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Thursday, 22 August 2002
Page: 5484

Mr LLOYD (2:02 PM) —My question is addressed to the Prime Minister. Is the Prime Minister aware of any recent developments in relation to companies scrapping executive share option schemes? What is the government's response to these developments?

Mr HOWARD (Prime Minister) —I thank the member for Robertson for his question. I am aware—and I think all members of the House would be aware—of the announcement made by the Managing Director of the Commonwealth Bank, Mr David Murray, that the bank intends to scrap its executive share option scheme. This is precisely the kind of corporate action that I had in mind when, just over two weeks ago, I addressed a meeting of the Securities Institute and the Institute of Chartered Accountants in Sydney.

It is not appropriate that parliaments legislate away the rights of companies to have share option schemes if they so choose. But, given the abuse that has occurred and given some of the concerns that have been expressed, I think it is entirely appropriate that companies take the lead, and I congratulate John Ralph, the Chairman of the Commonwealth Bank. Not for the first time, he has shown the lead to corporate Australia, and I hope the lead that Mr Ralph and his fellow directors have shown on this occasion will be picked up by other companies around Australia.

I should note in passing that, while the Corporations Act already requires the details of executive options be disclosed in directors' reports, the Australian Accounting Standards Board is currently developing an accounting standard on the issue, including on how options should be valued. The International Accounting Standards Board is also working on a new standard which would require companies to expense stock options granted as remuneration.

I also noted with some interest last Thursday the release by the ASX Corporate Governance Council of its directions on governance and best practice to listed companies. What this amounts to is a very obvious response by the business community in Australia to the call that I and others have made for a lifting of the standards of corporate governance.

The reality is that we have a choice. We can, à la the Labor Party, dump a whole lot of additional regulation on honest business operators in this country, to the detriment of the operation of our economy or, alternatively, we can do as the government has done and give a lead. I am delighted that people of the prominence in the business community of John Ralph and David Murray, leading the Commonwealth Bank, have responded to that and are giving an example to other company executives around Australia of the need for greater self-regulation.

As I said in that speech some 2½ weeks ago, if business does not respond with greater self-regulation, then inevitably governments will end up dumping unnecessary, additional regulation on them. What I think is pleasing from the action taken by the Commonwealth Bank today is that that message is being received in corporate Australia, and I congratulate John Ralph and David Murray on the lead that they have taken.