Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for the Republic) Share this | Hansard source

This bill, the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, is about undermining democracy and undermining transparency and accountability for Australian shareholders in companies—it's as simple as that. This bill is undoing a law that was put in place by the Howard government to provide more transparency, more accountability and more democracy, so we got better decisions from boards and more accountability to shareholders in the past. Yet this government wants to undermine that in the name of class actions and insurance costs for companies around directors' liability increasing, when there is simply no evidence of that at all. So, once again, what appears to be occurring here is that an ideologically driven campaign from the backbench of the government has forced the minister, the Treasurer, into amending a very important law that provides democracy and accountability and information for Australian shareholders.

What this bill is doing is undermining the viability of and the information and accountability that goes to mum and dad investors who are shareholders in companies, to people who run their own self-managed superannuation funds—self-funded retirees. They're doing it tough enough as it is under this government. Since COVID hit, interest rates have been so low they're not making returns on their investments at all. Self-funded retirees are doing it tough. They've been forgotten about by this government in all of the support packages that have been put together. Yet the government wants to make it more difficult for self-funded retirees to get information and hold boards to account for those companies that they've invested in. Well, that is undermining democracy in Australian companies.

Schedule 1 of this bill allows for companies to hold virtual annual general meetings and execute a range of other governance activities using electronic means until 16 September 2021. This is a temporary measure that was put in place by the government during COVID and which Labor supported. It was due to expire on 21 March 2021. But, given that COVID is continuing and given that our borders sometimes won't be open, Labor will be supporting this particular measure on a temporary basis.

However, we are worried about the reduction in transparency and accountability, particularly around shareholders being able to ask questions and have votes on issues with boards at annual general meetings. The Senate report into this bill quotes the International Corporate Governance Network, which observed:

… we encourage regulators to ensure that shareholder rights are not infringed so as not to restrict their ability to hold companies properly to account. Certain minimum shareholder rights should be guaranteed to allow for robust challenge of boards and management through interactive and unmoderated questioning or statements made by shareholders to have meaningful dialogue on contentious proposals.

So it is important, if this measure is passed, that there is a mechanism, through those online networks, for shareholders to continue to ask those important questions when it comes to annual general meetings and holding boards to account. So Labor supports this, on the basis that it is a temporary measure to get us through COVID.

Schedule 2 is the real controversy in this bill. Schedule 2 undermines what are known as the continuous disclosure obligations, which exist in corporate law—obligations from boards to shareholders about material information and when it was discovered. These are laws that were put in place by the Howard government, introduced in 2001. Companies and company directors were required to disclose publicly any information that was not generally available that a reasonable person would expect to have a material effect on the price or value of a company share price. If a company or a company director failed to comply with those obligations, they could face a civil penalty action either by shareholders or by ASIC. However, a director was not liable for a civil penalty for breaching those obligations if he or she took all reasonable steps to ensure that the company complied with its disclosure obligations and, after taking those reasonable steps, believed that the company was complying with its obligations.

Under the temporary COVID regime, which schedule 2 would make permanent, companies and directors that fail to disclose price-sensitive information, either at all or in a timely fashion, are only liable to shareholders for that failure if the company or directors acted with 'knowledge, recklessness or negligence', all of which can be very, very difficult to establish. So what we are seeing here is a watering down of those laws put in place by the Howard government to ensure that directors couldn't dud their shareholders by not disclosing vital information which could materially affect the price and the value of shares in the market. What shareholder in a company, what mum and dad investor or what self-managed super fund operator wouldn't want to know about information that may materially affect the share price of the company that they are invested in as quickly as possible? Yet this particular change undermines the strength of that guarantee, written into law and existing in Australian law since 2001, for Australian shareholders. So in that respect they are undermining the democracy and the information and transparency and accountability, that is so important to shareholders around the operation of their companies, and the material information which all shareholders have the right to know about.

In the Senate inquiry into this particular bill, there was deep concern that was presented by a number of submitters—most notably, the Australian Shareholders' Association. The representative body of the group of Australian shareholders expressed deep reservations on the regressive nature of this reform. But it says everything about the operation of this government and the ideological campaign that's been run by backbenchers around this issue that this government completely ignored the wishes of shareholders and instead, once again, sided with their mates on big bonuses in big companies—the directors of these companies.

I want to read to you some of the evidence that was presented to the committee, and some of that is deep concern from shareholders and legal practitioners about schedule 2. Their view is that it is 'unnecessary' and 'turns back the clock … leaving shareholders at risk of a return to the darker days of the distress of high legal costs to individuals or groups of shareholders pursuing redress'. The Australian Council of Superannuation Investors said:

If shareholders are required to prove a subjective standard (the mental state of the disclosing entity) rather than the current objective standard of materiality, this will make it more difficult for shareholders to hold companies to account.

The proposed changes to the continuous disclosure rules could therefore adversely affect the balance between companies and investors, and work to undermine market integrity.

And that's important: they could undermine integrity in the operation of Australian companies. Let's not forget that those opposite don't care about integrity. They don't care about integrity at all, in everything that they do. We've seen that in a host of policy areas in this parliament, whether it goes to sports rorts, whether it goes to the operation of committees or whether it goes to the way that they've handled the allegations that have been raised by Ms Higgins. Integrity doesn't matter at all to those in this place—

See this speech in context