Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

The Morrison government might be too busy to go ahead and set up a proper integrity commission, one with teeth, which holds public hearings and can hold people to account for past wrongdoings, but it's not too busy to water down laws affecting business accountability. We saw some reasonable changes put in place during the pandemic, but now the government is looking to make those permanent and to take away the corporate accountability and directors' liability, which ensure that Australian firms do the right thing.

The government is claiming that there is an epidemic of class actions taking place in Australia, despite the fact that shareholder class actions make up much less than even one per cent of all cases filed in the Federal Court. They affect a tiny share of the firms who've done the wrong thing. Very few directors are sued in Australia, and yet the government wants to go ahead and make directors liability even lighter than it currently is. These moves have been criticised by a range of stakeholders. The leading investor body, the Australian Council of Superannuation Investors, has said that there was no consultation with major investors on the repealing of continuous disclosure laws. ACSI Chief Executive, Louise Davidson has said:

Continuous disclosure provisions are fundamental to market integrity and should not be diminished.

She goes to say:

Investor confidence in the Australian market relies on disclosures being accurate. These changes could undermine that confidence by providing protection for companies making poor disclosures.

Reducing accountability for poor disclosures is not the answer to addressing issues with class actions. These policy issues should be considered and addressed separately from the continuous disclosure and director liability regime.

That's from a body that represents $1.5 trillion of super savings. They have said that these changes will dent market integrity. Peter Morgan, the former head of Perpetual investments, said he was 'totally against any attempt to get rid of a physical AGM'. Stephen Mayne, who has been a regular critic of corporate mismanagement, has said, 'The physical AGM is the one day of the year where shareholders get to eyeball directors.' ISS has said it is a proposal that would 'stifle the questioning and accountability of boards'. As Stephen Mayne has pointed out, there is a significant risk of going to a fully virtual AGM approach. Damon Kitney, in The Australian, summed up the atmospherics at Crown's AGM. Following the devastating findings of the Bergin inquiry, Crown's virtual AGM was almost completely devoid of emotion. Crown's directors were back in control because questions were not asked in person. They were submitted in writing and they were read to the chair, Helen Coonan, by the company secretary, Mary Manos. As a result, shareholders didn't get to see the whites of their eyes, as Stephen Mayne has put it. They didn't get to question company directors in the way in which an in-person AGM would allow.

These changes mean that company directors will only be liable for civil penalty proceedings in respect of continuous disclosure obligations where they can prove the directors have acted with 'knowledge, recklessness or negligence'. These changes have been referred to as the 'honest idiot defence'. Damian Graham, who oversees $130 billion of assets as the chief investment officer at Aware Super, says investors rely on an informed market:

I would suggest we would prefer that the strongest disclosure regime was in place … As a principal, greater disclosure provides greater confidence and supports the highest level of efficiency of markets.

Maurice Blackburn class action principal Andrew Watson has said that securities class actions will become more difficult and has pointed out that in a given year less than two per cent of companies get sued for breaches of the continuous disclosure and misleading and deceptive conduct rules. So, as a result of the government's attacks on those bringing class actions, we are going to get less continuous disclosure as a result. As the member for Whitlam has said:

After the revelations about Crown Casino in the New South Wales Casino Inquiry, it is hard to understand why the Government is going down this path.

Shareholders are demanding more transparency, not less, to protect their investments and allow them to make rational decisions about where to put their money.

So these changes, if they're approved by this parliament, will allow dodgy directors to get away with not releasing crucial information to shareholders.

This is not just an issue that should affect shareholders. Australian firms are stronger and Australia is a more attractive investment destination when we have appropriate disclosure rules in place. These proposed changes put the interests of a handful of company directors ahead of the vast number of mum and dad investors. It's ironic that the coalition, which, at the last election, claimed it was the party of shareholders, is now limiting the ability of shareholders to keep directors in check. Australian Shareholders Association head, Allan Goldin, says: 'The new instruction to management from boards could be: "If you want to keep some information to yourself or exaggerate a bit, just make sure you don't tell me so no-one can sue me." This is a real danger.'

It's not as though we don't have significant problems in the economy. As Greg Jericho has pointed out, even prior to the pandemic, the level of prime age men working full-time was below the post-1990s-recession median of 74 per cent, let alone the mining boom peak level of 75.9 per cent. The current level is a full percentage lower than the pre-pandemic point, and since 2012 there's been a historically low number of men in this group working full-time. We have, according to Greg Jericho, still a significant drop in the level of hours actually worked, and we have an unemployment rate not forecast to return to pre-pandemic levels for years to come.

Even then, the government is too unambitious in its unemployment targets. We've had the Reserve Bank governor saying that he thinks full employment might be below four per cent, which would mean we need much more ambition to increase employment in Australia, yet we have two million Australians out of work or without enough work. Estimates from the University of Melbourne's Jeff Borland suggest that between 150,000 and 250,000 people could lose their jobs when JobKeeper comes to an end at the end of this month. The economy is a full one per cent smaller than before the pandemic. Even before COVID, growth was well below trend. Wages growth under the Liberals has been at record lows. Under Labor, wages grew an average of 3.6 per cent a year. Under the Liberals, wage growth has slowed to 2.2 per cent, and has recently fallen to all-time lows of 1.4 per cent. In real terms, many Australian workers are going backwards. They're seeing the buying power of their pay packet fall, because the Liberals have been focused on corporate profits rather than wages.

Again, we see that with this bill, a bill that tilts the balance away from the many and towards the few. It's always the way with the Liberals. They're always out there to ensure that the small number who receive profits benefit at the expense of the large number who receive wages. Again, here, they're looking to protect their mates. They're looking to protect the C-suite, the insiders, at the expense of the many more people who own shares.

This is in a context in which productivity is in the doldrums, in which household consumption is down and in which household debt is among the highest in the world. There are serious economic problems to be addressed. But the Liberals aren't addressing them. With this bill, they are simply doing the bidding of a handful of insiders, not dealing with the very real problems that Australia has.

This bill reflects the lack of ambition for Australia under the Liberals. If only we had a Prime Minister as ambitious for the nation's economy as he is for his own political career. If only we had a government interested in looking after Australian shareholders rather than watering down disclosure. As the member for Whitlam has pointed out, every shareholder who was told at the last election that the coalition was on their side now knows that to be a complete falsehood and now knows that this Liberal Party is a party that will stand up for the few against the interests of the many.

Phillip Thompson (Herbert, Liberal National Party) Share this | Link to this | Hansard source

We all know that COVID-19 has had a massive impact on many parts of our communities and, in particular, our business community. There have been many things that have prevented businesses doing things they normally do, particularly because of the large number of unpredictable lockdowns that we've all had to experience. I have more than 12,000 businesses in my electorate of Herbert, and JobKeeper has supported at least 4,000 of those through this pandemic. But subsidies and financial assistance alone aren't enough to keep businesses going. The burden of regulatory red tape has had to be eased in a lot of areas, and that has had a major positive impact in helping small business owners through the pandemic.

That's what today's bill, the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, is about. We're extending some of the temporary relief that has allowed business dealings to continue. Specifically, schedule 1 extends temporary relief, allowing companies to use technology to meet regulatory requirements, hold meetings, distribute meeting materials and execute documents until 15 September 2021. We've all become very accustomed to Zoom and Teams over the last 12 months, and this will allow those technologies to continue to be used to hold those meetings while meeting face to face is still impossible. We need to be ready for another COVID-19 outbreak maybe occurring in a particular area and for public health orders being imposed from time to time.

But we're not just extending the date and leaving it at that. The extension includes enhancements to the original temporary relief following feedback received through consultation. These enhancements including ensuring that substantive regulatory obligations are the same irrespective of whether companies conduct meetings virtually, in person or in a combination of both, or whether they use paper based or electronic forms of communication. The extension will cover more than 200 listed companies and many more unlisted companies with 31 December as their year-end date, who are expected to hold annual general meetings in the first half of this year.

COVID-19 has helped revolutionise a lot of things and helped us make changes and try new things that we really didn't need to try before a global pandemic. That's why, in response to the positive feedback from consultation, we're also proposing permanent reforms that will continue to allow companies to electronically sign company documents and send meeting related materials electronically. These reforms will be in place when this temporary extension ends. We're also proposing to conduct an opt-in pilot for hybrid annual general meetings, in which shareholders can choose whether to attend meetings in person or virtually. This pilot will commence when the extension to the temporary relief ends. The aim of the pilot will be to encourage companies and shareholders to engage with technology, with a view to considering whether further permanent reforms are needed to further support companies to use technology effectively to engage positively with their shareholders. In addition to enabling businesses to use digital technologies to conduct meetings and send meeting related materials, the relief also allows businesses to use digital technologies to sign meeting related materials and keep, retain and provide meeting related materials such as meeting minutes.

What about those in our community who might not be able to access technology? The experience with this temporary relief was that shareholder attendance increased when they were offered the ability to participate via technology. Compared with 2019, there was a 36 per cent increase in shareholder attendance in 2020. In 2020 some companies had over 800 people attending their virtual meeting. So they actually had more people attend, because they didn't have to physically be anywhere. But this relief does accommodate shareholders if they have preferences for physical meetings, as they place no obligation on companies to host virtual-only meetings if the shareholder base prefers otherwise. This relief also allows shareholders to elect to receive hard-copy meeting materials.

What about protecting shareholders' rights with these virtual meetings? That's a question that I, too, asked. Shareholders will have the same substantive regulatory protections regardless of whether a physical, virtual or hybrid meeting is held. Specifically, companies provide shareholders as a whole with facilities to ask questions orally and make comments at the meeting, a reasonable opportunity to participate, and facilities to be counted towards a quorum and to vote and comply with preferred voting methods as expressed in company constitutions. Companies must also send meeting related materials electronically and send hard copies if shareholders elect to receive them.

This is a great example of how we don't necessarily need to go back to exactly how things were before COVID-19. This is an example of how we have learned plenty of lessons from trying something new, how we can move forward in a way which will provide significant savings for businesses and, in turn, how we can reinvest in creating more jobs for Australians.

Mark Dreyfus (Isaacs, Australian Labor Party, Shadow Attorney General) Share this | Link to this | Hansard source

Although we have reservations, Labor supports schedule 1 of the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021. Others have commented on those amendments. In my remarks today, I will focus on schedule 2 of the bill, which Labor does not support.

On 25 May 2020, the Treasurer announced temporary changes to the continuous disclosure provisions in the Corporations Act. Before that date, the continuous disclosure regime introduced by the Howard government had required companies to disclose any information that was not generally available to shareholders and that a reasonable person would expect to have a material effect on the price or value of a company's shares. When a listed company or a director failed to fulfil that obligation and shareholders suffered as a result of that failure, shareholders could take action, and they didn't have to prove that the company or the company's directors had knowledge or were reckless or negligent. As the Australian Shareholders Association put it in a media release last week:

Previously if there was any failure to keep the market informed under the current 'Continuous Disclosure' rule, it was a simple black and white situation, don't tell shareholders something material and the Company and its Directors were liable. This was great for shareholders because they do not have insider or special interest knowledge and all they know is what they are told and what they read.

In May 2020, the Treasurer used an emergency COVID-19 power—or, more accurately, the Treasurer misused an emergency COVID-19 power—to water down John Howard's continuous disclosure obligations. As a result of those temporary changes, which continue to operate as I speak, shareholders who suffer a loss as a result of listed companies or company directors withholding information from them now have to prove that a company or a company director had knowledge of, or was reckless or negligent in respect of, whether the information they did not disclose to shareholders would have had a material effect on the price or value of the company's shares.

In less legalistic terms, the Treasurer's temporary changes make it easier for company directors to withhold important information from shareholders and harder for shareholders to take action against dodgy directors. Those are the changes that schedule 2 of this bill would turn into a permanent feature of Australian Corporations Law. As the Australian Shareholders Association said last week:

So the new instruction to management from boards could be, if you want to keep some information to yourself or exaggerate a bit just make sure you don't tell me so no one can sue me.

Let's be very clear about what we're talking about here. Australia's continuous disclosure obligations require companies to keep markets fully informed of anything that could materially affect their share price. These laws protect shareholders, promote market integrity and, by extension, make it easier for Australian companies to raise capital. As ASIC has told the Treasurer, the continuous disclosure regime 'is a fundamental tenet of our markets and is particularly important during times of market uncertainty and volatility'. It is not something to be messed around with or treated like an ideological plaything, but that is how the Morrison government is treating it, and it's a direct attack on the rights and interests of every shareholder in Australia. From mum-and-dad investors to self-funded retirees to large institutional investors, every single Australian shareholder should be concerned about these changes.

Why is the Morrison government doing this? The main reason the Morrison government has offered for the changes in schedule 2 is the supposed threat of 'opportunistic class actions' by company shareholders. The Morrison government doesn't explain what it means by 'opportunistic class actions'. My guess is that the government thinks that all class actions, whether by shareholders or any other aggrieved group of Australians, are opportunistic. How dare ordinary Australians who are harmed by powerful interests vindicate their legal rights! That's what the Morrison government says. The Morrison government, of course, has direct experience of class actions. Whether it's property owners in Townsville, Darwin, Perth, Richmond and many other places across Australia banding together to sue the government because the Department of Defence allegedly allowed toxic chemicals known at PFAS to contaminate local environments, or the victims of the Prime Minister's illegal robodebt scheme launching a class action to vindicate their rights, the Morrison government hates the idea of ordinary Australians standing up for themselves.

But let's put aside the debate about the merits or demerits of class actions, because, when it comes to the proposed changes to continuous disclosure laws, that is a side issue at best. Let's instead put the Morrison government's pathological obsession with class actions, and shareholder class actions in particular, into context. According to the large commercial law firm Allens, in 2019 there were 10 shareholder class actions filed in Australia—not 10,000 but 10. In fairness, and so I can't be accused of cherrypicking statistics, I note that in 2018 there were about 20 shareholder class actions filed in Australia, in 2017 there were about 15 and in 2016 there were fewer than five. Those figures also come from Allens. The point is that, on any measure, these are tiny numbers, especially when one considers the many tens of thousands of cases filed in Australian courts each year.

With this bill, the Liberals are trying to water down the continuous disclosure regime introduced by John Howard, a regime that has served Australia, and particularly Australian shareholders, very well for decades. With this bill, the Liberals, under Scott Morrison, are trying to make it easier for company directors and officers to get away with withholding information and with providing misleading information to shareholders.

Llew O'Brien (Wide Bay, National Party) Share this | Link to this | Hansard source

The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour. The member will have leave to continue speaking when the debate is resumed.