Hudson BrettBRETT HUDSON (National): Thank you Madam Chair. In the second reading speech this morning I did point out that while we have reached a consensus in the select committee on this bill proceeding and the recommendations back to the House there were some areas where the National Party members wanted to see different provisions in the bill and they are in Part 1. As we move to this I have some questions for the Minister. Particularly they're around the State Services Commissioner's ability to direct in effect the boards around the terms and conditions of chief executives' pay and conditions. For instance subsection (2AA)—which clause 4 puts into section 117 of Crown Entities Act—states: When considering the terms and conditions of a chief executive the State Services Commissioner must have regard to the following" and it is that very phrase that we expressed concern to officials about in the Governance and Administration Committee because in practical terms what does "must have regard" mean?Our argument to them was that in respect of all the words that could be used or the structures that could be used "must have regard" is a much lower threshold than some others because it is not required to substantiate a level of evidence to have achieved X—a threshold if you will. It is simply—well in English at least—having to show in some minor way that you've had regard to something. So I would like to hear from the Minister particularly as it is his policy what his expectations on the State Services Commissioner are and how "must have regard to" will be evidenced in reality and indeed in the documentation the commissioner will have to provide.In terms of those elements that the commissioner must have regard to I don't have any particular argument to make with the criteria that are there. They are the things I think that we would expect that the commissioner should have to take into consideration. What is absent is any indication of the weighting of any of those particular conditions. So on face value does that mean that each of them is of an identical importance to the other? If that were not to be the case either in law or in practice that creates some level of potential uncertainty certainly at least in reviewing legislation because of course one of the elements is Government expectations. We appreciate that a Government's expectations for CEOs of Crown entities are very important but equally so is information provided by the board with respect to the skills and abilities of the candidate or the performance of the existing chief executive and the nature of the commercial business. So when we have these elements along with the public interest and market information what weighting is the commissioner supposed to apply to each of them? How does he or she show that the weighting has been applied appropriately? And how in the legislation is it confirmed that the boards of those entities will know in advance—and sufficiently in advance I think to plan their business and appointments—what those weightings are? At the moment we have the conditions. That's fine. But if it turns out that the expectation or the reality is that Government expectations form 95 percent of the decision and the rest of the elements get a mere veneer of treatment at best—and I'm not suggesting that that is the intention but in the absence of those weightings it could be—then we could end up with some serious distortions which actually undermine the intent certainly of the select committee in reaching the recommended amendments that we have but also I would argue undermine the boards themselves particularly in the context of some of the operations they have particularly the ones that are more commercially oriented or minded such as the Superannuation Fund and particularly in the reality of the world and the investment world that the Accident Compensation Corporation lives within. That flows on actually not just to the weighting for each of those. If we look at subsection (2B) in clause 4 and indeed new subsection (2AB)—actually I'll start with (2AB) first: "The State Services Commissioner must provide reasons for refusing consent to any proposed terms and conditions." from the boards and those conditions or criteria in new subsection (2AA) are the route by which he or she will reach that conclusion. I have concern in regard to "must provide reasons for refusing consent" and my question to the Minister is: does he really believe that just simply saying "provide reasons" is sufficient to ensure that what the commissioner comes back with—because this will be the heated part: when he or she disagrees with what the board nominally considered an independent board puts forward. Is simply saying "must provide reasons" enough? We have the time now to reflect on this and to say "Officials maybe some slightly different wording here would be useful." to give confidence to the public and particularly to the boards that if the commissioner is going to disagree with him he or she has got to elucidate the grounds for that disagreement very very clearly and comprehensively. That will give confidence—confidence to the boards and confidence I would also argue to the public and indeed to members of this committee. That also has relevance to subsection (2B): "The State Services Commissioner must provide the boards of statutory entities with advice and guidance on the terms and conditions" and I do believe this is just simply an oversight and we in the committee are therefore as guilty of that as anything else But the Minister might note that while we would believe in practice that a good commissioner would see that these are natural linkages here in law there aren't. So the commissioner can apply weightings to criteria legally at least anyway he or she wants to and he or she is not obliged to actually give guidance to the boards that is consistent either with the criteria that he or she will apply or indeed with the weighting that any one of those criteria could have applied. I think it's actually tidier legislation if we were to take this opportunity to ensure that there is absolutely no misunderstanding or confusion that these things all operate together—that the conditions themselves are not simply for reflection in one area to make a decision but form very much a part of the guidance responsibilities he or she has to those boards and indeed are also a very important part of the reasons the documentation should the commissioner determine that they're not going to consent to the proposed terms and conditions for those boards. If we were to look at those I think each of them is very important and I think if we can ensure that wording is there that is very clear and links them together we create a situation where there's a great deal more confidence from the boards in particular but because we are making laws for the country also from the public.Now the other matter I want to just traverse in this call—there wasn't a huge number of submissions on this bill but we did get a few—is that the submissions we got were very well reasoned and came from very respectable and reputed bodies. The Institute of Directors was very clear that their view—and this is the nature of their organisation—is that the autonomy of a board is paramount and that if you take one role one item of responsibility from the host that a board has the most important one for them to exercise their independence in is the appointment and terms and conditions of a CEO. They argued quite strongly that setting fixed terms would mean potentially the possibility of people choosing not to seek a role and would impair the board's ability to structure those terms and conditions in a way that's most in their view appropriate for their entities. And while yes they can be reappointed there is no doubt that having that term limit means that the structure of the expectations has to be around that term. It can't possibly go beyond it because there is no guarantee of continued employment beyond that. I think—and we did reflect this to officials in the committee as well—that when we have a reasoned submission from a reputable organisation that exists for strengthening the ability of directors in both public and private sectors then we do have a duty to show the consideration to that. I'd like to hear from the Minister how he believes that five years will work effectively."