SUBJECTS: Executive remuneration, Qantas, Former Qantas CEO Geoff Dixon
MURRAY WILTON:
Chris Bowen is the Federal Minister for Financial Services, Superannuation and Corporations Law, he's on the line. Chris, good afternoon to you.
CHRIS BOWEN:
Good afternoon Murray, how are you?
WILTON:
Well thank you sir. First things first, all the critics will say this is just a bit of populist nonsense from a Government that wants to get people on side because we're all outraged at how much Geoff Dixon got.
BOWEN:
No, look we've been working on this; we actually announced this a long time ago. It's been passed through the House of Representatives and now it goes before the Senate so this has been something that's been some time coming.
What really does rightly annoy people, and what is a real issue in corporate governance policy terms, is these payouts to individuals when they leave a company. A lot of shareholders, rightly, in my view, question the long term benefit to the company of that payment.
Murray, I know people get concerned about high salaries for chief executives but if a chief executive is delivering the goods and working for the company, and the shareholders think that that is in the best interests of the company – well that's one question, but a complete another question is when a chief executive or senior executive leaves the firm, sometimes in very difficult circumstances, sometimes the firm's not going well at all, and yet we see a very substantial payout to them.
We think shareholders should have much more of a say on that, so as you said in your introduction, we've introduced this legislation to reduce the threshold before shareholders can have a say and say hang on a second, 'what's in this for the company?', 'why are we giving this big payout?'. We're reducing that quite dramatically.
MURRAY OLDS:
Chris, you guys in Canberra can't be all unhappy about it. I mean $10.7 million; you guys would have got five of that in tax.
BOWEN:
The payment for Mr Dixon, without going into detail, there was a range of elements to that payment. Some of it was, as you said, salary, some of it was termination, some of it was, as I understand, quite a complex superannuation deal.
We have the view that always, chief executives and senior executives will need to be well-remunerated, will need to be not out of the ballpark in terms of other comparable countries around the world but there does need to be a check and balance in place.
We've got a number of processes underway; we've got the one you're talking about – really paring back these termination payments without shareholder approval. We also have the Productivity Commission report which will be released on Wednesday, which will go into more detail on recommendations to Government.
But what we can sensibly do in the area of executive remuneration and in reviewing for the G20, as you would have seen on the weekend and APRA, our prudential regulator, on making sure that the signals sent to financial executives in particular are in the best interests of the economy so not encouraging reckless short-term risk taking to increase short-term bonuses – and a number of very credible commentators point to this as one of the issues, not the cause, but one of the issues which led to the global financial crisis.
WILTON:
Is there an obligation in your view Chris Bowen, the Government's view, that big companies, big public companies with a very proud public reputation like Qantas, is there an obligation on these big companies to come out and publicly justify why a guy like Geoff Dixon, and I just used that as an example, about why he's entitled to such a big payout. Is there an obligation on those companies to do so?
BOWEN:
I think there is to shareholders and frankly, to the broader community and that's what this legislation is all about. If it is in the best interests of shareholders and the company, and it can be justified, then fine. Convince the shareholders, tell them why it's so, put it to a vote and pack yourself in. If you don't think that can happen that you should probably be looking at the size of your termination.
OLDS:
Well Chris if the shareholders are happy and they're still continuing to invest their money in Qantas, what's the problem?
BOWEN:
Well because they're not having a say. You used Qantas as an example but I'll just talk more generally. They're not having a say on these sorts of payments and often shareholders are in a situation where – Qantas isn't in this case, because they've actually done quite well compared to a lot of other airlines – but where a company isn't doing well, it's difficult to sell your shares because …
OLDS:
Well won't they vote with their feet? Won't they just say, 'well you can go get nodded' and pull their shares out?
BOWEN:
That means selling their shares Murray, which isn't always possible, considering the way the share market operates in terms of getting an adequate return on your investment but I think shareholders do deserve more of a say and that will lead to better corporate governance.
WILTON:
We've got a call here from Ashley who's joined us, Chris Bowen. Hello Ashley, good afternoon to you.
CALLER:
Good afternoon fellas.
WILTON:
The view you've got – will you just put it to the Minister please.
CALLER:
Can I ask the Minister, is this more spin, like Grocery Watch and Petrol Watch? I'm a Labor supporter by the way, I'll say that out in front but you guys have done nothing since you've been in. It's just been a lot of spin.
BOWEN:
I don't think that's a fair comment Ashley when you've been dealing with the biggest financial crisis since the Great Depression. We've seen more evidence today that our response has been to get us through this, again in conjunction with other factors, pretty much better than any other country in the world.
Look, I'm not pointing to this legislative measure as being the be-all and end-all or anything that's particularly brilliant or special – I'm pointing to it as a sensible and moderate measure which will provide more accountability.
Will termination payments continue? Of course they will. Will some of them continue to be high? Yes they will, but at least companies will have to justify it to their shareholders. If they can't convince them, then they'll get knocked back.
WILTON:
Chris Bowen, good to talk to you. Thank you very much for your time today and thanks for fielding one from Ashley, a Labor voter.
BOWEN:
Good on you, cheers mate.