What Crikey says is wrong with Corporate Australia, from a speech to the Brisbane Institute in 2001:

MR WEEKES: Good evening. My name is Ray Weekes, Chairman of the Brisbane Institute. Welcome to the Brisbane Institute for what I think will be another thought provoking evening. I thought I would set the scene by placing our speaker, Stephen Mayne, in his historical context. He looks young but his work goes back to about 1650 when Europeans started on the long job of reinventing democracy and related institutions like a free media.

As society moved from the Middle Ages to cultivate a modern “civilite”, it was recognised there needed to be a move from the boorish and aggressive behaviour exhibited in traditional gathering places like taverns, to the frequently less boorish and less aggressive places where dialogue and opinions could be discussed.

People started to be mindful of their health and purse and to meet in coffee shops – so real estate industry please take note, the cafe society started 500 years ago and not in Milton.

The pamphlet or flysheet popped up as a tool to stimulate the dialogue in the London and Paris coffee shops and this was the beginning of modern journalism. The first pamphlets railed against modern dress, ridiculing its inconsistency, vanity and caprice – sort of like Who magazine’s worst dressed list I expect. Others though were made by earnest people who were busy investigating justice, social and administrative abuses.

In 1646, you could pick up a copy of “A looking glass for all proud, ambitious, covetous and corrupt lawyers”. This described the mercenary character of lawyers who delayed judgments on cases in order to fill their own pockets. Ladies and gentlemen, the more things change…

A lot of seditious pamphlets were, of course, written by that highly productive character, “Anonymous” but not all. Jonathan Swift and Daniel Defoe were pamphleteers who we now remember for their role in inadvertently inventing the novel while trying to find a way to ridicule authority and stay out of gaol. Emile Zola went the other way. He was a noted novelist, as you all know, whose pamphlet “J’Accuse” brought to light and eventually helped to right the gross miscarriage of justice that has gone down in history as the Dreyfus Affair.

The most enduring of the pamphlets were the ones that mixed a bit of yearning for reform with incisive comment or satire on the then establishment. One of the London pamphlets was called The Times and it is still, of course, enduring, although it has become a lot more staid in its old age.

And here we have a familiar story, the seditious pamphlet evolved into the staid newspaper which is, to some degree, a part of the establishment, but as a society, I think we would all argue we still need, for our own sakes, to keep alive that old tradition of disrespectful analysis.

That brings me to our guest tonight, Stephen Mayne. Stephen Mayne carries on the great gadfly tradition, but as one of the pioneers of an entirely new medium. The pamphlet has now gone electronic and in Stephen we have one of its foremost practitioners.

Stephen knows all about the business of newspapers and the business of government as a former chief of staff and business editor of the Daily Telegraph and Age journalist and former flack of the Kennett Government. But he is here tonight in his role as the person behind Crikey.com.au, noted for shining its MCG style halogen light on any practises or social evils in the boardroom, news rooms or party rooms across all Australian life.

I am sure there are a number of subscribers in the audience tonight, but it is subscribed to by hundreds of commentators and movers and shakers who probably want to see the gossip on everyone else as much as they want to check what is written about themselves. I must confess I find it compelling reading myself and I won’t tell you why.

Crikey attends board meetings and, in a good link with the past, will still often file sealed sections of his site from various Internet cafes across the country. And I am here to reveal that he is sometimes to be found in a 7-foot green foam suit handing out seditious pamphlets outside political party love-ins – but he won’t talk about that, of course.

Crikey is a modern gadfly and we are lucky to have him here. Like Emile Zola, he is being prosecuted for libel but he is not running….

Rattling the corporate skeletons

Good evening everyone. Let’s open up with some very brief reflections about the differences between Victoria and Queensland. I have spoken to a few people over the last 24 hours; just a few sort of random facts to throw at you. You have got three toll roads here still. We have got only one but ours is the world’s biggest toll road, which generates about $200 million a year in revenues. You have got four casinos in Queensland. We have only the one but ours is the world’s biggest casino, too, which generates about a billion dollars a year in gambling losses for Mr Packer. We both have about 30,000 pokies, which at least is less than New South Wales which has about 105,000. At least you have your rail link to the airport – ours is still in the middle of gabfests. You have a CJC at least. We do not have that but we do have an Upper House.

You have one council; we have about 15 for Melbourne. Japanese investors lost about five billion funding your wonderful tourism infrastructure. We can probably do better than that. The US investors in our power industry have put about $30 billion up and have lost about $10 billion we reckon so far over the last three or four years since Jeff sold all those power stations.

Our taxes are about 30 percent higher than yours but we spend about 15 percent more on services per head. We have had our crazy stadium experiment. We spent $500 million building the new Docklands Stadium which is in the process of going broke. You are about to do your Lang Park $280 million experiment. You have lots of great mining royalties that prop up your budget. We don’t have any of those. We just have tired old manufacturing industries. We subsidise the small states; you don’t.

Speaking of some of those tourism assets, Tricontinental, the Victorian State Bank lost about $150 million on the wonderful Twin Waters Resort up there near Noosa which you all enjoy. Trico also dropped about $80 million on Sea World which us Victorian taxpayers were happy to give you down there on the Gold Coast.

Our Murdoch paper backed the Liberal Government quite vociferously at the last state election. Your Murdoch paper backed the Beattie Labor government. HIH and One.Tel, neither of us have got the headquarters for those companies. They are both in Sydney. But your exposure is about $400 million; ours is about $4 million because we have a State run compulsory third party scheme and a State run worker’s compensation scheme. You have a privately run compulsory third scheme, hence your $400 million exposure, so we are calling HIH your Pyramid.

We both have lots of poorly performing companies. I guess the one to lead off on that we both share in a way is Village Roadshow which would probably be the worst company in terms of corporate governance listed on the Australian Stock Exchange. We sort of share it because the headquarters is about 500 metres from my place in East Melbourne but they sneak up every year to Movie World and have their annual meeting at 9am at Movie World and they throw it open to the kids. So if you are a shareholder, you can come along and bring your five kids and their 10 friends and you all get free access to Movie World for the day. So if you wanted to talk about the $34 million payment the Tax Office is demanding at the moment because Village has been the most aggressive corporate tax planner in Australia, you have to get over the gaggle of noise coming from the nursery with all the kids playing to get those questions asked. They have also had amazing excessive executive pay. There is about four executives earning more than two million a year. Massive related party transactions with the Kirby family which own the business. Three million to the Liberal Party over the last five years, more than double what any corporate has given either party. Why have they done that? Firstly, the Kennett government in Victoria tried to lock American cinema company Reading from breaking into the Australian market. Secondly, Village love their radio licences. I think up in Brisbane it is B105 and Triple M. Australia has the least amount of radio licences per head of any western democracy and therefore the owners of those radio licences have found themselves sitting on investments that have gone up in value by about 400 percent since Village Roadshow first bought in. And so you can understand why they would make massive political donations to the government of the day, which is dragging its feet in issuing new licences.

Village Roadshow also have quite a few legal stoushes going on, with their former French partners in the cinema game, with the DMG radio group of Britain which was the victim of a bogus letter writing campaign and with one of their senior executives in Los Angeles. So they really have got it all, and we get to share it between the two of us, which is good fun.

I first attended an annual meeting back in 1990 as a young cadet reporter on the then Murdoch owned Sun. It was one of John Spalvin’s companies in the Adsteam group. It was in the process of going broke. Within three years I had become fed up with the pathetic level of debate at annual meetings and, as a business journalist on The Age, I secretly got a former school mate and a flat mate to go along as a proxy holder to the Western Mining and the North Broken Hill annual meetings to throw a few curly questions into them. With North it was about the Burnie industrial dispute which was handled terribly and with WMC it was the $500 million they had just blown up in Canada with CEO Hugh Morgan still hanging on to his job.

So it started fairly early in terms of setting up people to try and rattle a few skeletons in the boardroom closets. It wasn’t until about six years later when I had been to probably another hundred AGMs full of dreadful debate, with nothing really cutting to the key issues of the day, that I decided to actually do a series for the Daily Telegraph as the business editor. So I spent about $130,000 of my own money and bought into about 50 companies and went along as a journalist but also as a shareholder just to see what it was like to ask a few questions and put some people on the spot.

Now the Telegraph is probably the hardest hitting paper in the country. Col Allan, the editor at the time, is probably the roughest and most aggressive tabloid editor Australia has ever had. He is the only editor in the country who I think would have agreed to such a bold plan for a mainstream newspaper to do.

It was interesting, the only two companies that he objected to me going along and causing trouble were the two richest blokes in Sydney. Kerry Packer was upset when I sent a proxy along to his PBL meeting but it was the same day that Rupert was selling Kerry 25 per cent of Foxtel. So the Packers and the Murdochs were getting on that day, and phone calls came in from James Packer to Lachlan – all sorts of heavy phone calls saying, “Why the hell are you sending your reporter along to upset our annual meeting when we have just done this deal and we are co-operating at the moment?”. Similarly with Frank Lowy, the heavy calls came in from him. He is the guy who owns Westfield; the second richest guy in Australia worth about $4.2 billion at last count. I suspect he or his minders put some heavy calls in and I think he has a fair bit of sway at News Corp. I am not sure if it is because he paid $800 million for Channel 10 to Rupert back in about 1987 and then subsequently almost went broke, but Rupert has perennially loved him ever since and doesn’t particularly like his journalists upsetting him.

Anyway, after that exercise, I went across to the Financial Review and tried to get them to allow a similar exercise but editor-in-chief Michael Gill thought that was a little bit too adventurous and so said I couldn’t do that. Then a few weeks later I went over the edge a bit and quit my job at the Financial Review and tried to stand against Jeff Kennett in his own electorate of Burwood in the Victorian election. In summary it was basically sheer frustration at the level of media back-sliding in not being prepared to take Kennett on over a whole series of cronyism and corruption and ethics issues in office; and also the way that he manipulated the media so amazingly and got such amazingly good press which was by being very combative and very abusive of journalists on the ground. He was running a divide and rule strategy with the media and at the same time doing commercial deals and courting the moguls, be it everyone from Conrad Black to Kerry Stokes to Kerry Packer to Rupert Murdoch and the two mogul sons.

I guess the thing that should resonate with Queensland is that just like you had Joh Bjelke Petersen and Bondy’s famous $400,000 defamation settlement, there was also allegedly a $400,000 defamation settlement between Channel 9 and Jeff Kennett back in 1994 which Jeff Kennett’s press secretary told me about and said the cheque for $400,000 went through last week.

When you consider that Kerry Packer was about $100 million in front on his casino investment at the time and the government was pushing through a series of reforms and changes to the legislation which benefited Crown, it was a pretty direct scandal in my view that you had a secret tax free payment of six figures, as explained by Kennett’s press secretary at the time, going to Kennett from Packer at the same time Packer was profiting. So it was deals like that which weren’t getting a proper run in the press, weren’t getting explored. So, anyway, I guess that is another story.

But the website we set up at the time of the election, www.jeffed.com, got about 115,000 page downloads in a two-week period. So we suddenly dawned upon the fact that the Internet is this wonderful medium in which there is no lawyer, there is no proprietor, there is no advertiser, there is no editor telling you what to do. You have just got your own little soap box and you can say whatever you like about whoever you like, so that is exactly what we did, and we were quite surprised by the impact it had.

Part of the problem though was that the material on the Jeffed.com website attacked virtually every media outlet in Australia, particularly in Victoria, for its weakness in covering Kennett. So it burnt almost every bridge there was going back into the mainstream media. So there was really no alternative but to branch out into being a web publisher and try to make a living from that.

Part of the plan was to push the shareholder activism thing because the one thing Australia really lacks in the corporate sector is a culture of shareholder pressure. A culture whereby, if something goes wrong, shareholders, big and small, demand changes. They demand action. And that culture then produces directors and CEOs who perform because they know if they don’t perform, they will get thrown out. I think you will see that from what I have to say tonight that it is the biggest thing lacking in corporate Australia. That was the basic goal we had in Crikey in terms of its shareholder activism activities: to create a culture of shareholder pressure which was not there.

I guess the first point is to establish what is Australia’s corporate performance? The best figures that I can come up with is that at the moment there used to be 40 companies – now there is only 38 after the demise of HIH and One.Tel – 38 Australian owned companies that generate more than $200 million a year in export revenue for Australia or in revenues from offshore operations they own.

Now compare that to the fact that there are about 200 foreign companies generating more than $200 million a year in the Australian market alone. In terms of the net investment flows, Australia owns about $150 billion in offshore assets which is largely the 38 companies and their operations, plus some super money, yet foreign companies have direct investment into Australia of about $600 billion. So it is running at about four or five to one and that is the worst investment ratio, foreign investment ratio of any western democracy, with the exception of New Zealand.

It is those sorts of things that lead to the dollar plummeting, and all the other associated things that come with a weak dollar and a poorly performing corporate sector.

If you think about it, can you name the globally known Australian brand names? It is very difficult. There is really only Qantas and Foster’s. If you look around at other similar sized countries, they have more global brands. They have succeeded on the global stage with brands and companies they have developed. In terms of the industries where we have done well, clearly the wine industry is probably our most successful industry in terms of Australian-owned export success. It is terrific, isn’t it, that we have the world’s most profitable and second biggest poker machine manufacturer. It is a wonderful industry to dominate in.

Even our mining industry you would have to argue has a fairly chequered performance given what has just happened to BHP, given that Rio Tinto went to London. If you look at Pasminco, if you look at MIM, we have not, given that we have probably the best endowment of any country in the world in terms of our natural resources, built up a world beating Australian owned mining industry. That is probably one of the saddest things that has happened in the last 10 or 15 years.

I think if you are looking at examples of lack of accountability, there are some pretty good ones out there. For instance, there is a director called Tony Daniels who is on the board of Orica. He is on the board of Pasminco (resigned recently) and is Pacific Dunlop. Now these are three of the biggest dogs on the market. They have all fallen by at least 60 per cent over the last three or four years. Yet he has just been promoted, if you like, to be the acting Chief Executive of Pacific Dunlop as it is going through its final death throes at the moment from once being a great Melbourne-based conglomerate. He is the sort of guy to whom ‘three strikes and you are out’ should apply and the shareholders should go along and say Orica, Pac Dun, Pasminco, you are out. You are off all three. You can’t have three and continue. Yet he gets a promotion at PacDun.

Similarly, I would say, with someone like Margaret Jackson who has just been promoted, if you like, to be Chairman of Qantas. Margaret was a long-term director of Pacific Dunlop. She joined the board in 1992 when the share price was about $5. It is now less than a dollar. She was also Chairman of the audit committee of BHP for the five years up until last year when she resigned. Over that period BHP wrote off about $5 billion dollars in absolute disasters, everything from the HBI and Beenup projects in WA to the magma copper adventure in the US. I would argue that these are two companies where she was specifically involved in important roles that had absolute disasters. Why is the system, the corporate club then throwing her up for a promotion to suddenly be the Chairman of Qantas?

Similarly, Jerry Ellis who was the Chairman of BHP and previously the head of the Minerals division when all these disasters happened. They were all in his Minerals division. He then joins a number of other boards. He gets thrown out of BHP, largely by the foreign institutions who were annoyed rather than the Australian institutions who were too passive, then he goes out and joins the board of Pacifica, which is a Melbourne based brake parts manufacturing company. So I go along to their annual meeting and say, excuse me, but Jerry, five billion was written off when you were running BHP, the Minerals division and when you were Chairman. I don’t think it is appropriate that you now join this board. I know the Chairman of this Pacifica board is an old alumni mate of yours from BHP, you worked together for 30 years, but really when is the system going to send a message to a Chairman who blows billions of dollars that you can’t just go off and join another company which one of your old mates is still running. Of course, he got re-elected with 99 percent of the vote, which says a lot about the way our institutional investors just vote like donkeys in Australia and never vote against anything.

Basically, I put to you that the corporate club in Australia is the biggest closed shop union in Australia, that it is very difficult to break into. I have now stood for ten boards – not with any serious prospect of getting elected but just to put a bit of pressure on to try and effect some change when there is something bad going down. I have not been able to get elected. It really is a closed shop. It is also a shop that doesn’t punish those that don’t perform. I mean, you hear a lot of directors and chief executives complaining about Australia’s unfair dismissal laws, how it is not flexible enough and they can’t sack poorly performing workers. Have a look at the contracts that our CEOs write for themselves; these five-year contracts that run for pages and pages, detailing every last perk and benefit they are going to get and every last payment they will get if they get terminated early. You contrast that with Jack Welch, the Chief Executive of General Electric. GE is one of the world’s biggest companies. Jack Welsh is one of the gurus. His contract is a one-pager. It simply says that he can be sacked by the board at any time for no reason, without payment. So that is what you call accountability. He has risen to the top. He is paid millions of dollars a year. He does not have to write these prescriptive contracts that lock in his benefits for years to come. He is accepting the culture of accountability and saying, ‘I am here at your pleasure fellow directors. I am here at the pleasure of the shareholders. You can sack me at the drop of a hat for no reason’. That is an accountable system. It is not the system that works in Australia.

In terms of a director getting voted out, the closest we have – and it is the first time I have ever seen a director get below 90 percent – was Nick Whitlam last year at the NRMA. Now I nominated for the NRMA board basically because if you read the press at the time, Nick Whitlam appeared to be doctoring the proxy votes a couple of years earlier. He was overpaid. He was the highest paid non-executive chairman in the country, earning $500,000 a year. He was constantly travelling and on the road and going to conferences such as Davos with his wife. He was coveting the CEO’s job, which is not the role of a non-executive chairman. He was in an unbelievably destructive fight with fellow directors such as Anne Keating, and he was also dishing out contracts left, right and centre as thank-yous to various people who had funded his campaigns over the years, be it his lawyers, be it his advertising agency and so on. So it was the full suite of problems that you don’t want with a chairman. But even with all this stuff running on the front page of the Financial Review, day after day after day, he still got 89 per cent of the vote. So it just says to you that the institutions, the big guys who hold the trump cards, will not throw out a director. The only way you can do it is actually by bringing pressure on them through the media and embarrassing them into resigning because you literally cannot vote someone off based on the way our sheep-like institutions vote.

I would like to now demonstrate a couple of examples of how the network works because the biggest problem in Australia with the institutions is you have the same group of people running the companies, i.e. being the management, being the non-executive directors, as run the fund managers, as run the institutions. So, would you believe that Tony Daniels, I would argue the worst performing director in Australia apart from the Prime Minister’s brother Stan Howard, was until last year the Chairman of the New South Wales State Super Board, responsible for more than $20 billion of funds under management. He is not going to vote against himself in his own re-election at Pasminco and Orica and Pacific Dunlop, is he? He is going to vote for himself. Strictly speaking, it is the fund managers appointed by State Super that make the decisions and they would not vote against the man who appointed them, would they?

The same goes with Margaret Jackson. She is on the board of the ANZ and, I think, is our fifth biggest fund manager, so you are never going to see an ANZ fund manager vote against Margaret Jackson. She was also Chairman of the TAC, which is the Victorian compulsory third party monopoly insurer – the reason we do not have an HIH exposure I should point out. She was chairman of TAC which is a $4 billion dollar fund. Of course, the fund managers appointed by TAC and ANZ are not going to vote against her re-election to boards like BHP, Qantas and PacDun.

Similarly, look at someone like Ken Cowley who is the former long serving chief executive of the Australian operations of News Corp. He has had a number of disasters including PMP, the magazine company whose share price has fallen about 70 percent in the last 3 or 4 years. He has just put a whole heap of money into Ansett New Zealand which has gone belly up. He has had a series of problems. Super League was his disaster. Anyway, he sits on the Commonwealth Bank board.

The Commonwealth Bank was one of the largest shareholders in PMP. So when the small shareholders were all arguing that PMP should be throwing out Ken Cowley for incompetence and for selling a whole bunch of shares shortly before a profit downgrade last year, you got the Commonwealth Bank voting for him to get another three years on the board.

So you really need a complete separation of powers. You can’t have the Commonwealth Bank, as our biggest fund manager with $71 billion under management, also being one of the biggest lenders to companies with $43 billion in corporate loans to Australia, because they can’t be the debt financier and servicing a company as a banker and then be the independent shareholder managing the funds for millions of Australians. It is a fundamental conflict of interest.

I thought this was best demonstrated with the BHP-Billiton merger vote where you had a situation where stockbrokers like JB Were, for a long time the BHP house broker, saying this is a bad deal because it transfers $5.5 billion worth of value from BHP shareholders to Billiton shareholders and the share prices moved reflecting that. Billiton’s share price rose 20 per cent, BHP’s rose about 4 per cent shortly after the announcement.

The board that has written off $10 billion over the previous 10 years, that was endowed with some of the great mineral assets in Australia and managed to blow it up with crazy excursions into America and on ridiculous downstream plants like the HBI plant at Port Hedland, have blown up $10 billion and they just run this “trust us” line. So there is no independent expert’s report saying this is a good deal for BHP shareholders. They have got no record of performance and they don’t even get an independent expert to come along and say, this is the way to go.

What happens then is they go to all the big Australian fund managers and put the gun to the head and effectively say, “if you vote against this deal, I will quit. I am Don Argus, I’m the Chairman. I’ll quit, and the Chief Executive, Paul Anderson, will also quit because we will be so embarrassed at the fact that we have put up this deal and the shareholders have rejected it”.

Now Don Argus had a distinguished career at the National Australia Bank for 40 years, the last seven years as CEO. National Australia Bank now owns MLC which I think is one of the top 10 largest shareholders at BHP and they are the second or third biggest fund manager in Australia after the Commonwealth Bank and AMP. They are in a pretty difficult position. Do they vote against the deal that the guru from the NAB put forward?

But I guess the more concerning perception was again with the Commonwealth Bank because the Commonwealth Bank was the largest Australian shareholder in BHP. Through Colonial First State, they had 3.3 per cent and if they had voted their 3.3 per cent against the deal, if you go back and look at the numbers, the deal probably wouldn’t have got over the line without the chairman using undirected proxies. They had a pivotal 3.3 percent. But the chairman of the Commonwealth Bank, John Ralph, is one of the BHP directors. So as their fund

So as their fund managers are sitting there deciding how to vote, “is this in the interests of shareholders?”, and they know if they vote this deal down they are severely embarrassing their own Chairman so, of course, after a lot of to-ing and fro-ing, they came out and voted in favour of the deal. The only institution in Australia that publicly came out and voted against the deal was Perpetual, which is a completely independent fund manager. It is not owned by a bank or anyone else with a bit of a conflict of interest.

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.

Peter Fray

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