Afterpay
(Image: AAP/Derek Rose)

Business gossip columnists don’t break too many stories that cause ructions in the media world, but the Financial Review’s Joe Aston had one on Monday when he revealed that prominent Sydney PR consultant Brett Clegg was sitting on a $770,000 profit on employee options in the booming buy-now-pay-later outfit Afterpay.

The disclosure triggered an immediate ethics debate among journalists, lobbyists and spin doctors alike, with Aston directly posing some of the key questions:

  • Why would Afterpay’s board issue employee share options to a non-employee? 
  • Why would it issue share options to a consultant whose firm it’s already paying in cash for services? 
  • Indeed, why weren’t the options issued to Clegg’s company Cato & Clegg rather than Clegg personally? 
  • And all in exchange for what?

According to Aston’s information, 40,000 options to buy Afterpay shares at $12.98 were issued to Clegg on November 30 last year when the stock closed at $14.42. It’s not as if the company was hard up for cash after completing a $117 million institutional placement at $17 a share in August 2018 and a $36.8 million share purchase plan for retail investors in September at $16.96.

Most employee incentive and option schemes require recipients to stick around for at least three years, but Clegg wrote a cheque for $129,800 to take up his first 10,000 ordinary shares just 10 months later on September 25 this year. With Afterpay shares closing at $32.25 last night, the paper profit on the full 40,000 options is a rather tasty $770,000.

It should be noted that Brett Clegg isn’t any old PR operative. He has a big history at Fairfax and News Corp and is one of three equity partners in the firm known as Cato & Clegg, the two others being long-standing Sydney PR Sue Cato and Clive Mathieson, the former editor of The Australian who was chief of staff to Malcolm Turnbull at the time of last year’s coup.

Clegg’s career started out in accounting at Ernst & Young, before he transitioned to the AFR as a 20-something business reporter in the late 1990s. 

After covering Macquarie Bank, and particularly Nicholas Moore, through its controversial listed-infrastructure phase, he took a big pay rise to work directly for the Millionaire Factory.

This experience gave Clegg useful insights and networks across Sydney’s corporate community, so he was a much better journalist and commentator on returning to the AFR in the mid-2000s.

News Corp first poached Clegg when, in mid-2010 as deputy editor of the AFR, he had a falling-out with then-editor Glenn Burge. He joined The Australian and performed roles including deputy editor and deputy CEO.

After Greg Hywood took over as Fairfax CEO in December 2010, he lured Clegg back to head up the Financial Review Group.

Ironically, Clegg personally hired Joe Aston out of the CEO speechwriter’s role at Etihad. Aston has edited the AFR‘s Rear Window column since 2012, a role he has performed savagely but effectively for the past seven years.

Certainly, he showed no mercy towards his old boss over the Afterpay shares, confirming his fearless take-no-prisoners approach.

In July 2013, Clegg quit as chief executive of the Financial Review Group and returned to News Corp as NSW publishing director and then the national boss of all local News Corp papers, a role he tapped out from in January 2017.

In October 2017 he launched Cato & Clegg, but the climb up Sydney’s greasy pole was broadening as he spent nine months on the University of Technology Sydney council starting in August 2017 and in August this year assumed the chair of the Sydney Dance Company after first joining its board in January 2015.

Finally, it is worth reflecting on a speech Brett Clegg gave to graduating UTS business students in 2013, when he said:

“The corporate world is built on both reputation and relationships — if you lose your integrity it will not matter how talented or bright spark you are. It’s a long road back from making a short-sighted decision that tarnishes your image among your colleagues and industry peers … Never lose sight of the long game amid opportunities for short-term advantage.”

There’s nothing illegal about the Afterpay options play, but the optics are not good.

In what may become known as the “Clegg amendment”, expect lobbyist and PR codes of practice to be updated across Australia, specifically banning businesses from offering their people or firms equity incentives because it militates against giving fearless advice, creates a conflict of interest and is also dilutive of other shareholders.

The Clegg investment is not believed to have been widely known, but the only on-the-record comment from a tight-lipped Sue Cato was: “The position was disclosed in our office’s Declaration of Interest Register.”

As for Afterpay, the obvious question to ask is: who else has been paid in equity via options? And why? 

Peter Fray

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