Aristocrat, James Hardie and MacBank’s consultancy fees.

Sometimes you have to wonder whether there’s a gene for poor corporate governance, or whether it’s a cultural thing. A question of nature or nurture?

Are companies created with the bad gene already embedded at birth? Or does it develop with exposure to hurly burly and greed of day to day life in corporate Australia?

The source for a rich and long debate. Suffice to see the role of the individual director and boards collectively cannot be under-estimated in any discussion.

It’s an argument that applies across the boardrooms of corporate Australia. Some companies get it right most of the time, indeed nearly all the time, while others just plain struggle.

If they were children they’d be fed Ritalin to help them cope with their Attention Deficit Disorder, or their corporate governance under achieving hyperactivity.

In short, some companies just don’t get it. There were two examples yesterday, so where do we start? James Hardie or that old stager, Aristocrat? Both serial offenders of late.

Take Hardie, the asbestos liability avoider. Look at this report in the SMH – Big retainer for former Hardie boss – and wonder if there should be any sympathy at all for Hardie, its board or management.

Certainly outsiders could perhaps shed a tear or two for the suffering small shareholder. But they have had the option of selling and investing their money somewhere less problematic.

So the company is now paying former CEO, Peter Macdonald, a monthly ‘consulting fee of $US 60,000. Remember he’s the man who couldn’t understand the right way of meeting the company’s asbestos liabilities. The board ‘terminated’ his services last month, paying him the best part $A8.8 million in compensation (had to old chap, honour the blighter’s contract and all that!).

The consultancy is for three months and possibly to April at the $US60,000 a month rate, and then until October 2006 year at $US13,000. That’s possibly more than $A770,000, depending on exchange rates. This arrangement was not mentioned at all when the ‘termination’ of the CEO was announced last month.

Chairman Meredith ‘Sorry’ Hellicar says the arrangement is to give Hardie access to Macdonald. She said the long retainer was to give the company access to his “assistance” while the Australian Securities and Investments Commission completed an investigation into the asbestos issue, which began in September.

“The two years has been set on a conservative basis to make sure that if things like the ASIC inquiry take up to that long we have access to his knowledge and experience; on operational matters the arrangement is short term,” Ms Hellicar said.

Now ain’t that interesting. Making sure Pete is safe and alongside Hardie during any probe by the corporate sleuths, so he can be focused on helping his old employer and not be diverted by any blandishments or offers from the ASIC types.

A nice way of expressing a commonality of interests.

Meanwhile that other corporate governance offender, Aristocrat is facing some problems with shareholders as news spreads that a generous new performance reward scheme will be backdated for more executives, apart from CEO, Paul Oneile.

SMH – Aristocrat’s generosity extends well beyond its chief executive

No mention was made of the scheme when Mr Oneile’s original contract was revealed a year ago when he joined the then struggling company.

Now the company has called a meeting of shareholders for December 21, when everyone is on Christmas slowdown, to approve the granting of 380,000 share sunder the scheme which has been backdated to January 1, thereby ensuring him a profit of $3 million.

Now other senior managers are reported to be in on the same deal.

The board claims it is unfair Mr O’Neile cannot participate in the rise in Aristocrat shares this year.

But surely that a mistake both he and the board should pay for because of their collective failure to build a share or option component into his original contract.

Both should pay the price for this failure of foresight and a lack of confidence in the future of Aristocrat and the direction of its share price.

I bet they wouldn’t be doing this is Aristocrat shares were depressed!

Peter Fray

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