Using your position of power to give preferment or benefit to a family member is not normally associated with good governance. Family companies can do it with their own money, but when you are dealing with public companies, not-for-profits or government, it really is best if nepotism at the top is avoided. Rupert Murdoch is arguably the world’s most famous corporate nepotism proponent, but that didn’t stop his UK division making the following declaration last week, after UK authorities announced there would be no criminal charges over phone-hacking against the company:
“Long ago, we apologised for the conduct that occurred, immediately took steps to pay compensation to those affected, and updated and instituted substantial reforms in our business to ensure our governance is second to none.”
A Murdoch business claiming to have the best governance is a bit like Fox News claiming to be fair and balanced. It’s a joke when you consider News Corp's record with phone-hacking, aggressive tax practices, inhibitions on free speech at the AGM, a lack of independent directors, related-party transactions, broken promises on editorial independence and, of course, Murdoch's constant attempts to promote and prefer his children. The Americans generally have a pretty awful corporate governance system with gerrymanders, poison pills and insider-dominated boards making it very hard to hold management, boards and controlling shareholders to account. However, one good US rule that few other jurisdictions have is the requirement that boards and senior executives reveal if any of their immediate family members are on the payroll. For instance, check out pages 62 and 63 of the 2011 News Corp proxy statement and you will see disclosures about the positions held by a range of Murdoch family members, along with the fact that the son of then-finance director David Devoe was employed as a junior finance executive by the company. Meanwhile, back in Australia in 2015, these sorts of disclosures of related-party transactions are not being made as a matter of course. Look no further than the Australian Shareholders’ Association, which for more than 50 years has held ASX-listed companies to account over governance matters. Yet when former KPMG partner Diana D’Ambra succeeded Ian Curry as ASA chair in May this year, it was only a matter of weeks before her husband, John Cowling, was on the payroll. Cowling, like his wife, is a good operator, but the arrangement should have been publicly explained, including to ASA members in a newsletter and on the website. Given that Cowling is also a volunteer company monitor, it was disclosed to some other NSW company monitors a few months back, but there has been no update or clarification since. After almost six months as a sort of acting CEO consultant without any formal title, it is time for this arrangement to be disclosed and resolved for the longer term. In my opinion, John Cowling should either cease being paid by the ASA or he should be appointed CEO with his wife not voting on the appointment and then resigning from the board. Frankly, it is surprising the rest of the ASA directors have agreed to the current arrangement. And if they are comfortable with the optics, why not disclose it? *Cr Stephen Mayne is a former director of the Australian Shareholders’ Association and, before that, was an unsuccessful applicant for the CEO role in 2010. ASA deputy chairman Barry Nunn responds: The engagement of John Cowling has been explained at member meetings and other activities.  To ensure all have a full understanding of the situation, the key points are:      -  John is working under a formal contract with ASA in a consulting role that clearly defines his role and tasks. These do not include direct management.      -  John's remuneration is well below market value for the type of professional involvement in which he is engaged.      -  John's contract is for a finite period and will conclude in the near future.      -  The ASA Chairman has no direct involvement in the management of the contract or in the supervision of the work. Management of John's contract and his workload is being handled by other directors, to whom he reports. John's engagement came as a result of the sudden resignation of the newly appointed ASA CEO in June. It was clear to the Board that considerable effort would be required to maintain our Association's progress. The immediate engagement of an experienced professional with understanding of the ASA was seen as necessary.