When then-treasurer Peter Costello appointed Stan Wallis to conduct a sweeping review of Australia’s financial system shortly after the 1996 federal election, the former Amcor CEO sensibly disposed of all his personal shareholdings in financial services companies. Wallis complained at the time that it cost him a lot of money, but it was the right thing to do to avoid even the perception of a conflict of interest.
Fast-forward 18 years and another newly appointed federal Treasurer, Joe Hockey, is repeating the Wallis inquiry exercise, but this time it will be conducted by former Commonwealth Bank chief executive David Murray, who will make an important speech on the topic at a Committee for Economic Development of Australia function on Friday.
When Murray retired from the board of CBA in 2005, his final director’s notice revealed that he owned or had an interest in 542,528 shares, which if retained today would be worth about $40 million, given the stock has reached $74. Murray also retired with an interest in 250,000 options, which presumably paid out given the outstanding share price performance of CBA ever since Costello sold the Commonwealth’s residual 50.1% stake at about $10 a share in 1996.
In hindsight, that was a much worse decision than selling off two-thirds of Australia’s gold reserves, and the investors who bought those CBA shares from the Commonwealth in 1996 have made more than 10 times their money when you factor in surging fully franked dividend payments, which are now running at more than $3.50 per share a year.
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All this raises the question of a possible conflict of interest for both Murray and the Liberal Party itself as we have another sweeping inquiry into Australia’s financial system — unique in the world considering we have four banks among the five most valuable listed companies.
Ideally, Murray should follow the lead of Wallis and dispose of all his interests in financial services companies before recommending any reforms to the government that could have a material impact on some of the key institutions. At the very least he should disclose what those interests are and how he intends to handle any perceived conflicts.
As a City of Melbourne councillor, under Victorian law supported by the current Liberal state government, I have to repeatedly declare any interest in a listed company worth more than $10,000 every six months. And my ability to influence the share price of listed banks is nothing compared with the power that has been vested in Murray.
“No other single union, corporate or investment vehicle has delivered anything like that to any other division of an Australian registered political party.”
The Liberal Party in Victoria is also in a difficult position on the question of a conflict of interest. Since 1999, the Cormack Foundation has disclosed donations to the Victorian Liberals worth a staggering $27 million. The breakdown is as follows:
- 2012-13: $3.9 million
- 2011-12: $2.3 million
- 2010-11: $2.51 million
- 2009-10: $1.97 million
- 2008-09: $2.47 million
- 2007-08: $2.7 million
- 2006-07: $2.2 million
- 2005-06: $1 million
- 2004-05: $11,000
- 2003-04: $800,000
- 2002-03: $1.8 million
- 2001-02: $3.05 million
- 2000-01: $818,000
- 1999-00: $1.45 million
No other single union, corporate or investment vehicle has delivered anything like that to any other division of an Australian registered political party.
The Cormack Foundation was established to manage the proceeds after the Victorian Liberals sold radio station 3XY for less than $20 million in the late 1980s. However, the trustees now claim it is independent of the Liberal Party, even though its capital base came directly from a party directed asset sale.
It is possible to construct the Cormack Foundation’s current circa $80 million share portfolio by tracking the twice-yearly dividend payments it discloses from key investments in the likes of NAB, ANZ, Westpac, Wesfarmers, BHP Billiton, Milton, Argo, Telstra, Origin, Rio Tinto, Transurban and, wait for it, the Commonwealth Bank. Indeed, its holding of 260,000 Commonwealth Bank shares is almost double the value of any other holding, coming in at $19.3 million on current prices.
So should Cormack follow the lead of Wallis and Murray and also sell its big four bank holdings pending major industry structure decisions by Hockey, who has enormous regulatory power over Australian licensed banks?
The Cormack Foundation thinks not. Its company secretary, Peter Matthey, responded to an email last week claiming his organisation is “an independent foundation” which is “not owned by the Liberal Party”. He also says Cormack’s assets are not nominally or beneficially “the property of the Liberal Party”. He also says that “donations are made to free enterprise organisations other than the Liberal Party” in line with its charter to support “the private sector”, “individual enterprise” and “an intelligent, free and liberal democracy”.
Given the $27 million Cormack has given to the Liberal Party over 15 years and last year’s record donation of $3.9 million, this is just too cute by half and simply doesn’t pass the sniff test. Let the debate begin …
*Stephen Mayne is chair of the Finance and Government committee at the City of Melbourne and Policy and Engagement Co-ordinator for the Australian Shareholders’ Association. The ASA yesterday released a statement calling for reform of Australia’s campaign finance system and an end to public company donations.