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Wednesday, 29 April 1987
Page: 2017

Senator VIGOR(6.06) —There is complete tripartite support for the report of the Senate Standing Committee on Constitutional and Legal Affairs on the role of parliament in relation to the national companies scheme. I hope that the report foreshadows far-reaching reforms in both Australian and international regulation of corporate responsibility. This Parliament is too often too late in taking account of fast changing technologies. This report draws the attention of the Parliament to the revolutionary changes in the business environment which have been caused by the advances in information and communication technology.

This accelerating internationalism was highlighted by Mr Henry Bosch, the Chairman of the National Companies and Securities Commis- sion, in last year's annual report when he pointed out:

Flows of information and funds have become almost instantaneous, and (world) financial markets are becoming increasingly interdependent.

It was the recognition of Australia as one market in the global market which led to the recent amalgamation of the six State stock exchanges to form the Australian Stock Exchange Ltd. Delocalisation is possible within one organisation and, as Senator Puplick has said, there is no reason why we should centralise because we have uniform legislation. Modern technology will allow us to have proper delocalisation.

This report underlines the globalisation of business and the need for Australia to rationalise and unify our companies and securities laws in order to support Australian business within the international context. While Australia continues to manage its business under six different State administrations, we have no way of negotiating international agreements on equal terms with other countries. Unwieldy constraints on reforms arise from the need to rely on infrequent meetings of Ministers from all the States and the Commonwealth in order to get this agreement.

Administrative duplication between the National Companies and Securities Commission and the various State corporate affairs commission and the administrative differences in enforcing the legislation between States also make the current situation very messy and inefficient. It is little wonder that Australia, with such a messy local system of regulation of corporate behaviour, cannot cope with ensuring good corporate behaviour by large international companies which operate within Australia.

Transfer pricing and the use of tax havens are major tax rorts which are routinely used by international companies to avoid their Australian corporate citizenship obligations. These tax rorts are so unpoliced, so ungoverned, that Australia is considered fair game for such shenanigans in all international business circles. Until we learn to insist that corporations operating in and out of Australia observe the responsibilities of Australian citizens and contribute fairly to the management of the infrastructure that Australia provides for their business activities, we can expect no better from them. People in corporations will do what they are expected to do.

The first step is to get our act together nationally, to streamline our companies and securities legislation and to give adequate support to the National Companies and Securities Commission so that our regulations are enforceable and enforced. This report sets out the means whereby this is possible. It points out that the constitutional powers do exist for both national and international management of corporate affairs by the Commonwealth of Australia. It also underlines the inefficiencies and the undemocratic nature of the current agreement between States and the Commonwealth in these matters.

Australia is a very small cog in the international big wheels of finance and trade. But the problems experienced by Australia are the same as those experienced by nearly all national governments in attempting to control corporations which operate outside the constraints of national legislation and whose turnovers are in some cases very much greater than those of the States in which they have host operations. Currently, both the United Nations and signatories to the General Agreement on Tariffs and Trade are trying to find ways of negotiating international treaties to control some of the worst excesses of multinational corporations. Some of the most glaring injustices, which arise because there are no internationally enforceable legal constraints on such enterprises, have been brought to the notice of this parliament in previous speeches. It is important that the Commonwealth Government be in a position to undertake local regulation of corporations efficiently and effectively and that it be empowered, under the external powers of the Constitution, to negotiate such treaties on Australia's behalf.

The report also points out the incongruity of the undemocratic way in which the Ministerial Council governs Australia's corporate activities. The Ministerial Council, under the agreement between the States and the Commonwealth, is the final arbiter and the final authority over legislation to regulate corporate activities. Yet this same Ministerial Council, unfettered by accountability to Parliament, is made up of continually changing members because of the high turnover of Ministers in each of the Australian governments. It should be pointed out that those same Ministers are chosen not by parliament but by the State Premiers and the Federal Prime Minister unilaterally. This system lacks most of the normal democratic checks and balances and leaves corporate regulation vulnerable to corporate pressure. There are considerably fewer corporate pressure points. We have only to look at the present Government's vulnerability to such corporate and media pressure to realise how important it is to maintain final accountability within the Parliament. Ministers are fallible. This is one of the major problems. What is worse, perhaps, is the vulnerability of the Ministerial Council to manipulation by bureaucratic pressure. I quote Mr Kennan, the Victorian Attorney-General and a member of the Ministerial Council, who said in October 1985:

The complex nature of the business to be conducted by the Ministerial Council and the relatively high turnover of Ministers has meant that the Ministerial Council is singularly vulnerable to the Yes Minister process.

The Ministerial Council has had a wide range of powers. The NCSC must obey the directions of the Council; the NCSC must report on performance and policy as required by the Council; the Council nominates and effectively employs people for appointment to the NCSC; the Companies and Securities Law Review Committee is advisory only to the Council; and all regulations under the Act must be consistent with resolutions of the Council, which thus has power of veto over legislative action of even the Federal Parliament.

The linchpin of democracy is accountability of our important institutions to the people. The present agreement leaves the Ministerial Council unaccountable and the final arbiter of what is right and what is wrong. When the Council is pressured through both the corporations it is attempting to regulate and the Public Service it employs to assist it, with no final accountability to the people, its position is intolerable. When Australia's ability to negotiate with world corporate powers and with the nations of the world is bogged down by legal and administrative inefficiency because of archaic concepts of state supremacy over business, our pretensions to national independence seem laughable. This is why I commend the report totally to the Senate.

There are a few things I would like to see included in the new legislation. We need ways of stopping the manipulation of corporate ownership through nominee companies; we need ways of stripping the corporate veil. It is time to take a step into the real world and to grasp the realities of new technologies. It is time to recognise the global market of world finance and trade and to legislate for good corporate citizenship and responsibility, both nationally and internationally. I believe this report leads us in the right direction. I commend Senator Bolkus and all members of the Committee for their excellent work in this area. I commend the report to the Senate.

Debate (on motion by Senator Reid) adjourned.