Division Description Changes — Bills — Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2018; in Committee — 7th Feb 2018

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senate vote 2018-02-07#2 Edited by mackay staff on 2023-07-28 08:34:09	Title Description The majority voted in favour of [amendments](https://www.openaustralia.org.au/senate/?gid=2018-02-07.24.1) introduced by Tasmanian Senator [Peter Whish-Wilson](https://theyvoteforyou.org.au/people/senate/tasmania/peter_whish-wilson), which means they'll now be included as part of the bill. ### What does the bill do? Senator Whish-Wilson [explained that](https://www.openaustralia.org.au/senate/?gid=2018-02-07.24.1): > No-one can justify the salaries that are paid by shareholders to the bank CEOs in this country. Our banks are some of the most profitable in the world and our CEOs are some of the most highly paid CEOs in the banking sector on the planet. These amendments before us today, amendments (1), (2) and (3), will put a cap on both variable and fixed remuneration. > > Fixed salaries are 10 times average weekly earnings, which roughly works out at about $850,000, double what our Prime Minister makes, so bank CEOs still make a lot of money. The variable component's half that, so it still takes them to well over a million dollars. ### Amendment text ~~(1) Schedule 1, item 1, page 4 (line 15), after paragraph 37(1) (b), insert:~~ ~~(ba) its executive remuneration obligations; and~~ ~~(2) Schedule 1, item 1, page 12 (line 18), before Division 4, insert:~~ ~~Division 3A—Executive remuneration obligations~~ ~~37DC Cap on remuneration of accountable persons~~ (1) The executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI remuneration for a period (the pay period) that would result in the remuneration of the accountable person for the pay period exceeding the remuneration cap for the pay period. ~~(2) The remuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:~~ ~~number of days in t h e period number of days in t h e reportin g period x 10 x AAWE~~ ~~where:~~ ~~AAWE means the annualised average weekly earnings for the reporting period for the ADI.~~ ~~(3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:~~ ~~number of weeks in t h e reporting period x AWE~~ ~~where:~~ AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period. ~~37DE Cap on variable remuneration of accountable persons~~ (1) In addition, the executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI variable remuneration for a period (the pay period) that would result in the variable remuneration of the accountable person for the pay period exceeding the variable remuneration cap for the pay period. ~~(2) The variableremuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:~~ ~~number of days in t h e period number of days in t h e reporting period x 5 x AAWE~~ ~~where:~~ ~~AAWE means the annualised average weekly earnings for the reporting period for the ADI.~~ ~~(3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:~~ ~~number of weeks in t h e reporting period x AWE~~ ~~where:~~ AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period. (4) For the purposes of subsection (1), in working out the maximum amount of variable remuneration that may be paid to an accountable person during a period, any deferral of variable remuneration under Division 4 of this Part during that period is to be ignored. ~~(3) Schedule 1, page 31 (line 9), after item 15, insert:~~ ~~15A Cap on remuneration and variable remuneration of accountable persons~~ (1) Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act applies in relation to the remuneration and the variable remuneration of an accountable person only if the decision granting the accountable person the remuneration or variable remuneration was made on or after 1 January 2019. (2) Despite subitem (1), if an accountable person's remuneration or variable remuneration is payable under a contract entered into before the day this Act received the Royal Assent, Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act does not apply in relation to the remuneration or variable remuneration until 1 January 2020. ~~(3) Despite subitem (1), if:~~ ~~(a) an accountable person's remuneration or variable remuneration is payable under a contract entered into before the commencement of Part IIAA of the Banking Act 1959 as inserted by this Act; and~~ (b) apart from this subitem, the application of Division 3A of that Part in relation to the remuneration or variable remuneration would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph); ~~that Division does not apply in relation to the remuneration or variable remuneration to the extent that it would result in such an acquisition.~~ Note: Because this subitem prevents Division 3A of Part IIAA of the Banking Act 1959 from giving rise to such an acquisition of property in relation to remuneration or variable remuneration payable under such a contract, compensation will not be payable under section 69E of that Act. > (1) Schedule 1, item 1, page 4 (line 15), after paragraph 37(1) (b), insert: > >> (ba) its executive remuneration obligations; and > > (2) Schedule 1, item 1, page 12 (line 18), before Division 4, insert: > >> Division 3A—Executive remuneration obligations >> >> 37DC Cap on remuneration of accountable persons >> >>> (1) The executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI remuneration for a period (the pay period) that would result in the remuneration of the accountable person for the pay period exceeding the remuneration cap for the pay period. >>> >>> (2) The remuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula: >>> >>>> number of days in t h e period number of days in t h e reportin g period x 10 x AAWE >>>> >>>> where: >>>> >>>> AAWE means the annualised average weekly earnings for the reporting period for the ADI. >>> >>> (3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula: >>> >>>> number of weeks in t h e reporting period x AWE >>>> >>>> where: >>>> >>>> AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period. >> >> 37DE Cap on variable remuneration of accountable persons >> >>> (1) In addition, the executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI variable remuneration for a period (the pay period) that would result in the variable remuneration of the accountable person for the pay period exceeding the variable remuneration cap for the pay period. >>> >>> (2) The variableremuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula: >>> >>>> number of days in t h e period number of days in t h e reporting period x 5 x AAWE >>>> >>>> where: >>>> >>>> AAWE means the annualised average weekly earnings for the reporting period for the ADI. >>> >>> (3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula: >>> >>>> number of weeks in t h e reporting period x AWE >>>> >>>> where: >>>> >>>> AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period. >>> >>> (4) For the purposes of subsection (1), in working out the maximum amount of variable remuneration that may be paid to an accountable person during a period, any deferral of variable remuneration under Division 4 of this Part during that period is to be ignored. > > (3) Schedule 1, page 31 (line 9), after item 15, insert: > >>15A Cap on remuneration and variable remuneration of accountable persons >> >> (1) Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act applies in relation to the remuneration and the variable remuneration of an accountable person only if the decision granting the accountable person the remuneration or variable remuneration was made on or after 1 January 2019. >> >> (2) Despite subitem (1), if an accountable person's remuneration or variable remuneration is payable under a contract entered into before the day this Act received the Royal Assent, Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act does not apply in relation to the remuneration or variable remuneration until 1 January 2020. >> >> (3) Despite subitem (1), if: >> >>> (a) an accountable person's remuneration or variable remuneration is payable under a contract entered into before the commencement of Part IIAA of the Banking Act 1959 as inserted by this Act; and >>> >>> (b) apart from this subitem, the application of Division 3A of that Part in relation to the remuneration or variable remuneration would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph); >>> >>> that Division does not apply in relation to the remuneration or variable remuneration to the extent that it would result in such an acquisition. >>> >>> Note: Because this subitem prevents Division 3A of Part IIAA of the Banking Act 1959 from giving rise to such an acquisition of property in relation to remuneration or variable remuneration payable under such a contract, compensation will not be payable under section 69E of that Act.
senate vote 2018-02-07#2 Edited by mackay staff on 2023-07-28 08:21:56	Title Bills — Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2018; in Committee Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2018 - in Committee - Cap executive salaries Description ~~<p class="speaker">Peter Whish-Wilson</p>~~ ~~<p>by leave—I move amendments (1), (2) and (3) on sheet 8343 together:</p>~~ The majority voted in favour of [amendments](https://www.openaustralia.org.au/senate/?gid=2018-02-07.24.1) introduced by Tasmanian Senator [Peter Whish-Wilson](https://theyvoteforyou.org.au/people/senate/tasmania/peter_whish-wilson), which means they'll now be included as part of the bill. ### What does the bill do? Senator Whish-Wilson [explained that](https://www.openaustralia.org.au/senate/?gid=2018-02-07.24.1): > No-one can justify the salaries that are paid by shareholders to the bank CEOs in this country. Our banks are some of the most profitable in the world and our CEOs are some of the most highly paid CEOs in the banking sector on the planet. These amendments before us today, amendments (1), (2) and (3), will put a cap on both variable and fixed remuneration. > > Fixed salaries are 10 times average weekly earnings, which roughly works out at about $850,000, double what our Prime Minister makes, so bank CEOs still make a lot of money. The variable component's half that, so it still takes them to well over a million dollars. ### Amendment text (1) Schedule 1, item 1, page 4 (line 15), after paragraph 37(1) (b), insert: (ba) its executive remuneration obligations; and (2) Schedule 1, item 1, page 12 (line 18), before Division 4, insert: Division 3A—Executive remuneration obligations 37DC Cap on remuneration of accountable persons (1) The executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI remuneration for a period (the pay period) that would result in the remuneration of the accountable person for the pay period exceeding the remuneration cap for the pay period. (2) The remuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula: number of days in t h e period number of days in t h e reportin g period x 10 x AAWE where: AAWE means the annualised average weekly earnings for the reporting period for the ADI. (3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula: number of weeks in t h e reporting period x AWE where: AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period. 37DE Cap on variable remuneration of accountable persons (1) In addition, the executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI variable remuneration for a period (the pay period) that would result in the variable remuneration of the accountable person for the pay period exceeding the variable remuneration cap for the pay period. (2) The variableremuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula: number of days in t h e period number of days in t h e reporting period x 5 x AAWE where: AAWE means the annualised average weekly earnings for the reporting period for the ADI. (3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula: number of weeks in t h e reporting period x AWE where: AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period. (4) For the purposes of subsection (1), in working out the maximum amount of variable remuneration that may be paid to an accountable person during a period, any deferral of variable remuneration under Division 4 of this Part during that period is to be ignored. (3) Schedule 1, page 31 (line 9), after item 15, insert: 15A Cap on remuneration and variable remuneration of accountable persons (1) Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act applies in relation to the remuneration and the variable remuneration of an accountable person only if the decision granting the accountable person the remuneration or variable remuneration was made on or after 1 January 2019. (2) Despite subitem (1), if an accountable person's remuneration or variable remuneration is payable under a contract entered into before the day this Act received the Royal Assent, Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act does not apply in relation to the remuneration or variable remuneration until 1 January 2020. (3) Despite subitem (1), if: (a) an accountable person's remuneration or variable remuneration is payable under a contract entered into before the commencement of Part IIAA of the Banking Act 1959 as inserted by this Act; and (b) apart from this subitem, the application of Division 3A of that Part in relation to the remuneration or variable remuneration would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph); that Division does not apply in relation to the remuneration or variable remuneration to the extent that it would result in such an acquisition. Note: Because this subitem prevents Division 3A of Part IIAA of the Banking Act 1959 from giving rise to such an acquisition of property in relation to remuneration or variable remuneration payable under such a contract, compensation will not be payable under section 69E of that Act. <p class="italic">(1) Schedule 1, item 1, page 4 (line 15), after paragraph 37(1) (b), insert:</p> ~~<p class="italic">(ba) its executive remuneration obligations; and</p>~~ ~~<p class="italic">(2) Schedule 1, item 1, page 12 (line 18), before Division 4, insert:</p>~~ ~~<p class="italic">Division 3A—Executive remuneration obligations</p>~~ ~~<p class="italic">   37DC Cap on remuneration of accountable persons</p>~~ <p class="italic">     (1) The executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI remuneration for a period (the <i>pay period</i>) that would result in the remuneration of the accountable person for the pay period exceeding the remuneration cap for the pay period.</p> <p class="italic">     (2) The <i>remuneration cap</i> for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:</p> ~~<p class="italic">number of days in t h e period number of days in t h e reportin g period x 10 x AAWE</p>~~ ~~<p class="italic">where:</p>~~ ~~<p class="italic"><i>  </i> <i>AAWE</i> means the annualised average weekly earnings for the reporting period for the ADI.</p>~~ ~~<p class="italic">     (3) The <i>annualised average weekly earnings</i> for a reporting period for an ADI is the amount worked out using the formula:</p>~~ ~~<p class="italic">number of weeks in t h e reporting period x AWE</p>~~ ~~<p class="italic">where:</p>~~ <p class="italic"><i>AWE </i>(short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.</p> ~~<p class="italic">   37DE Cap on variable remuneration of accountable persons</p>~~ <p class="italic">     (1) In addition, the executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI variable remuneration for a period (the <i>pay period</i>) that would result in the variable remuneration of the accountable person for the pay period exceeding the variable remuneration cap for the pay period.</p> <p class="italic">     (2) The <i>variable</i><i>remuneration cap</i> for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:</p> ~~<p class="italic">number of days in t h e period number of days in t h e reporting period x 5 x AAWE</p>~~ ~~<p class="italic">where:</p>~~ ~~<p class="italic"><i>  </i> <i>AAWE</i> means the annualised average weekly earnings for the reporting period for the ADI.</p>~~ ~~<p class="italic">     (3) The <i>annualised average weekly earnings</i> for a reporting period for an ADI is the amount worked out using the formula:</p>~~ ~~<p class="italic">number of weeks in t h e reporting period x AWE</p>~~ ~~<p class="italic">where:</p>~~ <p class="italic"><i>  </i> <i>AWE </i>(short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.</p> <p class="italic">     (4) For the purposes of subsection (1), in working out the maximum amount of variable remuneration that may be paid to an accountable person during a period, any deferral of variable remuneration under Division 4 of this Part during that period is to be ignored.</p> ~~<p class="italic">(3) Schedule 1, page 31 (line 9), after item 15, insert:</p>~~ ~~<p class="italic">   15A Cap on remuneration and variable remuneration of accountable persons</p>~~ <p class="italic">     (1) Division 3A of Part IIAA of the <i>Banking Act 1959</i> as inserted by this Act applies in relation to the remuneration and the variable remuneration of an accountable person only if the decision granting the accountable person the remuneration or variable remuneration was made on or after 1 January 2019.</p> <p class="italic">     (2) Despite subitem (1), if an accountable person's remuneration or variable remuneration is payable under a contract entered into before the day this Act received the Royal Assent, Division 3A of Part IIAA of the <i>Banking Act 1959</i> as inserted by this Act does not apply in relation to the remuneration or variable remuneration until 1 January 2020.</p> ~~<p class="italic">     (3) Despite subitem (1), if:</p>~~ <p class="italic">     (a) an accountable person's remuneration or variable remuneration is payable under a contract entered into before the commencement of Part IIAA of the <i>Banking Act 1959</i> as inserted by this Act; and</p> <p class="italic">     (b) apart from this subitem, the application of Division 3A of that Part in relation to the remuneration or variable remuneration would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph);</p> ~~<p class="italic">that Division does not apply in relation to the remuneration or variable remuneration to the extent that it would result in such an acquisition.</p>~~ <p class="italic">Note: Because this subitem prevents Division 3A of Part IIAA of the <i>Banking Act 1959</i> from giving rise to such an acquisition of property in relation to remuneration or variable remuneration payable under such a contract, compensation will not be payable under section 69E of that Act.</p> <p>We've already talked about this this morning, and I certainly did in my second reading speech. The Nick Xenophon Party have indicated they won't be supporting the amendments before the Senate today to cap executive salaries. I am glad that One Nation is going to support the amendments to cap executive salaries. No-one can justify the salaries that are paid by shareholders to the bank CEOs in this country. Our banks are some of the most profitable in the world and our CEOs are some of the most highly paid CEOs in the banking sector on the planet. These amendments before us today, amendments (1), (2) and (3), will put a cap on both variable and fixed remuneration.</p> <p>Fixed salaries are 10 times average weekly earnings, which roughly works out at about $850,000, double what our Prime Minister makes, so bank CEOs still make a lot of money. The variable component's half that, so it still takes them to well over a million dollars. As I mentioned earlier, this is in line with what the Israeli government capped their bankers' salaries at. They took some firm action. When that vote went to their parliament, it was 56-zero—56 MPs voted for it and zero voted against it. They got to the point where they all agreed that their banking CEOs were paid too much. There was no need for it, it was counterproductive and it only added to inequality in their country. They saw capping the salaries of bankers not just as an economic argument but as a moral argument. I argued in this place in my second reading speech that we have the right to do that as a government because bankers are an unusual breed and they have a privilege to operate in this country that is given to them by the Australian taxpayer. They have a licence given to them by the taxpayer, the voters and the government that allows them to operate and then they're insured against failure through the too-big-to-fail guarantees. They work in a very privileged environment and they literally are given a licence by the Australian people to print money.</p> <p>I want to make this very clear: the Treasurer talked in his second reading speech in the other place about bringing bank executives more in line with community expectations. I have no doubt at all that, if you go outside these walls and speak to Australians, the expectation of nearly every Australian you speak to is that these salaries cannot be justified. They are excessive, totally unnecessary, inequitable and unfair, and they add to inequality in this country. If government can play an active role in setting minimum wages in Australia, why can't we also play a role in setting maximum wages, especially in an industry that's regulated by the government? It's part of our constitution. The Banking Act very clearly talks about governments issuing a licence to bankers and playing an active role in regulating this industry. As we know, if the financial system collapses, there's corruption or there's instability then it affects every single one of us.</p> <p>Lastly, I have no doubt about the rotten culture, which everyone has acknowledged—even Senator Cormann tacitly acknowledged it in his speech in the second reading debate today—and the need for this legislation. Believe me, that is a big turnaround from four years ago, when we were having the FOFA debate in this place and Senator Cormann clearly said it was just a few bad apples in the banking industry. I'm glad he's come to the view now that there are some systemic issues and that this legislation is here today because of those systemic issues. I accept that it's more about prudential issues than it is about bad behaviour and adverse consumer outcomes, but nevertheless at least it is something.</p> <p>We accept there's a rotten culture, and there has been in the banking sector. There have been numerous scandals. We've talked about them ad nauseam in this debate. The only way that you can fix that profit-before-people culture, that profit-at-all-costs culture, is to cap CEO salaries. It's the simplest and easiest way to do that, because the culture of an organisation starts at the top. If CEOs know they're not going to earn $10 million or $20 million this year based on massive returns, there'll be a lot less pressure throughout the organisation to constantly make profits and do all the kinds of things that we've uncovered in our Senate inquiries, like sell to people products they don't want, charge excessive fees and charges to their customers, rip off customers or carry out unconscionable conduct. That's our view. I won't talk about that anymore. I will simply ask Senator Cormann to at least address this when he responds to this amendment. Senator Cormann, do you believe that bankers' salaries are excessive and do you believe the government has a role in limiting them?</p> ~~<p class="speaker">Mathias Cormann</p>~~ <p>I don't believe the government has a role in setting remuneration for employees of any business, including the banking business. The government does not support a cap on the remuneration for accountable persons under the Banking Executive Accountability Regime. Setting of salaries and remuneration arrangements more generally of any private sector business is, ultimately, a matter for shareholders and boards to make decisions on. It is not the role of government to set the size of remuneration payable to accountable persons; these are commercial decisions for an authorised deposit-taking institution to make in line with its policies.</p> <p>However, the government does have a role in ensuring such policies do not result in perverse outcomes for consumers. This is why the bill includes provisions requiring the deferral of a minimum percentage of an accountable person's variable remuneration for at least four years. This will ensure that accountable persons have clear incentives to make decisions which account for longer term effects on the bank and its customers. Simply capping the remuneration of accountable persons would not provide the incentives that the referral of variable remuneration can, when behaviour of a person is clearly linked to remuneration outcomes.</p> ~~<p class="speaker">Peter Whish-Wilson</p>~~ <p>In terms of incentives, if a variable remuneration is deferred for four years—and let's say the variable remuneration, the bonus, is $5 million—what kind of opportunity costs are going to be carried by that particular CEO or executive, Senator Cormann? What is the real penalty of having your remuneration deferred for four years? You still get it four years later. We're not talking about very significant costs. It's hardly an incentive.</p> ~~<p class="speaker">Mathias Cormann</p>~~ <p>What Senator Whish-Wilson has said is not quite right. Firstly, there's the provision where payments of variable parts of the remuneration can be deferred for at least four years. But, if there is conduct in breach of the Banking Executive Accountability Regime, my advice is that there is a requirement for the bank to reduce your variable remuneration. There is a penalty, which we are confident will focus the relevant people's minds.</p> ~~<p class="speaker">Pauline Hanson</p>~~ <p>One Nation will support this amendment put up by Senator Whish-Wilson of the Greens. We are going to support this because I think what the banking executives get in their remuneration package—between $10 million and $20 million—does not pass the pub test as far as Australians are concerned. The minister states that it is not the government's responsibility to get into private business, but this is not the government getting into private business. As I see it, the banking sector is a necessity that Australians have to use. It is a service that is important to their everyday needs and requirements in running their businesses and their lives. It is something Australians have to use.</p> <p>The fact is that the Australian taxpayer guarantees the banking sector, so we do have a very important decision to make here, because if ever the banking sector were to fail then the taxpayers would be picking up the bills. So the taxpayers do have a right to have an input and a say into the remuneration that is paid—which is out of the realms of common sense. It is important that we have this discussion and the Australian taxpayers have a right to know the government's stance on this and why the government are not prepared to rein it in, when there is another country in the world that has done the same with their banking sector.</p> ~~<p class="speaker">Peter Whish-Wilson</p>~~ ~~<p>Can I just quickly ask Senator Cormann: do you agree that remuneration has been part of a problem of poor culture in the financial services sector in recent years?</p>~~ ~~<p class='motion-notice motion-notice-truncated'>Long debate text truncated.</p>~~

Change

Division

senate vote 2018-02-07#2

Edited by mackay staff

on 2023-07-28 08:34:09

Title

Description

The majority voted in favour of [amendments](https://www.openaustralia.org.au/senate/?gid=2018-02-07.24.1) introduced by Tasmanian Senator [Peter Whish-Wilson](https://theyvoteforyou.org.au/people/senate/tasmania/peter_whish-wilson), which means they'll now be included as part of the bill.
### What does the bill do?
Senator Whish-Wilson [explained that](https://www.openaustralia.org.au/senate/?gid=2018-02-07.24.1):
> *No-one can justify the salaries that are paid by shareholders to the bank CEOs in this country. Our banks are some of the most profitable in the world and our CEOs are some of the most highly paid CEOs in the banking sector on the planet. These amendments before us today, amendments (1), (2) and (3), will put a cap on both variable and fixed remuneration.*
>
> *Fixed salaries are 10 times average weekly earnings, which roughly works out at about $850,000, double what our Prime Minister makes, so bank CEOs still make a lot of money. The variable component's half that, so it still takes them to well over a million dollars.*
### Amendment text
~~(1) Schedule 1, item 1, page 4 (line 15), after paragraph 37(1) (b), insert:~~
~~(ba) its executive remuneration obligations; and~~
~~(2) Schedule 1, item 1, page 12 (line 18), before Division 4, insert:~~
~~Division 3A—Executive remuneration obligations~~
~~37DC Cap on remuneration of accountable persons~~
(1) The executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI remuneration for a period (the pay period) that would result in the remuneration of the accountable person for the pay period exceeding the remuneration cap for the pay period.
~~(2) The remuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:~~
~~number of days in t h e period number of days in t h e reportin g period x 10 x AAWE~~
~~where:~~
~~AAWE means the annualised average weekly earnings for the reporting period for the ADI.~~
~~(3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:~~
~~number of weeks in t h e reporting period x AWE~~
~~where:~~
AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.
~~37DE Cap on variable remuneration of accountable persons~~
(1) In addition, the executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI variable remuneration for a period (the pay period) that would result in the variable remuneration of the accountable person for the pay period exceeding the variable remuneration cap for the pay period.
~~(2) The variableremuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:~~
~~number of days in t h e period number of days in t h e reporting period x 5 x AAWE~~
~~where:~~
~~AAWE means the annualised average weekly earnings for the reporting period for the ADI.~~
~~(3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:~~
~~number of weeks in t h e reporting period x AWE~~
~~where:~~
AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.
(4) For the purposes of subsection (1), in working out the maximum amount of variable remuneration that may be paid to an accountable person during a period, any deferral of variable remuneration under Division 4 of this Part during that period is to be ignored.
~~(3) Schedule 1, page 31 (line 9), after item 15, insert:~~
~~15A Cap on remuneration and variable remuneration of accountable persons~~
(1) Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act applies in relation to the remuneration and the variable remuneration of an accountable person only if the decision granting the accountable person the remuneration or variable remuneration was made on or after 1 January 2019.
(2) Despite subitem (1), if an accountable person's remuneration or variable remuneration is payable under a contract entered into before the day this Act received the Royal Assent, Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act does not apply in relation to the remuneration or variable remuneration until 1 January 2020.
~~(3) Despite subitem (1), if:~~
~~(a) an accountable person's remuneration or variable remuneration is payable under a contract entered into before the commencement of Part IIAA of the Banking Act 1959 as inserted by this Act; and~~
(b) apart from this subitem, the application of Division 3A of that Part in relation to the remuneration or variable remuneration would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph);
~~that Division does not apply in relation to the remuneration or variable remuneration to the extent that it would result in such an acquisition.~~
Note: Because this subitem prevents Division 3A of Part IIAA of the Banking Act 1959 from giving rise to such an acquisition of property in relation to remuneration or variable remuneration payable under such a contract, compensation will not be payable under section 69E of that Act.
> *(1) Schedule 1, item 1, page 4 (line 15), after paragraph 37(1) (b), insert:*
>
>> *(ba) its executive remuneration obligations; and*
>
> *(2) Schedule 1, item 1, page 12 (line 18), before Division 4, insert:*
>
>> *Division 3A—Executive remuneration obligations*
>>
>> *37DC Cap on remuneration of accountable persons*
>>
>>> *(1) The executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI remuneration for a period (the pay period) that would result in the remuneration of the accountable person for the pay period exceeding the remuneration cap for the pay period.*
>>>
>>> *(2) The remuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:*
>>>
>>>> *number of days in t h e period number of days in t h e reportin g period x 10 x AAWE*
>>>>
>>>> *where:*
>>>>
>>>> *AAWE means the annualised average weekly earnings for the reporting period for the ADI.*
>>>
>>> *(3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:*
>>>
>>>> *number of weeks in t h e reporting period x AWE*
>>>>
>>>> *where:*
>>>>
>>>> *AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.*
>>
>> *37DE Cap on variable remuneration of accountable persons*
>>
>>> *(1) In addition, the executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI variable remuneration for a period (the pay period) that would result in the variable remuneration of the accountable person for the pay period exceeding the variable remuneration cap for the pay period.*
>>>
>>> *(2) The variableremuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:*
>>>
>>>> *number of days in t h e period number of days in t h e reporting period x 5 x AAWE*
>>>>
>>>> *where:*
>>>>
>>>> *AAWE means the annualised average weekly earnings for the reporting period for the ADI.*
>>>
>>> *(3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:*
>>>
>>>> *number of weeks in t h e reporting period x AWE*
>>>>
>>>> *where:*
>>>>
>>>> *AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.*
>>>
>>> *(4) For the purposes of subsection (1), in working out the maximum amount of variable remuneration that may be paid to an accountable person during a period, any deferral of variable remuneration under Division 4 of this Part during that period is to be ignored.*
>
> *(3) Schedule 1, page 31 (line 9), after item 15, insert:*
>
>>15A Cap on remuneration and variable remuneration of accountable persons
>>
>> *(1) Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act applies in relation to the remuneration and the variable remuneration of an accountable person only if the decision granting the accountable person the remuneration or variable remuneration was made on or after 1 January 2019.*
>>
>> *(2) Despite subitem (1), if an accountable person's remuneration or variable remuneration is payable under a contract entered into before the day this Act received the Royal Assent, Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act does not apply in relation to the remuneration or variable remuneration until 1 January 2020.*
>>
>> *(3) Despite subitem (1), if:*
>>
>>> *(a) an accountable person's remuneration or variable remuneration is payable under a contract entered into before the commencement of Part IIAA of the Banking Act 1959 as inserted by this Act; and*
>>>
>>> *(b) apart from this subitem, the application of Division 3A of that Part in relation to the remuneration or variable remuneration would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph);*
>>>
>>> *that Division does not apply in relation to the remuneration or variable remuneration to the extent that it would result in such an acquisition.*
>>>
>>> *Note: Because this subitem prevents Division 3A of Part IIAA of the Banking Act 1959 from giving rise to such an acquisition of property in relation to remuneration or variable remuneration payable under such a contract, compensation will not be payable under section 69E of that Act.*

senate vote 2018-02-07#2

Edited by mackay staff

on 2023-07-28 08:21:56

Title

Bills — Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2018; in Committee
Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2018 - in Committee - Cap executive salaries

Description

~~Peter Whish-Wilson~~
~~by leave—I move amendments (1), (2) and (3) on sheet 8343 together:~~
The majority voted in favour of [amendments](https://www.openaustralia.org.au/senate/?gid=2018-02-07.24.1) introduced by Tasmanian Senator [Peter Whish-Wilson](https://theyvoteforyou.org.au/people/senate/tasmania/peter_whish-wilson), which means they'll now be included as part of the bill.
### What does the bill do?
Senator Whish-Wilson [explained that](https://www.openaustralia.org.au/senate/?gid=2018-02-07.24.1):
> *No-one can justify the salaries that are paid by shareholders to the bank CEOs in this country. Our banks are some of the most profitable in the world and our CEOs are some of the most highly paid CEOs in the banking sector on the planet. These amendments before us today, amendments (1), (2) and (3), will put a cap on both variable and fixed remuneration.*
>
> *Fixed salaries are 10 times average weekly earnings, which roughly works out at about $850,000, double what our Prime Minister makes, so bank CEOs still make a lot of money. The variable component's half that, so it still takes them to well over a million dollars.*
### Amendment text
(1) Schedule 1, item 1, page 4 (line 15), after paragraph 37(1) (b), insert:
(ba) its executive remuneration obligations; and
(2) Schedule 1, item 1, page 12 (line 18), before Division 4, insert:
Division 3A—Executive remuneration obligations
37DC Cap on remuneration of accountable persons
(1) The executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI remuneration for a period (the pay period) that would result in the remuneration of the accountable person for the pay period exceeding the remuneration cap for the pay period.
(2) The remuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:
number of days in t h e period number of days in t h e reportin g period x 10 x AAWE
where:
AAWE means the annualised average weekly earnings for the reporting period for the ADI.
(3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:
number of weeks in t h e reporting period x AWE
where:
AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.
37DE Cap on variable remuneration of accountable persons
(1) In addition, the executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI variable remuneration for a period (the pay period) that would result in the variable remuneration of the accountable person for the pay period exceeding the variable remuneration cap for the pay period.
(2) The variableremuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:
number of days in t h e period number of days in t h e reporting period x 5 x AAWE
where:
AAWE means the annualised average weekly earnings for the reporting period for the ADI.
(3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:
number of weeks in t h e reporting period x AWE
where:
AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.
(4) For the purposes of subsection (1), in working out the maximum amount of variable remuneration that may be paid to an accountable person during a period, any deferral of variable remuneration under Division 4 of this Part during that period is to be ignored.
(3) Schedule 1, page 31 (line 9), after item 15, insert:
15A Cap on remuneration and variable remuneration of accountable persons
(1) Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act applies in relation to the remuneration and the variable remuneration of an accountable person only if the decision granting the accountable person the remuneration or variable remuneration was made on or after 1 January 2019.
(2) Despite subitem (1), if an accountable person's remuneration or variable remuneration is payable under a contract entered into before the day this Act received the Royal Assent, Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act does not apply in relation to the remuneration or variable remuneration until 1 January 2020.
(3) Despite subitem (1), if:
(a) an accountable person's remuneration or variable remuneration is payable under a contract entered into before the commencement of Part IIAA of the Banking Act 1959 as inserted by this Act; and
(b) apart from this subitem, the application of Division 3A of that Part in relation to the remuneration or variable remuneration would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph);
that Division does not apply in relation to the remuneration or variable remuneration to the extent that it would result in such an acquisition.
Note: Because this subitem prevents Division 3A of Part IIAA of the Banking Act 1959 from giving rise to such an acquisition of property in relation to remuneration or variable remuneration payable under such a contract, compensation will not be payable under section 69E of that Act.
(1) Schedule 1, item 1, page 4 (line 15), after paragraph 37(1) (b), insert:
~~(ba) its executive remuneration obligations; and~~
~~(2) Schedule 1, item 1, page 12 (line 18), before Division 4, insert:~~
~~Division 3A—Executive remuneration obligations~~
~~   37DC Cap on remuneration of accountable persons~~
(1) The executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI remuneration for a period (the pay period) that would result in the remuneration of the accountable person for the pay period exceeding the remuneration cap for the pay period.
(2) The remuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:
~~number of days in t h e period number of days in t h e reportin g period x 10 x AAWE~~
~~where:~~
~~   AAWE means the annualised average weekly earnings for the reporting period for the ADI.~~
~~     (3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:~~
~~number of weeks in t h e reporting period x AWE~~
~~where:~~
AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.
~~   37DE Cap on variable remuneration of accountable persons~~
(1) In addition, the executive remuneration obligations of an ADI are to ensure that the ADI does not pay an accountable person of the ADI variable remuneration for a period (the pay period) that would result in the variable remuneration of the accountable person for the pay period exceeding the variable remuneration cap for the pay period.
(2) The variableremuneration cap for an accountable person of an ADI for a period starting in a reporting period for the ADI is the amount worked out using the formula:
~~number of days in t h e period number of days in t h e reporting period x 5 x AAWE~~
~~where:~~
~~   AAWE means the annualised average weekly earnings for the reporting period for the ADI.~~
~~     (3) The annualised average weekly earnings for a reporting period for an ADI is the amount worked out using the formula:~~
~~number of weeks in t h e reporting period x AWE~~
~~where:~~
AWE (short for average weekly earnings)means the amount published by the Australian Statistician in a document titled "Average Weekly Earnings" under the headings "Average Weekly Earnings, Australia—Original—Full-time adult average weekly total earnings" (or, if any of those change, in a replacement document or under replacement headings) for the most recent index reference period before the start of the reporting period.
(4) For the purposes of subsection (1), in working out the maximum amount of variable remuneration that may be paid to an accountable person during a period, any deferral of variable remuneration under Division 4 of this Part during that period is to be ignored.
~~(3) Schedule 1, page 31 (line 9), after item 15, insert:~~
~~   15A Cap on remuneration and variable remuneration of accountable persons~~
(1) Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act applies in relation to the remuneration and the variable remuneration of an accountable person only if the decision granting the accountable person the remuneration or variable remuneration was made on or after 1 January 2019.
(2) Despite subitem (1), if an accountable person's remuneration or variable remuneration is payable under a contract entered into before the day this Act received the Royal Assent, Division 3A of Part IIAA of the Banking Act 1959 as inserted by this Act does not apply in relation to the remuneration or variable remuneration until 1 January 2020.
~~     (3) Despite subitem (1), if:~~
(a) an accountable person's remuneration or variable remuneration is payable under a contract entered into before the commencement of Part IIAA of the Banking Act 1959 as inserted by this Act; and
(b) apart from this subitem, the application of Division 3A of that Part in relation to the remuneration or variable remuneration would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph);
~~that Division does not apply in relation to the remuneration or variable remuneration to the extent that it would result in such an acquisition.~~
Note: Because this subitem prevents Division 3A of Part IIAA of the Banking Act 1959 from giving rise to such an acquisition of property in relation to remuneration or variable remuneration payable under such a contract, compensation will not be payable under section 69E of that Act.
We've already talked about this this morning, and I certainly did in my second reading speech. The Nick Xenophon Party have indicated they won't be supporting the amendments before the Senate today to cap executive salaries. I am glad that One Nation is going to support the amendments to cap executive salaries. No-one can justify the salaries that are paid by shareholders to the bank CEOs in this country. Our banks are some of the most profitable in the world and our CEOs are some of the most highly paid CEOs in the banking sector on the planet. These amendments before us today, amendments (1), (2) and (3), will put a cap on both variable and fixed remuneration.
Fixed salaries are 10 times average weekly earnings, which roughly works out at about $850,000, double what our Prime Minister makes, so bank CEOs still make a lot of money. The variable component's half that, so it still takes them to well over a million dollars. As I mentioned earlier, this is in line with what the Israeli government capped their bankers' salaries at. They took some firm action. When that vote went to their parliament, it was 56-zero—56 MPs voted for it and zero voted against it. They got to the point where they all agreed that their banking CEOs were paid too much. There was no need for it, it was counterproductive and it only added to inequality in their country. They saw capping the salaries of bankers not just as an economic argument but as a moral argument. I argued in this place in my second reading speech that we have the right to do that as a government because bankers are an unusual breed and they have a privilege to operate in this country that is given to them by the Australian taxpayer. They have a licence given to them by the taxpayer, the voters and the government that allows them to operate and then they're insured against failure through the too-big-to-fail guarantees. They work in a very privileged environment and they literally are given a licence by the Australian people to print money.
I want to make this very clear: the Treasurer talked in his second reading speech in the other place about bringing bank executives more in line with community expectations. I have no doubt at all that, if you go outside these walls and speak to Australians, the expectation of nearly every Australian you speak to is that these salaries cannot be justified. They are excessive, totally unnecessary, inequitable and unfair, and they add to inequality in this country. If government can play an active role in setting minimum wages in Australia, why can't we also play a role in setting maximum wages, especially in an industry that's regulated by the government? It's part of our constitution. The Banking Act very clearly talks about governments issuing a licence to bankers and playing an active role in regulating this industry. As we know, if the financial system collapses, there's corruption or there's instability then it affects every single one of us.
Lastly, I have no doubt about the rotten culture, which everyone has acknowledged—even Senator Cormann tacitly acknowledged it in his speech in the second reading debate today—and the need for this legislation. Believe me, that is a big turnaround from four years ago, when we were having the FOFA debate in this place and Senator Cormann clearly said it was just a few bad apples in the banking industry. I'm glad he's come to the view now that there are some systemic issues and that this legislation is here today because of those systemic issues. I accept that it's more about prudential issues than it is about bad behaviour and adverse consumer outcomes, but nevertheless at least it is something.
We accept there's a rotten culture, and there has been in the banking sector. There have been numerous scandals. We've talked about them ad nauseam in this debate. The only way that you can fix that profit-before-people culture, that profit-at-all-costs culture, is to cap CEO salaries. It's the simplest and easiest way to do that, because the culture of an organisation starts at the top. If CEOs know they're not going to earn $10 million or $20 million this year based on massive returns, there'll be a lot less pressure throughout the organisation to constantly make profits and do all the kinds of things that we've uncovered in our Senate inquiries, like sell to people products they don't want, charge excessive fees and charges to their customers, rip off customers or carry out unconscionable conduct. That's our view. I won't talk about that anymore. I will simply ask Senator Cormann to at least address this when he responds to this amendment. Senator Cormann, do you believe that bankers' salaries are excessive and do you believe the government has a role in limiting them?
~~Mathias Cormann~~
I don't believe the government has a role in setting remuneration for employees of any business, including the banking business. The government does not support a cap on the remuneration for accountable persons under the Banking Executive Accountability Regime. Setting of salaries and remuneration arrangements more generally of any private sector business is, ultimately, a matter for shareholders and boards to make decisions on. It is not the role of government to set the size of remuneration payable to accountable persons; these are commercial decisions for an authorised deposit-taking institution to make in line with its policies.
However, the government does have a role in ensuring such policies do not result in perverse outcomes for consumers. This is why the bill includes provisions requiring the deferral of a minimum percentage of an accountable person's variable remuneration for at least four years. This will ensure that accountable persons have clear incentives to make decisions which account for longer term effects on the bank and its customers. Simply capping the remuneration of accountable persons would not provide the incentives that the referral of variable remuneration can, when behaviour of a person is clearly linked to remuneration outcomes.
~~Peter Whish-Wilson~~
In terms of incentives, if a variable remuneration is deferred for four years—and let's say the variable remuneration, the bonus, is $5 million—what kind of opportunity costs are going to be carried by that particular CEO or executive, Senator Cormann? What is the real penalty of having your remuneration deferred for four years? You still get it four years later. We're not talking about very significant costs. It's hardly an incentive.
~~Mathias Cormann~~
What Senator Whish-Wilson has said is not quite right. Firstly, there's the provision where payments of variable parts of the remuneration can be deferred for at least four years. But, if there is conduct in breach of the Banking Executive Accountability Regime, my advice is that there is a requirement for the bank to reduce your variable remuneration. There is a penalty, which we are confident will focus the relevant people's minds.
~~Pauline Hanson~~
One Nation will support this amendment put up by Senator Whish-Wilson of the Greens. We are going to support this because I think what the banking executives get in their remuneration package—between $10 million and $20 million—does not pass the pub test as far as Australians are concerned. The minister states that it is not the government's responsibility to get into private business, but this is not the government getting into private business. As I see it, the banking sector is a necessity that Australians have to use. It is a service that is important to their everyday needs and requirements in running their businesses and their lives. It is something Australians have to use.
The fact is that the Australian taxpayer guarantees the banking sector, so we do have a very important decision to make here, because if ever the banking sector were to fail then the taxpayers would be picking up the bills. So the taxpayers do have a right to have an input and a say into the remuneration that is paid—which is out of the realms of common sense. It is important that we have this discussion and the Australian taxpayers have a right to know the government's stance on this and why the government are not prepared to rein it in, when there is another country in the world that has done the same with their banking sector.
~~Peter Whish-Wilson~~
~~Can I just quickly ask Senator Cormann: do you agree that remuneration has been part of a problem of poor culture in the financial services sector in recent years?~~
~~Long debate text truncated.~~