Claire Moore (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister representing the Assistant Treasurer, Senator Sherry. Is the minister aware of the headlines surrounding executive remuneration in these recent weeks with the reporting season coming to a close? Could the minister please outline to the Senate what the government has done to make executives more accountable to shareholders and their remuneration even more transparent?

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

Thank you to Senator Moore for her question, one that is obviously very relevant. There has been a good deal of media coverage in the last few weeks. It is what is known as the AGM season, so we have seen a number of instances of the issue of executive pay and concerns around executive pay being raised at AGMs. I would emphasise there is absolutely no problem with, in successful businesses, effective executives receiving increased remuneration. Notwithstanding that, faith does need to be kept between executives and their shareholders. We must have strong rules of accountability. Further, keeping faith between businesses, particularly large businesses, and the general public is also important in the context of this debate. Earlier this year, the government introduced significant reforms in relation to—

Honourable Senators:

Honourable senators interjecting—

Claire Moore (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

On a point of order, Mr President: I cannot hear any of this answer.

John Hogg (President) Share this | Link to this | Hansard source

I remind senators that conversation across the chamber is disorderly. I was about to pull them up but they ceased. Senator Sherry is entitled to be heard in silence. Senator Sherry, continue your answer.

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

Earlier this year the government introduced significant reforms in relation to executive remuneration that we argue and believe reflect this need for balance. The reforms were first and foremost about giving more power to shareholders. We should not forget that it is shareholders who ultimately pay the wages of executives. Shareholders take on the risks of investing capital in the company, so it is only appropriate that executives are accountable to those shareholders. We should not forget that other employees have to go through transparent and to some degree regulated processes when they seek pay rises, and executives should be no different.

There are some key elements of the reforms. There is a two-strikes process. Under the new two-strikes rule, if a company remuneration report has received a 'no' vote of 25 per cent or more in two consecutive annual general meetings, shareholders will have the opportunity to vote on a motion to spill the board. Where a spill motion has been supported by a majority of shareholders— (Time expired)

Claire Moore (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Can the minister explain in what practical ways the government's reforms on executive remuneration are working?

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

Yes. Just to conclude the key elements of reform, where a spill motion is being supported by a majority of shareholder votes, directors will face fresh elections at a subsequent spill meeting. Before the government's reforms there was no legislation governing how businesses use remuneration consultants. Now a remuneration consultant must be approved by the board in order to be engaged and must demonstrate their independence. Also, directors are prohibited from participating in votes on remuneration of key management personnel.

This has been an effective package, as has been well illustrated over the last couple of weeks. It is clear proof that the government's reforms are already working. We have seen a number of instances this year of shareholders rejecting proposed remuneration. We have seen instances of companies that have recorded high 'no' votes, particularly in the last few weeks, and making much more effort to justify the pay— (Time expired)

Claire Moore (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, I ask a further supplementary question. Can the minister continue to inform the Senate of how the government is balancing the interests of shareholders, consumers and business? Is the minister aware of any alternative propositions or policies?

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

The government is absolutely unashamed and is indeed proud of the fact that we have given shareholders a greater say in how their companies are run and how key executives are paid. This is a very important reform. This is unequivocally a government that is pro-business, pro-consumer and, in this case particularly, pro-shareholder. That is consistently evident in our approach to tax reform, our approach to broader industrial relations and our approach to strengthening the rules around executive remuneration.

This government stands for fairness and balance. We believe there must be fairness and balance in the important issue of how executives pay themselves. There needs to be important accountability and transparency to shareholders in the first instance, but it is also important to maintain faith in the integrity of our capital market economy with the broader Australia community. Of course unlike those opposite, who have absolutely no policy in this area— (Time expired)