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Wednesday, 13 November 2002
Page: 6218

Senator CONROY (2:00 PM) —My question is to Senator Coonan, the Assistant Treasurer and the Minister representing the Treasurer on matters of corporate governance. Is the minister aware of the most recent survey by the Australian Financial Review which showed that, on average, a CEO receives a massive $1.68 million a year—over 37 times average weekly earnings? How does the minister justify such staggering salaries for CEOs when the average worker earns $44,000 a year?

Senator COONAN (Minister for Revenue and Assistant Treasurer) —I thank Senator Conroy for his question. The issue of the size of salary packages being paid to corporate executives is, fairly said, one that does trouble some sectors of the community. The sheer sizes of the packages are sometimes difficult to comprehend. I think an abiding principle that Australians agree with is that people should be paid what they are worth and that they have their right to pocket a fair day's pay for a fair day's work.

Senators on this side of the chamber would be aware that the growth of executive salaries last financial year appears to be well down on previous years, but that does not address some concerns about the magnitude of some of the payments. There are real issues of fairness if the heads of companies extol the virtues of wage restraint for their workers while accepting excessive salaries for themselves—I think that is a fair point. The owners of these companies—and this is the critical point and the answer to Senator Conroy's question—and the shareholders and their representatives on the boards can clearly play whatever role they need to in containing or winding back the level of remuneration for executives if they feel that it is excessive. That is the point: the answer to this is in the hands of the shareholders and the boards.

The Labor Party, in its usual attempt to stir up the politics of envy, seems to be suggesting that the government should somehow or other be stepping in and setting the salaries of individual CEOs. Is that what is really being proposed? I do not know whether Senator Conroy dreams of sitting at his desk and setting salaries for CEOs, but it is not going to happen. The shareholders would not be keen on the idea of the Labor Party—or, indeed, the ACTU or any of Labor's union mates—ticking off what are, or are not, fair and appropriate salaries for individuals.

The decision on the question of what is an appropriate amount for executive salaries ultimately resides with the owners of a corporation and the shareholders. Corporations in this country, I remind the Senate, are not like the ALP: there is no 60-40 or even 50-50 power split. If the shareholders want to alter the rewards received by the leaders of their companies, they are perfectly entitled to do so. I encourage shareholders to be active on this front—including institutional shareholders and superannuation funds, which I have noticed have been taking a great interest lately in this issue. Shareholders and directors need to be vigilant, and the extent of remuneration packages needs to be clearly disclosed so that they can make informed decisions. Nothing alters the point that the answer to this question is quite simple: it resides in the power of the shareholders to do what they wish to about setting executive salaries.

Senator CONROY —Mr President, I ask a supplementary question. Does the minister acknowledge that shareholders have lost millions of dollars over the last 12 to 18 months as share prices have plummeted? Does she acknowledge that the average return to Australian superannuation members last year was negative 4.5 per cent? In these circumstances, how can any increase in executive remuneration be justified, particularly when they follow increases of 13. 4 per cent in 2001 and 22 per cent in 2000?

Senator COONAN (Minister for Revenue and Assistant Treasurer) —I thank Senator Conroy for his supplementary question. I have a very good suggestion for Senator Conroy and those opposite: if they were actually prepared to pass the government's choice legislation, they would find that those who were trapped in nonperforming funds would actually have a choice and be able to choose where they placed their investment to get the maximum return. The answer to this question lies fairly and squarely in the hands of those opposite. They should pass the government's choice legislation and stop this fuss.