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CLERP 9: Not far enough?\n\n



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Senator Andrew Murray Australian Democrats Taxation, Finance & Corporate Affairs Spokesperson

8 October 2003 MEDIA RELEASE 03/716

CLERP 9 - NOT FAR ENOUGH?

Australian Democrats’ spokesperson for Taxation, Finance & Corporate Affairs, Senator Andrew Murray, welcomed today’s release of the corporate governance draft legislation, CLERP 9, but believes it may not go far enough.

“This legislation is long overdue. The need for tough corporate governance law reform has long been apparent, to end the self-regulation that so favours the big corporate spivs,” Senator Murray said.

The legislation will be extensively tested through the Joint Standing Committee on Corporations & Financial Services.

“On a first appraisal, CLERP 9 looks to be wide-ranging and quite strong. Nevertheless we fear the influence of big corporate mates of the Government, and wonder if it goes far enough. The Democrats will put our own suggested changes to the Committee for their appraisal.

“An area of strong political and public interest is that of executive remuneration.

“It was the Democrats and Labor that forced the Government to accept the disclosure of executive remuneration. We welcome the Coalition’s acceptance of this principle now, and their intention to enhance it through the non-binding shareholder vote on remuneration. It is at least a first step to putting boards on notice that executive greed has to end.

“Ideally we’d like shareholders given a binding veto on excessive executive salaries. Unfortunately some boards and too many directors have had their hands in the till. They have shown they can’t be trusted.

“Good corporate democracy is the key to corporate governance. We live in an advanced democracy, it is right that we apply the same judgements to ways in which our corporations are run.

“We must test which of these democratic mechanisms need reinforcing in corporations: best practice regular elections; compulsory voting; representative bodies; independent institutions and people; appointments on merit; the separation of powers; transparency, accountability and full disclosure.

“Poor corporate governance is bad for productivity and profitability. It creates situations where major conflicts of interest, mismanagement, impropriety and even corruption can go unchecked.

“Stronger legislation is the only way to ensure transparency and accountability and CLERP 9 is a positive step forward. You can be sure we Democrats will use our balance of power position to ensure the new legislation is as tough as possible. The corporate crooks deserve nothing less,” concluded Senator Murray.

For media enquiries, please contact Grace Tan at 0417 174 302 or (02) 6277 3709 Appendix attached.

http://www.democrats.org.au

http://www.democrats.org.au

APPENDIX

Some items the Australian Democrats would consider appropriate in CLERP 9, and that it wants tested at Committee, include:

• Remuneration disclosure must be full including all options, golden hellos and golden goodbyes.

• Disclosure must include a calculation of estimated total cost if the executives were to leave in the next financial year

• Disclosure must be mandatory for anyone (not just the top 5) whose full package is in excess of $1 million (AMP for instance apparently has 14 executives in this category)

• Executive packages should be expensed (see accounting standards debate)

• Failure to disclose and expense should result in an automatic ASIC fine against the company equivalent to the total package for the executive(s) concerned

• Executive contracts that require Board approval may not be voted on by executive directors (only non executive)

• Disclosable executive contracts must be publicly available on company website

• Executive contracts must specify risk and performance criteria for any executive above 20x average male earnings

• Executive contracts (full package) below 20x average male earnings do not automatically need shareholder approval (unless that is required by the company constitution) but do need (non executive) board approval

• Executive contracts must be approved by shareholders within 12 months of negotiation if in excess of 20x average male earnings, and 33% of all the shareholding register able to vote must have voted for them

• Existing contracts are subject to all the above except shareholder vote approvals and risk/performance criteria

and

• It must be mandatory for institutions to vote their shares