CORPORATIONS AMENDMENT (Improving Accountability on Termination Payments) Bill 2009
Tuesday, 25 May 2010 04:12
DARREN CHEESEMAN CORPORATIONS AMENDMENT (Improving Accountability on Termination Payments) Bill 2009Mr. Speaker this is about Labor again trying to clean up yet another mess left behind by the Liberals.
This Bill arises from the Liberals decade in power, when they did nothing about clear accountability issues as executive remuneration spiralled out of control.
It's about clearing up the mess around the trough that many executives snuffled in from 1996-2007 under the Howard government watch.
I have to say Mr Speaker, this is one piece of legislation that I believe has the overwhelming support of the Australian people.
It is legislation I am 100% behind.
Working Australians have been outraged to hear time and again the reports of excessive executive salaries.
And doubly so when the executives got paid out just before a company crash, or a dive in a company's performance.
As usual, it takes a Labor Government to fix up these excesses.
The Bill will amend the Corporations Act 2001 to strengthen the regulatory framework relating to the payment of termination benefits to company directors and executives.
Whilst it is hard to fix this issue completely, this Bill puts in place some solid reforms that will make executives, CEOs and company directors more accountable.
The three key measures of the Bill include:
• lowering the threshold at which termination payments must be approved by shareholders.
• Expanding the scope of the provisions to include key management personnel for companies that are a disclosing entity.
• Clarifying and expanding the definition of what constitutes a termination benefit.
Mr Speaker, I want to say upfront that there are thousands of decent, fair minded company directors, CEOs and executives who care about the standards they set.
I personally know many people in the business world who have very high principles, who work very hard and who do give a damn about the people they employ.
But it is equally true that there are many motivated by greed, who jack up their own pay at every opportunity, often at the expense of ordinary workers.
There are people who hide this, or try to obscure their remuneration via all sorts of mechanisms.
The core elements of this Bill are a clear indicator of this.
Because of the behaviour of many executives, we are having to, as a part of this Bill, prohibit directors and executives, who hold shares in the company, from participating in the shareholder vote to approve their own termination benefit.
You would think this sort of behaviour would not occur.
You would think people would see the clear conflict of interest here, and declare it.
But not so.
Greed over-rides principle in the corporate section of many companies.
As part of this legislation we are introducing an express obligation on the recipient to immediately repay unauthorised termination benefits.
And we are introducing significantly higher penalties associated with unauthorised payments of termination benefits.
These are provisions the former Government should have immediately put in place when they saw the stories of excessive greed unfolding.
But they didn't Mr Speaker.
If the Howard Government had not refused to act, these sorts of laws would have been in place during the collapses of the global recession, where we saw many major companies, including banks, collapsing, with executives still walking away with truck loads of cash.
Mr. Speaker, these amendments are urgent as there is significant community concern about executive largesse, particularly at a time when many Australian families are being hit by the global recession.
Mr. Speaker, the new laws will expand the definition of a termination benefit including a requirement for a broad interpretation of the term "benefit" and a requirement that the substance should prevail over its legal form.
So we are trying to put an end to some of the slippery little schemes executives that have been put in place.
This will include, for example, amounts paid as voluntary out of court settlements.
The changes do provide the powers to prescribe whether certain types of benefits are taken to be given in connection with a person's departure from office.
For example, a payment made in connection with retirement or loss of office or position includes the automatic or accelerated vesting of options and any payments in lieu of notice.
Mr. Speaker, we are significantly increasing penalties for breaches as part of this legislation, with potential fines for individuals now set at $19,800 and for corporations $99,000.
However, as is usual in laws of this nature, the new arrangements will not apply retrospectively to existing contracts before the Bill becomes law.
It will apply to all new contracts.
Mr Speaker, whilst there are so many examples of good executives, there are also so many examples of very average executives, with average principles.
In Australia I have to make mention of outgoing Telstra Corp Chief Executive Sol Trujillo.
Poor old Sol. He was totally committed to driving down costs.
He and other executives threatened and browbeat his workforce, forcing individual contracts on his workers, driving down their conditions.
And then it was see you later mate.
He took a $3 million termination payment on top of his $13.4 million base salary.
Yes Mr Speaker, he took a $3 million termination payment on top of his $13.4 million base salary.
And I think he thought he was being modest!
That was when he was sacking thousands of workers and driving down their conditions.
What a man of principle Mr Speaker!
Talk about out of touch.
Mr. Speaker, when this issue comes up, we always hear the Liberals trot out the hoary old line that "Companies are forced to pay these salaries and benefits because it is the market that determines executive pay levels. If we don't pay it, we will lose these top executives." That's what the Liberals say.
I believe that is absolute rubbish Mr Speaker.
I believe there are many highly qualified Executives who are smart, honest and trustworthy.
My view is that the sort of person who wants these excessive payments has a question mark over them from the start.
I ask, what did Sol Trujillo achieve at Telstra for his $13 million a year plus.
The answer is virtually nothing.
He made the service worse, none of the big reforms that were needed happened, and he intimidated and demoralised his workforce.
He, like so many so called brilliant executives, relied on the very blunt and very dumb management tool of sacking workers.
Mr Speaker, there are plenty of recent other examples.
Sol is not on his own.
Pacific Brands sacked 1,800 plus workers but they didn't address the core problem, which required responses other than the simplistic "sacking tool" most highly paid executives resort to.
Pacific Brand's CEO left with a golden handshake of $3.4 million, as the company got worse.
Everyone also knows the shocking excess of Mr Owen Hegarty of Oz Minerals.
He got a bonus payout of around $8.35 million, which from memory was around 6 times his normal salary.
I would have loved to see Mr. Hegarty stand in front of everyday shareholders and argue that case.
Mr Speaker, these examples in all likelihood, would have not been allowed under the current rules.
At the very least they would have had to go through a much more rigorous process.
The Australian people overwhelmingly support what Labor is doing here.
Australians don't support amoral profiteering and thinly disguised greed.
They support a decent days work for a decent days pay, as they have always done.
This Bill is about introducing fairness and proper process into all areas of the corporate world, and it is another good Labor Bill.
I commend this Bill to the house.
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