Changes needed in corporate Australia
I think the very important point to make is that a lot of the private funds, the private institutions have fairly big conflicts of interest, and this is where it comes down to the government funds because they have not got the commercial conflicts. If you go to America, the most powerful and impressive fund manager is CALPERS, the Californian Pension Fund. It is representing Californian public servants. They go out and knock over directors and vote things down and put up their own resolutions left, right and centre. They are a very, very powerful, effective force. We really need the likes of the QIC, New South Wales State Super, the Victorian Funds Management Company and the Commonwealth super schemes doing exactly that. They need to be leading the charge. They have more than $100 billion dollars under management between them and there is a great opportunity for Labor governments across the country to set the dogs loose through their public service super funds and actually try to create a culture of shareholder pressure.
Labor spokesman on shareholder issues, Stephen Conroy, is making lots of the very positive noises about legislating and changing the law to empower shareholders and give shareholders more rights and I heard him speak in Sydney a couple of weeks ago. He basically said to all the shareholders at the Shareholders Association, it’s up to you. You guys have got to make more noise. If you can make more noise, I will have more chance of getting some of these reforms through the parliament to improve the way corporate accountability works in Australia.
If you had your dream scenario, your dream reforms that you would like to get over the line, obviously one of them would be more disclosure. Information is power in the modern age. If you can get as much information on the table as possible, the shareholders, the analysts, the brokers, the media, everyone assessing it are empowered.
Yet you have crazy situations like the Stock Exchange in Australia floating on itself. So the regulator, the quasi-regulator, has suddenly given up regulating and said, no, we are going to go out and be a rapacious private monopoly and the owners of the Stock Exchange have made twenty-fold returns on their investment. Membership of the ASX was worth $25,000, it is now worth a million dollars on the stock market for those lucky members who still hold the stock. Do you think they are going to run around trying to be the regulator again? All they are interested in is making money.
You can hardly get any statements out of the stock exchange without paying for it. They supposedly give you one year’s worth of free statements but some are time-delayed and the website is slow and unreliable. When I ran for the AMP board, I had to pay the Stock Exchange $7.50 just to find out how many votes I got. It is amazing that you have this regulator that has given up on informing the market, holds all the information to its chest and only releases it to people if you pay for it. Can you imagine if the Australian Electoral Commission only released old election results on their website to people who paid for it? So what you need is a system where you have ten years worth of announcements free of charge on the website, accessible, so anyone who wants to search the history of HIH or One.Tel can go on to the web and find their statements going back 10 years without forking out hundreds of dollars just to do a bit of basic research. It is things like that which are really essential reforms.
You also need things like analyst briefings being revealed on company websites so you don’t have the insiders at the big funds getting the inside running on what is happening at a company.
As I mentioned, you should have compulsory disclosure of chief executives contracts, just like you have in the US with Jack Welsh. Here it is private information. You can’t get access to it.
You need ASIC to have much tougher laws overall, to be a more aggressive watchdog. For example, with director dealings. In Australia if a director sells shares: let’s look at Rodney Adler and One.Tel and HIH – selling like there is no tomorrow just before the thing gets suspended. He has two weeks under the Australian laws to disclose that he is selling his shares. In the UK it is 48 hours. There shouldn’t be a delay in the information getting to market on things like directors dumping their stock because it is a sure sign that there is something wrong. Probably the best sign you can get is, are the directors buying or are they selling? In Australia you don’t know for two weeks after they have actually done it and by then the horse has bolted.
The one tactic that I have tried in terms of putting pressure on is this running for boards. So in the coming year we will be encouraging other people to stand for boards, to create a culture of competition in terms of getting elected, to try and break the closed shop; and often it is not a case of trying to win. It is a case of trying to change, trying to bring pressure, because if you are a member of the club and someone stands for your board and says you are a dill and that gets sent out to a hundred thousand shareholders, that is putting lot of pressure on in itself, the very contest.
What I did was announce plans to stand for the Optus board on an anti cash-for-comment ticket because, unbelievably, companies like Optus, Qantas, the Commonwealth Bank and the NRMA were still paying John Laws or Alan Jones six figure sums after the whole cash-for-comment scandal. Their ethics were just shot. I said if they are prepared to pay money to get positive press, I am going to run for their board until they stop doing this. I am going to embarrass them, so they are going to have to tell all their shareholders they are still doing cash-for-comment. Most of those companies refused to include the cash-for-comment part in my platform that gets distributed to shareholders. They were so embarrassed by it they censored the platform. But in the case of Optus, they dropped the contract – $300,000 a year for Alan Jones – within 10 days of me announcing plans to stand. So I said, fine, I’m not standing. It was a great example of how you can put your hand up and affect change.
The same thing happened at Telstra. Steve Vizard had a whole range of conflicts of interest at Telstra where he was doing private deals to get AFL club website development contracts, at the same time that Telstra was trying to buy the AFL Internet rights, and there were a couple of other conflicts that he had. So I wrote to them and said, I’m standing for your board offering myself as an alternative to Steve Vizard who in my opinion has conflict of interest issues with blah, blah and blah. A week later he resigned from the board. There was no mention of the fact there was a contest but he resigned from the board, obviously preferring not to have an embarrassing public stoush and proxy fight over his continued position on the board.
So you can make a difference but the key is to stand up at the meetings if you can, put some pressure on. If there are any willing would-be board candidates out there, I would love to hear from you after the meeting because I have rarely had any pressure put on some of the Brisbane-based companies and it would be great to have someone, for instance, down at Movie World next November running for the Village Roadshow board.
MR WEEKES: I remembered, just when Stephen was talking, someone once said about a business leader that he set low personal standards and then consistently failed to achieve them. Also as a CEO I can tell you – look, I hope some sympathy comes out for CEOs after that – but the mark of a true CEO is that he is often wrong but never in doubt – absolutely never in doubt. I think most people find with the CEO role wonderful moments strung together between hours of terror, especially when you have got to deal with people like Stephen Mayne. So thanks for that Stephen.
Now I have great pleasure in introducing a very brave respondent. Adrienne Ward has had considerable experience from the inside on company boards and wrestling with issues of corporate accountability and responsibility. Adrienne is national director of business development with Accenture, formerly Anderson Consulting. She has had senior roles with Westpac and Optus and is a board member of the Premier’s business round table, Griffith University, the TAFE Brisbane Institute and the Executive Club. She was winner of the Westpac Chief Executive Award for 1999 for Australia; winner of the 1995 Telstra Business Women’s Awards for South Australia; voted as one of the top 12 women to watch in Australia for Business Class Magazine. I am very much looking forward to her thoughts on Stephen’s talk as well as to the surrounding issues of corporate accountability, as I am sure you are. Ladies and gentlemen, Adrienne Ward.
MS WARD: Thank you. I will start by saying, Stephen, it is not actually that hard to get on a board.
When I was asked to do the response tonight, I asked a number of people, who is Stephen Mayne and what does he do? It was amazing the responses I got but the most common was “professional stirrer”.
That is actually not my role tonight. As a true business person, I am not here to debate Stephen point for point but rather to give an alternative view, and perhaps bring to light some of the issues that Stephen has not caught up on.
Firstly, I am not here to say that corporate or business Queensland or Australia, depending on where you are looking, is comprised of saintly people because it is not. Certainly Stephen has raised a number of valid concerns, some of which are being addressed and some of which are not, but let’s remember that the main purpose of business is profit and we have to look at profit. It is not actually a dirty word.
When we view a company financially, risks have usually been taken by both the shareholders, who have invested the money, and the people who have actually founded the companies, who I must say in my experience have put all their worldly goods on the line.
Unfortunately, a corporation is no different to any other multi-person entity, whether it be a family, a footy team or a hippie commune. There will always be people who don’t abide by the rules.
And when we talk about good corporate governance, the four areas of responsibility of a board that I deal with on a daily basis are strategy, performance, conformance, and finally shareholders. And what Stephen is saying about shareholder pressure is quite right. Companies have to deal with all of this and also the competing expectations of the shareholders, their customers and their staff. There is a new catch phrase – I am sure a lot of you have heard it – it is “triple bottom line accounting”; that is, companies having a corporate heart with environmental, social and community commitments.
These days we have greater access to the Internet, as obviously Stephen’s site shows, so that shareholders have better information at their finger tips which can push alliances either way. If you take Nike and the public furore over them allegedly producing goods in Asian sweat shops, this actually led to a downturn in their share price because of the public ill feeling.
Stephen tonight has raised some valid points but now let us consider some of the good things that corporate Australia and corporate Queensland actually does. If you look at 20 years ago, community and charitable organisations raised money through old fashioned legwork, door knocking, cake stalls and sheer pounding of the streets. These days, with less government funding, they need to be commercial in the way they do business and raise funds. Society today expects companies to show their corporate heart not only with direct financial assistance but also the provision of goods and services to these organisations. I can give you a couple of examples. One is Westpac; Westpac actually supports Surf Lifesaving here in Queensland and the Smith Family. McDonalds has committed $3 million this year alone to Ronald McDonald houses solely in Queensland, which allows families to have accommodation close to their children while in hospitals. We are talking about the Mater Hospital and the new Townsville Hospital which will be ready in 2002.
I think one of the points I need to get across is where is the media when all these good deeds are actually announced? I wanted to raise the point that whilst the media serves a purpose of vigilance, it is an unfortunate fact of our society that bad news sells. Yes, there is the dominance of newspapers; that is, no competition, so we tend to find our news is biased. I am sure many of you have seen Stephen’s site which is informative, interesting and quirky but unfortunately it does not present a great deal of positive news. Where is all the good stuff going?
But what I would like to do is get back to what Stephen called shareholder pressure, and while I agree that in business we need to focus on that, there are a couple of other areas that I believe can actually improve the way we do business in Australia. The main one I am looking at is diversity on boards. For so long we have heard from government that we need more diversity on boards but what does that actually mean? Are we talking about industry experience or gender specific? Well, my view is that it is both. Long gone are the days when all a board required was a series of solicitors and accountants. As our work trends are changing, so is the way we do business. That is, we are actually no longer local or physical. We tend to be more global and electronic and our board compositions should reflect this.
So how is it that we have no industry related experience on these boards such as marketing, information technology, organisational performance and strategy? While we need legal and accounting professionals to keep us on the straight and narrow, we also need the other professionals to help us lead the way forward that is best for all parties concerned.
What about knowledge? How many occasions have I actually been involved in where board members cannot read financial statements and they don’t understand good corporate governance? They tend to want to be appointed for egotistical and monetary reasons and not for the good of the company. This comes back to what Stephen is talking about and the Boys Club issue and what I also call nepotism, and how fairness and equity need to be addressed.
This is my second point. What about women on boards? When discussing potential candidates, I constantly hear the phrase “But I don’t know any good women”. Well, number one, what actually constitutes a good woman? And number two, it is not that hard to think of one. I am not talking about the Margaret Jackson’s of this world. I call them the Queen Bees because they have a tendency to be at the top and won’t assist any other women getting up to that top level. I am talking about younger, stronger, intelligent females that have the capabilities to be on these boards. Yes, I do know that it pays to network and know the people already on the board, but what about just asking around and also using government registers to help that process.
These are only two issues and there are plenty more. As I said, Stephen has touched on a couple of those. But it is my view that business has its strengths and weaknesses and will always be a part of an organisation that has a human factor. We don’t in Australia suffer as much bribery, corruption or nepotism that exists in other countries, neither however are we perfect.
I believe some of the areas that need to be addressed more closely are the ones I have spoken about and they include the diversity and Boys Club themes. I also believe Australian corporations have in many ways shown themselves to adapt and move with world trends quite quickly and the GST is one of them. While changes are often seen as unfavourable, it allows us to be global and competitive like other countries, so it can’t really be all that bad.
But in closing, Stephen, I am just going to tell you this, and you are talking about the difference between Queensland and Victoria. Yes, Queensland is the fastest growing state. Yes, Queensland has Australia’s lowest state taxes. Yes, Queensland has the lowest debt levels of any other Australian state. But I think one of the best things that I love about Queensland and why I chose here rather than Victoria or New South Wales to live is that we are a can-do state. We just go out there and do it. So my advice to other people south of Queensland is that if you don’t really like it here, just go home. Thank you.
MR WEEKES: So there! Stephen, would you like to join us back on stage. This is your opportunity to ask questions. I might start this if I could and I will come to you next question. What I am sure many of your readers want to know is just who is the nastiest, the most evil and most feared political columnist in Australia who files on your site and goes by the name of Hillary Bray?
MR MAYNE: If I told you, Ray, I would have to kill you. For those who have not been to the site, Hillary Bray is a genuine insider who worked for the Howard Government in a fairly senior position and now writes a weekly column and is amazingly prolific and has insights that no other columnist has, great insights on what is happening inside the Liberal Party. And, leveraging off the web, has an amazing network of people who contribute information from all over the country. So she – I never say if it is he or she but tonight she can be a she. She covers an amazing amount of territory and has amazing relationships where she will be friends with someone in real life and have a separate Hillary relationship with them on the e-mail and they obviously don’t realise it is the same person.
The only way we have been able to keep Hillary’s identity secret, one of the ways is that Hillary puts some deliberate errors into stories so that people who suspect who it is will be put off the scent if they read this obvious spelling mistake about Hillary’s best friend or something like that. So far it has been 15 months and no-one has even got close, and if Hillary gets blown then we are out of business.
MR WEEKES: Just explain this then, you are a commentator, you run a media site. We are all brain washed with this idea that the media are independent commentators. Now that you have launched a political party can you explain how you can do both and what immersion journalism really is?
MR MAYNE: We are registering a political party called People Power in Victoria. The whole basis of it is that there is not enough competition for elected positions across the board in Australia, be it unions, footy clubs, mutuals, credit unions, companies, councils, federal elections, state elections, for someone who believes in competition. Competition makes people try harder, makes them perform better. We have decided we never were in the business of he said, she said on the one hand, on the other hand journalism where you are outside and you comment on what is happening.
From the day I tried to stand against Jeff in his seat, it has always been get into the trenches, be part of the story and write about the experience. So that is where it is immersion journalism because you immerse yourself in the issue. It is just like seeing ourselves as two things. As incubators for good candidates; so if there is a particularly dodgy councillor somewhere, we almost see our role as identifying that council, identifying the weaknesses and then trying to encourage a better qualified, more ethical candidate to contest the next council election. We would like to think we are almost like a rating agency. You know how rating agencies tell Queensland that you have a triple A rating and you have great debt, we would like to be the rating agency for elections. So we go around and say, John Smith, you are a solid councillor. You have done 20 years for the community. You are as straight as the day is long. We will give you a rating of nine out of ten, and he can then say that he is rated highly by this sort of quasi-People Power thing. So it is not going to be a traditional political party where you are just running for political elections and you are trying to get elected. It is more as a change agent trying to get more candidates to put their hand up because Australia has this culture. It is not just with shareholders, it a culture across the board of she’ll be right, go to the beach, and people just don’t put their hand up and have a go. Everyone whinges about the quality of people in elected positions. I am a professional shareholder whinger about people in elected positions but no-one actually then puts their own hand up and says, I will do a better job. So we want to try to facilitate people doing that.
AUDIENCE MEMBER: First of all, I would like to compliment you on the excellence of your address. The question is are you going to put it up on the Crikey website?
MR MAYNE: I can see a transcriber over there. So I would say I will just have to check with the defamation lawyers on a few things but it should not be a problem with the transcriber, so I will get it up there.
MR WEEKES: It will be on our website as well, the Brisbane Institute website.
AUDIENCE MEMBER: Wouldn’t it encourage diversity on boards if there were limits on the number of boards a person could be a member of?
MR MAYNE: I think that is a terrific idea. The Shareholders Association has a quota, a point system which says no-one should be more than four points. It is two points for a chairman and one point for a directorship. So there are lots of directors over the four points, and that reflects in my view the lack of talent in the board pool. Another good example of the failure of Australian management is that a couple years ago six of our top 10 companies were run by Americans or English CEOs, so we had given up the ghost of actually running our own biggest companies. I think certainly you have people like John Ralph, Nick Greiner, Mark Rayner, on too many boards and they can’t possibly keep abreast of them all. James Packer is a full-time executive at PBL and he is also sitting on five boards as a non-executive director. So he is over the limit that the Shareholders Association sets, plus he is a full-time executive. Is it any surprise that One.Tel goes broke and he hasn’t been in there forensically looking at the accounts, doing his job as a non-executive director.
MR WEEKES: Adrienne, do you want to respond to that as well?
MS WARD: I quite agree with that actually. We see that here in Queensland too. There are too many of the same people at the top level. That’s why I talk about getting more women up there too. We talk about wanting women or men to get to that more senior level but they really have to network, too. That is part of it too. You need to get to know and break through what we call the Boys Club theme. You need to network. You need to get up there and know who the board members are and start talking to them because I think it is the only way it is going to break through.
MR MAYNE: The relevant industry expertise which Adrienne mentioned is a very important point. If you look at Rio Tinto, they have eight executives on the board, all of whom obviously have mining experience, and they have eight independent directors, none of whom have direct mining operational experience. So, of course, the management are going to snow the board because it is a management dominated company. And it is the same with HIH – HIH had five executives on the board and, of course, they were able to snow the non-executive directors, who themselves had far too many connections with the auditor, Arthur Andersen, and there are countless examples over the years where management dominated. Elders IXL with John Elliott and I think he had five or six executives on the board was probably the most spectacular example of that in the 80s.
AUDIENCE MEMBER: I am a shareholder like many other people from that point of view. My concern is the thing I watch is the individual directors buying and selling their own shares on the market. Because I am quite sure they are manipulating in many cases the value of their own shares. I believe they should not be allowed to trade their own shares, except for the two months after the end of the financial year when the annual report has then be published. Then everyone knows exactly all the information and then in that time only.
MR MAYNE: I think there are actually legal restrictions on when directors can trade. There are windows at the end of the half-year announcement and the full-year announcement, so there is something in place there. I am not sure if it is legislative or just guidelines. You probably know better.
MR WEEKES: It is self-regulatory guidelines.
MR MAYNE: You can’t stop a director selling. My beef is that it should be disclosed instantly to the market. And that overall you should encourage more directors to take shares for their emoluments rather than taking cash to align their interests with the interests of all the shareholders.
AUDIENCE MEMBER: In terms of transparency, when do you think a law will be made as a national standard of protection for the shareholders and also the people of Australia because there are two areas here. They are hiding behind business confidentiality and I think that affects the whole of company business. I have been a shareholder for over 40 years; and also the way the governments function. I see little difference between the way contracts are done which affect shares and affect business. I think they are connected. When are we going to get a national law that protects the shareholder in a proper way and the business of Australia?
MR MAYNE: In terms of protecting shareholders from loss, I don’t think you will ever get it. In terms of disclosure, I am not sure. I agree there is far too much hidden behind commercial confidentiality, whether it is cabinet in confidence or whether it is boardroom confidentiality. Not enough is put out there. I mentioned earlier that information is power. The more information out there, the less gyrations you will have on the market because you won’t have the insiders pushing shares up and down. I think you won’t get any new national scheme which compels this. You will just get some ongoing reforms to the Corporations Law, for instance, a couple of years ago they changed the laws so you had to break down the pay components of the top five, the five most highly paid executives, so you could see base pay, bonus, super, other benefits. That was an improvement in disclosure. They just need to go several more steps along that path, including obviously the chief executive’s contract and those sorts of things which should be public.
AUDIENCE MEMBER: We are talking about transparency and unless the shareholders know that they are getting real value when their assets are sold. That is what I mean, the transparency.
MR MAYNE: When the director’s assets are sold?
AUDIENCE MEMBER: Yes, the directors, who they sell to, under what conditions.
MR MAYNE: I certainly agree. Any transactions that the directors are doing, be it shares, should be disclosed. If you are talking about their other assets, it is probably unrealistic to expect them to disclose their personal dealings. You just have to look for their equity holding in the company, the cash payment they are taking out of the company and knowing every last detail of that in a timely way to be fully informed.
MS WARD: One of the other things we need to look at is the auditors because of the Corporations Law. They are about to bring something in that says auditors will be audited themselves before they even go into the company books now and they will be held liable for anything that happens, due to obviously what happened with One.Tel and HIH. So there will be bit more of a restriction on what is going on and auditors really can’t sign off on anything any more.
MR MAYNE: There is a very easy solution to the auditors issue. I reckon the government, ASIC, should be appointing auditors to companies. You can’t have self-appointed auditors by boards, supposedly keeping them honest. There is no reason why you can’t have a government audit board that simply looks at the relevant skills of the partner and says, you are an expert at this. You are appropriate to do BHP for three years. If you don’t do a good job, you are sacked. We will put someone else in.
MS WARD: It is also similar to years ago when valuations of houses and valuation of land was happening. You would ring a valuer and say, I need this valued so much because I need to get the bank loan at this level. Well it can’t happen any more. That is what will happen throughout the companies.