HOST:
There's some new initiative coming out from the Federal Government at the moment, it's going to give unprecedented power over executive salaries to shareholders. In other words, what shareholders will have the power to do, if they think that the CEO is not doing what he or she should be doing, and is not doing well enough on their behalf they have the power to go away and vote them out of office, which seems quite staggering when you think that there might be reasons why they have underperformed that year or for two years, depending on what sort of programs or development programs they are involved with. David Bradbury, he's the Parliamentary Secretary to the Treasurer and he's one person who knows more about this than anyone else. He joins us now, hi David.
BRADBURY:
Good afternoon Peter, how are you?
HOST:
I'm very well. David I'd reckon there would be a lot of CEOs tonight going to bed, seriously shaking in their boots a little bit because if you're going to get some group of upset shareholders who are very upset with the fact that they haven't got a proper return for the last couple of years because that company may be in expansion mode or whatever else, and there's a chance they could get voted out, it might stop them wanting to go away and do that type of expansion.
BRADBURY:
Now look I've got to pick up on a couple of points you've made there Peter because I don't think you've accurately characterised what it is that we're proposing. And I'll just explain what it is that we're proposing. We're proposing a range of measures but the one that you're specifically referring to there is the two strikes test. I should emphasise that firstly this only relates to listed companies and secondly the two strikes only relate to the remuneration report which is presented to the annual general meeting to the shareholders. So it's not in relation to -
HOST:
The remuneration report can you just explain what that is -
BRADBURY:
Sorry, the remuneration report is what it's called. That's basically the report to shareholders setting out what all of the executives are going to be paid. And that's a typical part of the annual general meeting. So, we're only really talking about the executive salary packages and when they're presented to the shareholders. Now the way in which the two strikes rule will work is that there is quite a process you go through, so it's not as if we just happen to have a group of shareholders turn up one day not feeling all that good and deciding to take some pretty arbitrary action. There is a process that you have to follow. The first thing is, that at the first annual general meeting, if 25 percent or more of the eligible shareholders there at the meeting vote down the remuneration report then that gets you the first strike. Now fast track to the following annual general meeting the next year, if we find that at that annual general meeting, that when the remuneration report is presented to shareholders that is all of the executive salaries, if that is voted down again, the second strike, by 25 per cent or more of the eligible shareholders of the meeting then that gives you the two strikes .
HOST:
Just before you get to that figure. You're quoting 25 per cent, surely it should be a majority of shareholders?
BRADBURY:
I'm just about to get to that Peter. The 25 per cent is to give you the strike so you've got one strike and then the second year two strikes. At that point, it's then open to the shareholders but they need a majority vote to make this happen. It's open to the shareholders to spill the board. But you need more then 50 per cent of the shareholders at that point to do that. Now if they spill the board then within a 90 day period there has to be a further meeting and at that meeting the shareholders have another opportunity to decide whether to confirm the existing board or to remove the directors. Now there are provisions that allow certain directors to stay in place so that you don't have a company that is without a board through that period. But, the real emphasis behind what we are trying to do here is about recognising that there needs to be some ability for shareholders to shape the way in which directors of the company put together the pay packages of the executives of that company.
HOST:
David I've gone from thinking that CEOs are under enormous pressure to now seeing that they are the most protected. By the time that 25 per cent go away and get a spill and everything else, seriously the bloke would have already moved onto another position.
BRADBURY:
I've got to say, I think that in practice we've seen that there are a number of companies out there over the last couple of years that would have themselves in the sort of territory where they'd at least get to that second strike.
HOST:
Let's hope it doesn't worry too many before Christmas. David we have to go, but we do appreciate you taking the time to talk with us today.
BRADBURY:
No worries Peter, always a pleasure.
HOST:
Thanks David, Merry Christmas to you as well. David Bradbury, the Parliamentary Secretary to the Treasurer.