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From the Treasurer

Friday, 16 October 2009

The Victorian Government today appointed Dr Michael Vertigan to head a State Services Authority report into the governance arrangements in place for the approval of remuneration arrangements made to VFMC employees last financial year.
Treasurer John Lenders said that he would act on the recommendations of Dr Vertigan’s report when it had concluded its findings.

“Dr Vertigan is a well respected figure in business and public administration who will get to the bottom of this matter and provide me with the right actions to prevent any excessive performance payments from being approved in the future,” Mr Lenders said.

“While investment groups around the world have confronted an extraordinary crash of global investment markets, the investment performance of the VFMC clearly does not warrant excessive performance bonus payments.”

“The Victorian Government is committed to establishing the VFMC as a centre of investment excellence. That means attracting the world’s top financial professionals and providing incentives to achieve outstanding investment returns for Victorian taxpayers. 

“This process is well underway with new leadership in an outstanding Chair in John Fraser and a highly respected management team.

“The Victorian Government’s expectation is that employees who provide strong financial returns for Victorian taxpayers will be rewarded appropriately for their efforts.

“We’ve set financial compensation limits for the VFMC but it is not clear that those limits have been observed in the remuneration reported for the 2008-09 financial year.

“Like most Victorians, my expectation is that large performance bonuses should not be approved if targets have not been met. The world economy is under pressure from the Global Financial Crisis and our Government firmly believes that restraint in this area is required.”

Mr Lenders said he was made aware of the scale of last financial year’s remuneration payments to VFMC employees late last Friday night when he was briefed on the draft annual report. That report was tabled today in Victorian Parliament.

He said he had spoken with the Chair of the VFMC and the Secretary of DTF and they have to consult with each other before agreeing to any further VFMC performance payments, any changes to existing executive compensation arrangements or any new executive compensation arrangements.

In addition to the Vertigan report, Mr Lenders said he had also asked DTF to commission a review of global finance industry compensation practices to ensure that the financial limits and incentives that we have put in place are appropriate in the current economic environment.

“I will not condone a compensation scheme that rewards underperformance,” Mr Lenders said.

“At the same time it can be a difficult balance because of the often more generous salaries on offer for this kind of work in the private sector.”

Dr Vertigan is currently chairman of financial group MyState Limited and was secretary of the Victorian Department of Treasury and Finance to Treasurer Alan Stockdale and is a former chair of respected superannuation fund AGEST.

Mr Lenders said Dr Vertigan was expected to start his report within a week.

He said the State Services Authority usually provided advice to ministers on a confidential basis but the actions the government took following this review would be made public.

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