ASIC’s decision not to
prosecute Steve Vizard in the criminal courts for insider trading is a
disaster for corporate behaviour, ethics and politics in Australia, and
I’ll tell you why.

I was a public company director for over
three years until our company, Text Media, was sold two years ago to
the Fairfax newspaper organisation. During those years I learned about
life as public company director – how you never trade shares during
sensitive company reporting ”windows,” how you never trade shares while
in negotiations or serious discussions with another public company, and
how reputation, transparency and disclosure mean everything in a world
where directors and senior executives always know much more than
ordinary shareholders. It was a sobering experience that made me
realise the importance of culture as well as rules.

Even in our
(small) public company directors were constantly being advised by our
lawyers when there was a “window” preventing share trading, or when we
were dealing with share price sensitive information, or when
discussions constituted negotiations, or when we needed to make
announcements under ASIC’s continuous disclosure requirements. And if
our small-cap company was so scrupulous about directors’ behaviour, I
could only imagine what it’s like in a large public company like

When I first read the court reports of Steve Vizard’s
private share trading while he was a director of Telstra, I couldn’t
believe what I was reading. Here was a rich, intelligent, credible
public figure engaged in private share trading on a major scale which
used confidential information gleaned in his capacity as a director of
Australia’s biggest company. It sounded surreal. Yet this week, in his
deal with ASIC to avoid criminal prosecution, Steve Vizard acknowledged
it was real. The man who presented himself as an iconic establishment
figure working in the public interest had been using the secrets of the
Telstra boardroom to attempt to enrich himself.

If ASIC and the
federal government don’t undo their deal and attempt to prosecute
Vizard for criminal behaviour, they will send a loud new message to
every public company director in Australia: it’s OK to trade shares
using confidential information if you think you have the muscle to get
away with it. If I were still a public company director I would think
to myself this week: the rules have changed, the bar has been lowered,
the door has been levered open, you won’t necessarily be pursued

If a high-profile director of Australia’s biggest
company – which is itself half-owned by the federal government and who
himself was appointed by the government – can admit he secretly traded
shares in companies with equity connections with Telstra using
confidential boardroom information unknown to the public, and avoid
criminal prosecution by the agencies of the same government, the
precepts of disclosure and director’s responsibilities have been
permanently shattered.

This is the kind of “deal” that happens
in tinpot South American and African countries where small groups of
wealthy individuals cosy up to governments to extract commercial
leverage and announce “deals” that stink – the kind of countries
avoided by foreign investors because of the stench of corruption.

not pursuing Vizard through the criminal courts – even if that pursuit
eventually proved unsuccessful – the chairman of ASIC, Jeffrey Lucy,
has (perhaps unintentionally) created a whole new atmospheric around
Australian public company governance.

Whether they realise it or
not, Lucy and politicians like Victorian premier Steve Bracks who
publicly support Vizard have delivered a public endorsement of the
Graham Richardson principle of politics and public life. Whatever it

Peter Fray

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Peter Fray
Editor-in-chief of Crikey