Tuesday, 21 June 2011
Governance of Australian Government Superannuation Schemes Bill 2011, ComSuper Bill 2011, Superannuation Legislation (Consequential Amendments and Transitional Provisions) Bill 2011; In Committee
We are in committee and I was thinking, if it were second reading, I could not speak and I would not want to close debate. We are in committee and my mind is vividly refreshed after the debate of last night that went on for some hours. We had been dealing with the matter of the ACTU directors and those amendments had been dealt with. We are now dealing with an amendment relating to the number of directors. Senator Cormann, I am just speaking while you arrived as you might have some further amendments. I am going to sit down now and await your detailed contribution.
I thank the minister for assisting in facilitating the process. By leave—I move coalition amendments (1) and (2) on revised sheet 7092 together:
(1) Clause 21, page 14 (line 19), omit '9', substitute '8'.
[quorum of board]
(2) Clause 21, page 14 (line 29), omit '8', substitute '7'.
[quorum of board]
These amendments relate to the quorum on the board of the merged superannuation entity to be created under this legislation. The current quorum requirements are for nine directors out of 11 to be present in order to have a quorum on the board. Given that the ACTU has three nominated directors on the board, if for some reason the ACTU has a bloc, as they could well do at some point in the future, or decide to absent themselves from a board meeting, the board would be left without a quorum. Of course, that is an entirely unsatisfactory situation.
It is quite difficult to understand why a board, which has 10 members and one independent chair, should have a quorum of nine. It seems like a quite extraordinarily high quorum requirement which is not consistent, for example, with what we would be practising here in the context of Senate committees. In fact, it would make the Senate committee process entirely unworkable if we had quorum requirements that were this stringent. It has the additional complication of creating the circumstances where the ACTU directors could act on bloc. Bear in mind that they are nominated by the president of the ACTU and they can only be sacked by the president of the ACTU, so they would be clearly subject to, best case scenario, a serious degree of influence by the ACTU president. It would probably be likely that they would be subject to the direction of the ACTU president in terms of how they conduct themselves on that board.
We think it is a very simple amendment and we are not proposing to go in any way overboard. We are only suggesting that the quorum requirements be reduced from nine to eight, which would then have as a consequence that the ACTU by themselves would not be able to make the operations of the board unworkable. It is a very simple amendment. There is not anything else that I need to add to make it well understood. We think it is a sensible amendment. We think it will improve the corporate governance arrangements on the board that the government is creating under this legislation, and we commend it to the Senate.
Thank you, Senator Cormann, for your contribution. The government does not support the proposed amendment. In terms of the rationale in the bill the arrangement requires a greater number of directors to be present at a meeting than is necessary to enable the minimum two-thirds voting rule under the SIS Act to be met. The bill requires two-thirds of the directors on the board to vote in favour of a resolution for a decision to be made. As I mentioned, I think last night, the two-thirds voting is a sort of joint veto arrangement, a blocking veto arrangement, in terms of the equal representation rule that was inserted in SIS back in 1993—for good reason as it has worked well, I might say. The government is of the view that increased quorum numbers will facilitate improved decision making to ensure the incorporation of all the views of interests represented on the board.
There are a number of safeguards in the current arrangements that can deal with the issues raised by Senator Cormann. APRA does have the power to act if any board member is not acting in the best interests of all members overseen by the trustees. This includes military and civilian. APRA has intervened in at least one fund, and I am sure there are others in the past, and removed trustee directors.
The bill allows the minister for finance to terminate a board member if they do not meet the SIS Act fitness and proprietary standards. When considering only military matters there must be a military member present for the decisions to be taken. The ACTU cannot direct member representatives in regard to attendance in voting. That is now allowed under the SIS Act. Once you are appointed you are, at arm's length, required to make the decisions. You cannot be directed. The body is a CAC Act body and requires that board members comply with the directors' duties set out in the act. The government does not support your amendments.
I will not hold up the Senate for long, but I have a couple of points. The two-thirds requirement the minister talks about is easily met by having a revised quorum of eight rather than nine, because eight out of 10 is still well in excess of the two-thirds requirement. In terms of terminating members on the board, one of the key concerns we have is that the minister for finance is not able, for example, to terminate directors that are nominated by the president of the ACTU under this legislation on the basis that she would be able to terminate employer appointed directors. That is one of the areas of concern we have.
In terms of not being subject to directions, allow me to be sceptical. There are obviously different ways of skinning a cat. I do not think it is conceivable and I do not think that anybody across Australia would believe that ACTU president nominated directors on this board will not be subject to the influence, dare I say, the direction, of the president of the ACTU. These are obviously all very opaque processes. I am sure that this will not be happening on the front pages of newspapers. It will happen behind closed doors and it will be very hard for the public at large, or indeed the Senate, to scrutinise whether these sorts of processes are happening appropriately. We think that this is a very sensible amendment. We think that it is an amendment that will assist to make the board of this newly created organisation more workable. We commend this amendment to the Senate.
That the amendments (Senator Cormann's) be agreed to.
The committee divided. [13:57]
(The Chairman—Senator Ferguson)
Bills agreed to.
Governance of Australian Government Superannuation Schemes Bill 2011, ComSuper Bill 2011 and Superannuation Legislation (Consequential Amendments and Transitional Provisions) Bill 2011 reported without amendments; report adopted.