Let me confess that I have no idea whether Geoffrey Cousins will make a good Telstra director or not. But it’s fundamental to democracy that people have the right to make their own decisions about their representatives.

A corporation is still, in theory, a democracy, so if the shareholders want a particular director, they’re entitled to have him or her.

Stephen Mayne, however, in yesterday’s Crikey, argues that Telstra’s majority shareholder — the federal government — is acting wrongly in insisting on Cousins’s appointment.

He says (quoting John Durie) that it’s showing “contempt for both basic governance principles and Telstra shareholders”.

Corporate governance in Australia is such a tangled web that it’s hard to extract any basic principles at all from it. But here are a few starting points:

  • Companies don’t have interests of their own; they’re legal fictions. Talk of a company’s best interests is just a shorthand for the interests of the shareholders who own it.
  • To set up a conflict between company and shareholders is to descend into meaninglessness: it’s like asking whether I’m acting in the best interests of my bank account when I withdraw money from it.
  • Directors and executives have to serve someone’s interests; if they’re not acting for the shareholders, then it’s a fair bet they’re acting for themselves.

When shareholders don’t exercise control, boards become self-perpetuating oligarchies — just what you’d expect if you give up on the basics of democracy.

No-one should know this better than Stephen, who’s been a victim of every trick in the book that boards and management use to keep out outsiders. It’s ironic that he should now be defending management’s right to choose its own directors.

Peter Fray

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