7th Feb 2018, 11:06 AM – Senate Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2018 - in Committee - Cap executive salaries

The majority voted in favour of amendments introduced by Tasmanian Senator 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:

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.