthusiasm of Senator Brown about the billionaires who run the country, why he exempted those billionaires from the flood levy. Why did he make the local butcher and baker pay the flood levy tax but not Coles and Woolworths?

Michael Forshaw (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Order! Senator Macdonald, I appreciate the context in which you have been putting your remarks in this debate, but we are dealing with entirely different legislation. I think you are starting to stray, particularly in asking questions of Senator Brown on another piece of legislation. You should return to making remarks on this bill.

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern and Remote Australia) Share this | Link to this | Hansard source

Thank you, Mr Temporary Chairman. I hoped I was and I certainly intended to talk about this bill. I thought the approach that Senator Cormann adopted on this bill was one which all Australians would support and is certainly the one that I as a senator will be supporting. What I cannot stand in this committee stage is the absolute hypocrisy of the Greens political party. Anyone listening to the debate on this bill would have heard Senator Brown railing about the wealthy people and the billionaires and how they should not be allowed to get away with it.

In the context of that debate, I ask Senator Brown about those that he calls billionaire, multinational companies, mining companies, Woolworths and Coles. I do not agree with his descriptions, as I do not agree with his descriptions on this amendment before the chair, but why is he so opposed to the foreign, wealthy individuals or companies that he is talking about in this debate yet in the flood levy he let them off absolutely scot-free? It did not cost them a cent. It cost the local butcher and baker a heap and will continue to do so while this flood levy is on. Thanks to Senator Brown supporting the government on this, those multinational companies—the billionaires he talks about who run these companies—have been let off scot-free.

I challenge Senator Brown. Perhaps it is not directly on message, but he refused to answer the question during that debate. He scurried away, joined his mates in the Labor Party and got that tax through on ordinary Australians, but when we suggested it should be a more wide-ranging tax—that is, an income tax that everyone paid to fix up the flood damage in my state and other states—where was Senator Brown? He had scurried away. He was not game to come back and answer those questions then. So here is his opportunity. Perhaps he can do it now. A division having been called and the bells being rung—

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

Order! Senators, the matter that is currently under consideration will have to be adjourned because we have a standing order that says that divisions on Monday mornings cannot take place before 12.30 pm and any questions put to the Senate must be adjourned until after that time. This division will have to be put again at a later stage today because we will not be here at 12.30 pm. The motion moved by Senator Brown is postponed.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to 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.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting the Minister for Tourism) Share this | Link to this | Hansard source

I have a couple of points on this amendment from the Liberal-National Party. On the issues of the threshold of 25 per cent, the Productivity Commission did consult widely. It is obviously a matter of considerable interest, and indeed contention, for many.

While the first two strikes occur where a company's remuneration report receives a no vote of 25 per cent or more, there are still several protective measures in place to ensure that there is not a destabilising effect on company operations and that minority shareholders cannot abuse the process to inappropriately undermine company stab­ility. Following the second strike, share­holders will vote to determine whether the directors will need to stand for re-election. The spill resolution can only pass with 50 per cent or more of eligible votes cast. If it passes then the spill meeting, which must be held within 90 days, also requires over 50 per cent of votes to pass. The two-strikes process allows shareholders to express their concern with the remuneration report and compels a company to outline their response to these concerns.

As the PC concluded, a threshold of 25 per cent would better align with levels commonly accepted as demonstrating serious shareholder concern about remuneration, particularly in light of current voting patterns. Clearly it provides a greater level of accountability than a threshold of 50 per cent. In short, the two-strikes test empowers share­holders to take action against unres­ponsive boards while avoiding any destab­ilising effect on companies.

The senator asked a question about the minimum. The minimum is not a legislative minimum; it is the minimum established in the company's constitution, so that is the relevant figure. We believe it is appropriate, we do not believe it is set too low and we oppose the opposition's amendment.

Russell Trood (Queensland, Liberal Party) Share this | Link to this | Hansard source

The question is that the amendment standing in the name of the opposition be agreed to. A division is required. Under the standing orders for sitting of the Senate on Monday mornings, divisions have to be postponed until a later hour of the day, so we cannot proceed with this further now.

Progress reported.