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Wednesday, 15 October 2003
Page: 16501

Senator WONG (2:00 PM) —My question is to Senator Coonan, the Minister for Revenue and Assistant Treasurer. Can the minister confirm that the government's draft CLERP 9 bill continues to protect the `old school tie' network given that, first, directors when standing for election will still not have to disclose their relationships with the company or with other directors of the company; second, non-executive directors will still be entitled to retirement benefits, options and bonus payments; and, finally, directors will still be able to chair multiple companies? Minister, why is the government continuing to protect the `old school tie' network instead of acting in shareholders' interests and requiring directors to disclose their relationships with the board and with other directors?

Honourable senators interjecting

The PRESIDENT —Order! When senators have stopped having discussions across the chamber, we will proceed with question time.

Senator COONAN (Minister for Revenue and Assistant Treasurer) —The old school tie is a bit like the old chestnut that the Labor Party keeps dredging up in its new found interest in transparency and the conduct of corporations, having fitfully slept through all the CLERP reforms up until about CLERP 6. Senator Wong is incorrect when she suggests that the government's response to CLERP 9 is part of any `old school tie' network. In fact, what CLERP 9 is all about is increased transparency and a proper response to the need to look at some corporate excesses and to make reforms that will strike a proper balance between allowing a business to operate and reining in some of the excesses. That is really what CLERP 9 is all about. The disclosure framework for CLERP 9 is substantially improved.

The PRESIDENT —Senator Conroy and Senator Ferguson, order! I remind you that it is question time, not shouting time.

Senator COONAN —CLERP 9 substantially improves the disclosure framework. The bill builds on the current Corporations Act disclosure requirements in three ways in respect of executives and in respect of executive remuneration, if I can start with that, by extending the disclosure requirements to the top five senior management people within corporate groups and by allowing shareholders to vote upon a resolution at a company general meeting to adopt the remuneration disclosures made in the annual report. Directors will also have to give shareholders an opportunity to comment upon and ask questions about the disclosures at the general meeting.

The UK enacted a similar proposal in August 2002, allowing shareholders to make a non-binding resolution on remuneration. Of course, that had a very significant effect in the UK with the GlaxoSmithKline case, which rejected a proposal for the remuneration of the chief executive officer, who was also a board member, to include a 22 million, or $55 million, golden parachute in the event of his early dismissal. All of these matters in relation to both remuneration and disclosure of relationships build substantially on the exposure draft and substantially on what the ALP's position was on disclosures.

It is very interesting that CLERP 9 goes further than the ALP proposal by expanding section 300A under the Corporations Act and the requirement for corporate groups. Under CLERP 9, listed companies must disclose up to 10 of the most highly remunerated senior managers within the entire corporate group. The proposal that Senator Conroy has been hawking around town appears to apply only to senior managers employed within the listed company. The other proposals that the Labor Party have put forward on disclosure do little to advance the real case for transparency. It is interesting that most of the reports in relation to CLERP 9 seem to be overwhelmingly supportive of the balance that the government has struck in relation to disclosure.

Senator WONG —Mr President, I ask a supplementary question. I note the minister failed to answer why the government does not think directors standing for election ought to have to disclose their relationship with a company or other directors of the company. When will the minister recognise that the Howard government's self-regulatory approach gives a green light to corporate greed and that legislation is required to protect shareholders' interests?

Senator COONAN (Minister for Revenue and Assistant Treasurer) —There is no doubt that what the Labor Party are all about with CLERP 9 is regulatory overkill. There is also no doubt about what commentators have said. Here is an interesting quote from Stephen Bartholomeusz:

It is unclear just what Labor, the Australian Shareholders Association and others hope to achieve with their push for prescriptive black-letter law to, in the words of Labor's Stephen Conroy, “crack down on corporate greed”.

Black-letter law will not solve this problem and the government has got the balance right.