Andrew Giles (Scullin, Australian Labor Party) Share this | Hansard source

I move:

That this House:

(1) notes with deep concern that:

  (a) income inequality in Australia is growing such that currently the top 20 per cent of households receive half of Australia’s income while the bottom 20 per cent receive just four per cent; and

  (b) in 2013 the top 1 per cent of Australian earners received 9 per cent of Australia’s income, and the top 0.1 per cent received 2.5 per cent, in both cases representing the highest proportion since the 1950s, and a proportion which continues to increase;

(2) notes rapidly increasing executive and, in particular, Chief Executive Officer (CEO) remuneration, for example between 1971 and 2008, real CEO pay grew by nearly five times, while the real average weekly earnings grew just over one and a half times despite:

  (a) research showing that executive pay increases are not closely related to company performance;

  (b) the belief that large disparities between executive pay and average earnings might actually demotivate a company’s employees and adversely affect priorities, as reported in the 2009 Productivity Commission inquiry into executive remuneration in Australia; and

  (c) the belief that poor remuneration arrangements can promote inappropriate, risky short term decision making, carrying wider economic ramifications including a negative impact on productivity growth;

(3) notes the positive effect of past legislative efforts on ensuring corporate executive remuneration is transparent, particularly the ‘two strikes’ legislation which came into effect in 2011, acknowledging that mandatory disclosure of CEO pay ratios, as required in the United Kingdom and more recently in the United States, would:

  (a) provide:

     (i) important information to shareholders voting on executive remuneration; and

     (ii) a more accurate measure of an important aspect of income inequality in Australia; and

  (b) improve the health of our democracy by making important information more accessible to the public; and

(4) calls on the government to consider following the lead of the United States in its Dodd-Frank Wall Street Reform and Consumer Protection Act in mandating that public companies disclose the ratio of a CEO’s annual total remuneration to the average annual total of all company employees.

How much is enough? As Australia becomes increasingly unequal, that is a pressing question for members of this place to consider.

Income inequality is at a post-Depression high in Australia, mirroring a disturbing trend around the developed world. We have seen some particularly troubling evidence of this, which this motion is intended to respond to directly, as the annual reporting season of public companies is underway. Members will have noted commentary in particular about the remuneration package of the former head of the ANZ, Mike Smith, as well as other proposed remuneration packages of public company CEOs which have attracted first and sometimes second strikes under legislation Labor introduced when they were in government.

This is a very significant issue—the gap between the haves and the have nots in Australia. It is a particularly important question when we consider what is happening with levels of executive remuneration. And so this motion is intended to draw the attention of the House and the wider Australian community to the steps that have been enacted to deal with these issues and also to call for further action on the part of the Turnbull government.

It is critical, when we think about what is happening in executive remuneration in Australia, that we look to the wider context. We have in Australia inequality at such heights that we have not seen since the Great Depression and a government which seems determined through its policy settings to exacerbate this inequality, not ameliorate it. At the same time as we are seeing these excessive wage and other remuneration packages for CEOs of our public companies, we found out last week about record low wages growth. We are seeing a twin track approach to remuneration in Australia, where ordinary Australian workers are not keeping up and a small number of people, the one per cent and the 0.1 per cent are doing very well indeed.

We also come to this debate with an increased understanding that this level of inequality is not simply bad in and of itself. It is not just a moral failing, going to the question of how much is enough for anyone; it also carries very significant instrumental consequences. We know now that inequality is a brake on growth. We also come to this debate understanding that one of the key problems facing Australia's efforts to boost productivity goes to our managerial performance. The conceit which has underpinned high remuneration packages for our CEOs and other executives at major companies has been the proposition that these levels of remuneration are necessary to attract great talent. The evidence suggests that that talent is not producing in accordance with its level of remuneration.

Labor when last in government saw this as a very significant economic issue and also as a significant issue of moral and political concern, and asked the Productivity Commission to have a detailed look at executive remuneration in Australia. The commission did so, and produced 17 recommendations. Those which called for direct government action were legislated through the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011. The critical aspect of this for present purposes was to institute a two-strikes provision to give shareholders—shareholder activists—and indeed the wider Australian community a better sense of control over how executives were being remunerated. This legislation since its enactment has demonstrated that there is a gap between executive sense of entitlement and community standards and company performance. It has also demonstrated there is a need for more.

In this motion we refer to recent legislative efforts in the UK and the US which will call for the mandatory disclosure of CEO pay, relative to the median wage of employees at that enterprise or business. Other jurisdictions have been showing the way. In the UK and in the US there has been a first-principles approach to this question of executive remuneration which recognises that the social licence that has been granted there is being eroded, that public faith and public trust have been undermined by these types of behaviour. But also, given the complex nature of many of these remuneration packages, it has proved very difficult for there to be informed debate about what precisely is contained within them.

In moving this motion I draw the attention of the House—and I am very pleased that the member for Lilley, who has done more than anyone else in Australia to put these issues on the proper framework, in government and since then through his work in opposition—to call on further action to make our CEOs and other executives accountable to the Australian public through shareholders.

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