The Cousins debate would have to go down as one of the stranger corporate brawls that Australia has seen. What is most surprising is the outrage directed at Telstra’s majority shareholder for having the audacity to appoint someone of their choice to the board. Yesterday, Stephen Mayne noted in Crikey that “Telstra should probably have come straight out and said that Cousins has a screaming conflict of interest because he is so close to the PM.”

Wait a second – where is the conflict? John Howard appointing Cousins to the Telstra board is nothing like Dubya appointing Harriet Myers to the Supreme Court. While the judiciary must be perceived to be unbiased, no such principle applies for company directors. In fact, the reverse is the case – the directors of a company should be biased in the interests of the shareholders they are elected to represent (and John Howard, as Prime Minister, is the elected representative of Telstra’s majority shareholder).

This much was noted by Warren Buffett to Fortune, when he stated that “the only cure for better corporate governance is if the small number of very large institutional investors start acting like true owners and pressure managers and boards to do the same.” Surely appointing a director who will unashamedly act in your own interests amounts to acting like a “true owner”. (Of course, the other alternative is to appoint swathes of meek “independent” directors who stand by while the CEO rides into the sunset with $8.7 million.)

One of the loudest criticisms of Cousins’s appointment was from the $8.7 million dollar man himself, Telstra boss, Sol Trujillo. Trujillo claimed that the board “did not have time to assess Mr Cousins’s application and ensure he passed strict independence requirements.” That is a bit rich coming from the man described by BRW as Australia’s least admired executive, possibly because shortly after being appointed he hoisted three old mates – Phil Burgess, Greg Winn and Bill Steward – into senior executive positions. Further, according to Katrina Thomas in The Bulletin (no longer online after Telstra sued), Trujillo “refuses to consult anyone apart from his so-called three amigos.”

Trujillo claimed that the Cousins appointment “raises a lot of questions in the eyes of many investors, as well as potential investors.” Perhaps someone should remind Sol that in Australia the shareholders select the board who then selects the CEO – not the other way around.

Peter Fray

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