Chris Bowen (Prospect, Australian Labor Party, Minister for Financial Services, Superannuation and Corporate Law) Share this | Hansard source

I know the shadow minister does not want to hear this but it is an important point. The member for Wentworth, who is to my knowledge still the Leader of the Opposition—he was at two o’clock, last time I checked—has the policy that all remuneration should go before shareholders. The shadow minister, the member for Aston, has an amendment which waters down the government’s position and which says that less should go before shareholders than what the government’s position is. So who do we believe: the Leader of the Opposition or the shadow minister? I actually think the shadow minister is not a bad bloke, but where does the coalition stand on this policy? Is it the Leader of the Opposition’s or the shadow minister’s position? I am not sure which is the case and the House cannot know.

Perhaps when this goes into consideration in detail the member for Aston could enlighten the House as to whether the position of the Leader of the Opposition that I outlined a few moments ago is still coalition policy. It was that all executive remuneration goes before shareholders: salary, benefits, termination benefits. The government has said: ‘We don’t accept that. We don’t think that is a good idea.’ Dare I say we think that is regulatory overreach. We think that probably would not work. So we have come up with a modest but important measure to deal with what we see as a significant mischief, which is excessive termination pay, termination pay which is not linked to company performance. The community, with some just cause, gets very concerned when they see executives leaving a company that has been in difficulty—and often the chief executive or other executives must take some responsibility for that—and yet they get very substantial payments, without approval by shareholders.

The government has said: ‘Why don’t we reduce the level of executive termination pay that needs to be put to shareholders from seven years of total remuneration to one year of base pay? If the company really feels that payments higher than that are justified, if the company really feels that it can be warranted and explained to their shareholders, then put it to the shareholders.’ We are not saying they cannot do it, we are not saying we are going to outlaw it, we are not putting on a cap. We are saying, ‘Convince shareholders.’ The member for Aston has foreshadowed an amendment in consideration in detail which states, ‘We think we should make it total remuneration, not just base salary.’ So he would reduce the number of things which go to shareholders for a vote. Base pay at this level often represents about 30 per cent of total remuneration, so this would be a substantial watering down of the government’s position, and we will not accept the opposition’s amendment today. The opposition may well have to consider their position in the other place and they may well have to consider to vote for this legislation as it stands or to vote it down. Their position will be open for scrutiny by the Australian people.

We hear, as I say, many positions from the opposition on many things, but in my view this one takes the cake. The Leader of the Opposition is, as we all know, prepared to say anything and do anything for a cheap, populist stunt. He came out earlier this year and said: ‘I am tough on executive salaries. I will ensure, if I am Prime Minister of Australia, that they all get put to a vote; every last cent of an executive’s remuneration will need to be put to a vote of shareholders.’ And his shadow minister moves an amendment today to water down what we think is a moderate and sensible measure. We do realise you need to strike a balance here. You do need to ensure that Australia remains internationally competitive when it comes to attracting executives. But what we need to do is not go into regulatory overreach, as those opposite would propose to do, by putting it all to shareholders—or maybe it is their position tonight not to do as much as we would do. I am really not sure.

This is a controversial matter, and I recognise that people have people have different views. I recognise that the Australian Institute of Company Directors supports the opposition’s position. That is fine. Or can I say they support the member for Aston’s position. I do not think they support the member for Wentworth’s position. I somehow think that the company secretaries support the government’s position that this is an appropriate reform and that the regulations have dealt with their concerns. The company secretaries have said that the regulations deal with their concerns and they support the passage of the legislation. So it comes down to this: if a company thinks that executive termination pay higher than one year’s base salary can be justified, then put it to shareholders. Let the shareholders decide. The opposition tonight, at seven o’clock on 9 September, have a position that shareholders should decide less than they would be able to decide according to the government’s position. The opposition’s position up until recently was—and somehow or other, in their warped logic, it may continue to be their position—that all executive remuneration should be put to shareholders. But how you could achieve both positions at once is really quite beyond me.

See this speech in context