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Wednesday, 18 February 1987
Page: 219

Mr LIONEL BOWEN (Attorney-General)(10.26) —The Government opposes the motion for disallowance. The honourable member for North Sydney (Mr Spender) has put before us certain matters, but he omitted to mention the law on the point, which happens to be the companies and securities agreement entered into by the Liberal Government of 1978. The agreement does not permit any variation of what has been decided by the Ministerial Council for Companies and Securities. The honourable gentleman ought to be able to address his mind to the law. I understand he agrees that perhaps we ought to alter it. However, for the honourable member to come into the chamber on the basis that we can do something here, knowing full well that we are bound by a statutory enactment to which his Government was a party in 1978, does not add much to the debate.

There is a sense of deja vu about this, because the issue was debated by Senator Durack in the Senate last November and the regulation was disallowed in that place. Therefore, what the honourable gentleman has said Senator Durack also said.

Mr Spender —No, he said different things as well. You should read his speech.

Mr LIONEL BOWEN —I have read what Senator Durack said. He seemed anxious to make the point which the honourable gentleman made-perhaps he was not so exact as the honourable gentleman on excessive business regulation, a view with which we all agree-that a number of the amendments were quite sensible. This morning we should address our minds to those matters which the honourable gentleman regards as unfair. I am not here to say in detail that everything that he has said is necessarily binding for all time, because I think that there is a continual need to review.

The issue is whether there should be disclosure of directors' salaries and emoluments. At the outset, we say that many people in this country are obliged to disclose their salaries and emoluments. For example, members of parliament have theirs disclosed. The trade union movement is always urging what it might regard as fair and comparable justice in wage deliberations. When a case goes before the Australian Conciliation and Arbitration Commission there is always a suggestion about what can be afforded. Whether a rapid escalation in some parts of the wage scale would affect relativities is also considered. I do not know why there is so much worry about the fact that some directors might have to disclose salaries and emoluments, particularly when large business enterprises in Australia are anxious to oppose-on the basis of whether the business, the company or the nation can afford it-what they consider to be an unfair increase in certain salaries. But the basic point is that shareholders themselves would be anxious to know what the trustees of their businesses are getting by way of reward.

Another point that the honourable gentleman mentioned in passing concerned problems with the identity card. As he knows, and as I know, one of the great advantages of the ID card would relate not so much to directors but to preventing people from adopting aliases. I fail to see the relevance of the argument he has put today. It is recognised that because of the plurality of bank accounts, which we do not seem able to control, massive crime is committed without detection. That is because there is no obligatory ID card. It is about time that the Opposition, if it could get its act together on any policy at all, understood that the identity of anybody who is born, who is married or who dies is a matter of record. All we are trying to do is establish that in some areas the identity card would guarantee there was no fraud. So let us put to rest the argument that there is some merit in opposing the identity card.

The honourable gentleman also raised as an issue unnecessary regulation. I think he has a point in terms of business regulation being unnecessary. I sit in ministerial council meetings and I often object to what I regard as excessive regulation, but I am bound hand and foot by the 1978 proposition that whatever the ministerial council agrees on-bearing in mind that it is a conglomerate of all the States-is the way it is. I have been encouraging the business community in this nation to think about this, and for the life of me I do not know why the Opposition will not. We need one piece of legislation on a national basis. We have the power to enact such legislation. We have to bear in mind that there is one share market, there is one dollar and there is virtually one stock exchange, if we want to put it that way, and it is about time we adopted the concept of having uniform legislation which is effective. We can do something about that. At present we have to listen to the well-meaning deliberations of various State corporations and all the various Ministers. I do not object to that but it certainly does not help business regulation. From my point of view, the market is the best place to assess the rights and merits of share offers. We do not need to have registration of Part A offers. I think all these things could be streamlined but it is about time the business community came to us and asked: `Why don't you do something about it?' We will certainly try to help the business community. Honourable members will notice that later today we are introducing legislation to enable a body entitled the Australian Associated Stock Exchanges to function. Of course the world has got so small now that it is not just a question of buying shares in Australia; they are bought across the world. It occurs so rapidly now that one probably does not need a stockbroker; one is more inclined to need a bank to guarantee that at the same time shares are bought, whether they be bought on the Chicago exchange or some other exchange, the money is immediately taken out of one's bank account.

The honourable member has not faced up to the fact that there has always been a Schedule 7 in the Companies Act. We are discussing an amended Schedule 7, changed by regulation. It was not done over Christmas; it was done last year.

Mr Spender —Consultation was sought over Christmas.

Mr LIONEL BOWEN —Schedule 7, for example, has been in operation for a long while-since 1982. The amendment was certainly brought in in July 1986, as a result of a ministerial council meeting. Following that, as is obligatory under the agreement, within six months an Executive Council meeting approved of the regulations. That occurred on 18 September last. It has nothing to do with Christmas. The whole matter was certainly ventilated well before Christmas last year. Certainly it was debated in the Senate in November, which I suppose is near enough to Christmas, but the issue we are facing is this: We do not have a lot of opportunities to spend a great deal of time on what we would love to do in the companies area. I make the point that during the Whitlam period-I suppose mentioning this will not help our cause in terms of getting support from the Opposition-we did try to bring in national companies and securities legislation. I remember in opposition, in the period 1975 to 1977, introdu-cing a private member's Bill. We introduced that Bill again but on both occasions it was defeated by the Government which the honourable member for North Sydney, who is now in opposition, would have been supporting in principle even though he was not here in fact.

I turn to some of the issues the honourable gentleman raised, such as economic dependency. The relevant provision, as I understand it, follows the Canadian requirement that where a company has a significant volume of business dependent on another company that dependence ought to be disclosed when the company is reporting on its operations. There is no parallel provision in the United States of America but that is the situation in Canada. It is deemed that disclosure of economic dependence may be necessary for what is called a fair presentation of economic position. The honourable member did not refer to the provision that, where disclosure would seriously affect the company, the company may make application pursuant to section 273 of the Companies Act seeking approval not to disclose the information. The honourable gentleman was most anxious to tell me about the extraordinary delay in getting the accountancy review board, or whatever it is that we are saddled with-I do not say that in any derogatory sense-to set standards. I agree; there have been dreadful problems in trying to establish standards. This has occurred because of the structure of the process.

We have had to try to accelerate the establishment of standards. The honourable gentleman asked about this. According to my brief, the Schedule 7 requirements should be in accordance with approved accounting standards. But this is not a quick process; it is a dreadfully slow process. Whilst some requirements in Schedule 7 can be incorporated, the profession-I stress, the profession-is still developing standards on many matters. The Accounting Standards Review Board has established a working party to consider the manner in which the transfer is to take place. Members of the working party include the Australian Accounting Research Foundation and the National Companies and Securities Commission. With the greatest of respect, I am sure that if some lawyers were involved the drafting would be much faster. I only say that and I know that I will not get any votes out of the accountants.

The honourable gentleman said that the pro forma accounts arrangement is too rigid. I understand what he said and I think it has a lot of merit. I have argued this for two years. The proposals for the use of pro forma profit and loss accounts and balance sheets apparently were developed in the European Economic Community during the 1970s in an effort to overcome problems. The Community's proposals were approved in 1978 and the amendments necessary to implement them in the United Kingdom were enacted in the early 1980s. Obviously that concept was picked up. Senator Durack is not correct in saying that that concept does not apply. Australian pro formas, whilst patterned after the United Kingdom model, were developed following the review of financial statements prepared by many of Australia's listed companies and the professions. It is expected that the vast majority of companies will have no difficulties with the pro forma. The regulations allow a company to depart from the pro forma if compliance would result in the accounts being misleading.

These are some of the matters the honourable gentleman mentioned. He said that similar disclosure of directors was not required in the United Kingdom. I am reminded that in the United Kingdom there is an obligation to indicate the number of directors who have emoluments of less than 5,000 pounds and the number of directors whose emoluments fall within each successive 5,000 pounds step.

Mr Spender —That is the aggregate situation.

Mr LIONEL BOWEN —Yes, but I understand that anybody can work out the situation in the finish. I am told that the position in the United States is basically the same as is now provided in Schedule 7.

Mr Spender —What about subsidiaries, though?

Mr LIONEL BOWEN —For subsidiaries, the argument is that a loophole would develop so that people could use a subsidiary and have virtually dummy directors. I do not see such sensitivity about disclosing directors' salaries. Whenever we have tried to attract people from the private sector to Government departments they have been anxious to tell us that the salary the Government pays is half what they get in the private sector. This is a problem. Perhaps it is about time we paid the appropriate salaries-if that is the value of talent-to get such people into government, or even into the Opposition. But we should not hide what it is fair and equitable for shareholders to know.

The point here is that no effort is being made by the Government to do anything that would in any way inhibit business; far from it. I am very much for streamlining it. I urge the business community seriously to consider whether we should not have uniform legislation at a national level to overcome the dreadful problem and malaise that I have inherited, what is called the National Companies and Securities Commission, which came into operation by an agreement made on 22 December 1978. The honourable gentleman always bows, in some sense of servility, to the distinguished signatories to that agreement. This is who they are--

Mr Spender —Servility or civility?

Mr LIONEL BOWEN —Servility. We have the likes of John Malcolm Fraser, the Hon. Johannes Bjelke-Petersen, and Sir Charles Walter Michael Court. That is the philosophy that has saddled me with all this nonsense, and it means that the honourable member is not entitled to move for disallowance, because sub-clause 45 (2) of the formal agreement says that that cannot be done. So I make the submission to you, Mr Deputy Speaker, as if I were in a court of law: That the honourable gentleman has no standing at all here. He is not entitled to move for the disallowance because under the agreement made by those of his ilk, in philosophical terms, who decided to saddle me with this by an Act of Parliament, I have to do the bidding of the Ministerial Council. That I have done. The honourable gentleman has no power to disallow it. If he did disallow it, the States could go off and do their own thing, because the obligation, under sub-clause 45 (2), is to bring in the regulations so approved within six months, and that I have done. For that reason, there is no case to answer. We therefore oppose the disallowance motion.

Mr DEPUTY SPEAKER (Mr Leo McLeay) —Order! The Minister's time has expired.