JANINE PERRETT
In the other big story of the day, it is only week two of the new two strikes laws and already Crown has joined with Pac-Brands *inaudible* with the first strike against it. Shareholders and boards are revolting. To discuss the heated debate, the Parliamentary Secretary to the Treasurer and Labor Member for Western Sydney, David Bradbury. Welcome to the show.
DAVID BRADBURY
Good evening Janine.
PERRETT
It's only been two weeks since the new package came into being. We've had quite a few already in the first two weeks. Some opponents felt that it wouldn't have much effect, have you been surprised at how quickly and effectively shareholders have been using it?
BRADBURY
I think it was also going to be difficult to know exactly what the preparedness of shareholders to use these laws would be. I know that as we went through the process of developing the policies that underpin the legislation, there were a range of points of view that were expressed. On the one hand you had people saying that shareholders would be afraid to use these powers and that they would never use them. On the other hand you had people saying that this would have a dramatic and unsettling impact on share prices and share values. I think the reality of what we've seen is that it's been a pretty measured approach in the way that shareholders have approached the AGM season. They've been measured but they've been prepared to use these new powers.
PERRETT
Well they certainly have but look what happened today. Crown Casino's AGM, they got a strike against them, over 50 per cent. Then James Packer *inaudible* vowed to circumvent this law and use his 46 per cent shareholding to reinstate his board if a second consecutive vote is recorded. He called it a farcical situation and basically dismissed your legislation. What do you say to that kind of attitude?
BRADBURY
I think it is irresponsible for a board or for executives to take the position where they have had their first strike recorded, to simply say from the outset that they're not going to engage more closely with shareholders, we're just going to do as we please and if you come back in a year's time and you take the same position to record a strike, then you can do that but frankly we're not concerned about whether or not we do harm to the reputation of the company, we're not concerned about whether or not we put the company to added costs and the disruption of having potentially a spilled board, and we're not concerned about how we might be viewed even though we're prepared to tell all of those shareholders that expressed their dissatisfaction with our 'rem' report that we don't care what you think. I think it is irresponsible to take that position and in fact I think it's arrogant to take the position that we've seen taken here. But clearly it has always been a delicate balancing act for the Government in introducing these reforms and one of the questions we had to consider from the outset was whether or not we would preclude key management personnel, it's worth it just to explain the way these things operate because it's important in this context. Key management personnel, that is certain individuals, key members of management, when it comes to the two strikes they are precluded from voting and indeed from the spill resolution they're precluded from voting as well
PERRETT
So what about James Packer then?
BRADBURY
There are a few processes and it is probably worth just spending a bit of time explaining...
PERRETT
Well just because we haven't got a lot of time, he has thrown down the gauntlet to you saying that he's just going to ignore them, he's going to circumvent them. Under your rules, can he do that next year?
BRADBURY
Well what has occurred is the first strike has now been recorded. More than 25 per cent, more than 50 in fact. If next year a second strike is recorded with more than 25 per cent of shareholders voting down the remuneration report there would be a spill resolution...
PERRETT
Then that would lead to a board spill?
BRADBURY
No, no there is a separate resolution. You would then need 50 per cent spilling the board.
PERRETT
So you're saying that his threat is a hollow one and he might have to wear the new laws?
BRADBURY
Well where he would get to vote is at the extraordinary general meeting to be held within 90 days of the spill resolution. Assuming that he has then got the numbers to get the board that he wants back up then he may well be able to go through that. But the point that I would make is that I think it is irresponsible for a board to take the view that rather than do what we are trying to encourage boards to do and that is engage with shareholders, to actually put your company through all of this...
PERRETT
Well to make the point of course he has only got 46 per cent and while that may be enough to do it, there are another 54 per cent of shareholders. But I'm going to use a quote from you last week where you said that boards who try to dodge the two strikes rule on executive pay will only spark calls for tougher regulation from Canberra. Are you prepared to say that if people like James Packer do what he says and not just even in the spirit of the law, he's literally said it is farcical and he won't do it, will you follow through on this? Will you consider tougher regulation if people can circumvent it?
BRADBURY
Well I think the first point is that there will be calls for tougher legislation. In terms of the Government's position, I'm not going to make any knee-jerk responses on the day that these comments have been made. But clearly, the Government is watching very closely. In the end, we did not embark upon this process because we want companies recording strikes. In fact, if companies were not recording strikes I would see that as a good thing in the sense that it shows that boards are engaging with shareholders. But I think the point here is that he would be irresponsible to take the view that where more than 50 per cent of shareholders have voted down the remuneration report to dismiss that, I think that is irresponsible because in the end we've all got to compete for capital when it comes to investing in our companies.
PERRETT
Well just getting to some of the others I mentioned, do you find it an irony that Pac-Brands was recorded a first strike? The Chairman said that he would do it again which was again very arrogant, the irony is that it was Pac-Brands' remuneration to its Directors and Executives that prompted the Productivity Commission report that led to this entire process.
BRADBURY
Well the Productivity Commission reported predated...
PERRETT
Yeah but it was the outcry of that which lead to a lot of this happening.
BRADBURY
Yeah certainly there was a lot of colour and movement around some of the decisions at Pacific Brands but...
PERRETT
But doesn't this reflect what we're saying about Crown, this attitude that they don't seem to be getting the message?
BRADBURY
Well I think that there are many good examples. Take for example Transurban. Now Transurban was one of the companies that under the old non-binding vote had received very high no votes on its remuneration report over consecutive years, I think the last three years. There was a lot of talk particularly through the policy development process where people said that a company like this is the sort of company that is going to get a strike. They had their AGM this week and there was no strike and one of the interesting things was that their Chairman made the point that if you want to turn shareholder opinion around, you've got to engage and there has got to be genuine engagement and that is what the Government wants to see.
PERRETT
Given the problems that the Government has got at the moment, to have corporate Australia, some of the most powerful figures just thumbing their nose at laws you have brought in must be pretty galling.
BRADBURY
I think that if you have a look in its context, these are some pretty isolated examples of people, as you put it, thumbing their nose. But in the end, this is not an insult that I take personally. This is an insult to shareholders. In the end, there is a quaint view out there that shareholders are the owners of companies and sometimes people lose sight of that fact. But the reality is, we live in a competitive environment where we all have to compete for capital and if a board is prepared to take the view that they will dismiss and disregard the views of shareholders, then there are consequences that will flow from that which are independent from the two strikes regime.
PERRETT
But you aren't ruling out, if there was a call for tougher laws, you would look at it if this doesn't work?
BRADBURY
We will monitor the developments over the AGM season and beyond because I don't think the law ever reaches a point where it is perfect.
PERRETT
I look forward to speaking to you at the end of the AGM season, because it certainly started off with a bang. Thank you very much for joining us tonight.