Steve Fielding (Victoria, Family First Party) Share this | Hansard source

There are few issues that rub people up the wrong way as much as the massive sums being paid to some company chief executives. While thousands of Australians this year have been sent to the dole queue, some of these company chief executives have enjoyed multimillion dollar payments at the workers’ expense.

Who can ignore the fact that Peter Moore, the former CEO of Pacific Brands, left the company last year with a golden handshake of $3.4 million while, only some months later, 1,850 workers were given the boot. I think it is pretty hard for the company to make the argument that they needed to cut costs. Or what about the case of Owen Hegarty, who was paid $8.35 million on his departure from OZ Minerals despite the fact that the shareholders have seen hundreds of millions of dollars wiped off the value of the company in the last year.

The public outcry on the issue of executive pay has been enormous and it is well deserved. Australians are sick of seeing fat cat executives line their own pockets while ordinary Australians are told that there is not enough money in the company’s budget to allow them to keep their jobs or to pay them a raise of a few extra dollars a week. It is corporate greed at its worst and the government has finally woken up and realised it needs to act.

But the government’s Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 has more holes than swiss cheese. This bill deals with the issue of termination payments, but it does not touch any of the other parts of executive pay. Executive salaries are not only made up of big termination payments; there are also the issues of ‘golden hellos’ or sign-on fees, excessive base salaries and over-the-top bonuses paid according to performance. Back in March, the government set up an inquiry with the Productivity Commission to look at the issue of executive pay. The Productivity Commission is due to release its draft issues paper in a couple of weeks and its full report by the end of the year. Surely the sensible thing to do would be to see the findings of the Productivity Commission report on executive pay before rushing ahead with this bill.

Executive pay is an issue which does need urgent attention, but I am also aware that it is a highly complex issue and, if you rush ahead with a change in just one area of executive pay, you may see the problem transfer to another area—for example, golden hellos. If golden handshakes just turn into golden hellos or golden bonuses, is that really going to fix the problem? On paper, what the government has put forward is a start. They have changed the current thresholds on termination payments so that shareholders need to approve termination payments if they are more than one year’s base salary, instead of what it is at the moment, which is seven times their entire salary.

But, when you look a bit more at the detail of the government’s bill, it is clear that this bill still leaves open the possibility of executives getting excessive salaries through other channels. As was referred to before, it is like a balloon; if you squeeze it on one side, all it may end up doing is pushing out on the other side. Focusing on the issue of excessive termination payments, this bill will simply encourage companies to structure the contracts of executives differently so that they give bigger base salaries, or golden hellos or some other ‘golden’ terminology. There is merit in waiting for the Productivity Commission report so that a more comprehensive solution to excessive salaries can be considered.

All Australians are concerned about the excessive salaries and termination payments being paid to many company executives, but the big question is: where do you draw the line? I think it is right that we reward people for working hard and for doing a good job. But I also think we need to have limits and put an end to over-the-top payments. That is why I think the best way forward is to give more power to shareholders to have a say in all executive termination payments that are over the $1 million level. Family First believes that setting a $1 million trigger for shareholder approval is fair and reasonable. Anything over $1 million in a termination payment would set the trigger for shareholders to have a vote. No company executive should be able to cry poor and say that a $1 million trigger is too low for shareholders to approve. Also, no company should be able to make the ridiculous claim that a trigger of $1 million is an amount that is too small to be competitive and attract talented executives from the global marketplace. If they need to go above that to be competitive, as I said before, they need shareholders’ prior approval.

Family First believe that setting up a $1 million trigger for shareholders’ approval is fair and reasonable. Reigning in executive salaries is an important issue that needs to be addressed, and the government’s bill really falls short of what needs to be done to solve this significant problem.