Dear Stephen

I know you are acutely aware of conflict of interest problems in business, and the revelation of Sol’s payout highlights another example.

When acquirers go hunting these days, they offer a bribe to the target’s CEO: recommend the acquisition, and we’ll look after you. It’s peanuts in the context of shareholder funds, but big bikkies for the CEO, who gets the yacht, the jet, and a new lifestyle.

There are two big problems: it’s not actually peanuts, and it’s paid for with both acquirer and target shareholder funds. And it’s dishonest – how can a CEO with such personal wealth on offer act in the target shareholders’ interests? He’s being bribed – there’s no other language for it. He would have to be a large shareholder (eg Corrigan) to get more from a higher price than the bribe.

One might argue that it’s up to the shareholders’ representatives – the directors – to hold the CEO to account. But the acquirer can easily take care of that with some sweetener for the directors’ pension entitlements. And institutions don’t seem to care – they take the money and run.

Is there no way to shame these people by exposing the bribes for what they are?

Ronald Watts
02 9419 2662

Peter Fray

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