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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

a good idea « Previous | |Next »
May 21, 2003

I came across this courtesy of the Mayne boy's email service. His shop front is here. The story comes from here It refers to nearly 51% of shareholders in Britain's third largest company, drug manufacturer GlaxoSmithKline, voted to reject a proposed 22 million pound golden parachute for chief executive Jean-Pierre Garnier if he loses his job.

Mayne says:

"...the British government recently made it compulsory for companies to put their pay policies to a vote each year and investors are viewing it as a warning to other big companies that excessive boardroom pay deals would no longer be tolerated....Now all we need is for the Howard Government to play catch-up on corporate governance laws and for institutional Australia to wake from their slumber and we might start voting down some of our own excessive executive pay schemes."

Do you think that Howard Government will be so courageous? They could do so in the name of mutual obligation. Or does mutual obligation only apply to welfare recipients.

Bad corporate governance is more than the scandal of corporate rogues enriching themselves at everybody's expense through mechanisms like excessive corporate payouts. It also includes things like losing billions in shareholders funds, cutting corners to improve the bottom line with shoddy services and goods and bad occupational and health practices, deceptive conduct, non-disclosure and incompetent audit practices.

When you start listing them it begins to look like standard corporate behavior. No doubt we will hear voices saying that the political pressure for regulators to have stronger laws to improve corporate governance will constrain business strategy, strong and effective management and wealth creation.

| Posted by Gary Sauer-Thompson at 8:48 AM | | Comments (5)


Bingo!!! That is one postulation I definately wouldn't lay money on. I think the Yanks call it a 'sucker bet'

Gary - do you have a conception of what you mean by "corporate" behaviour other than you don't like it? It seems to me that you tend to use "corporate" as an all-purpose perjorative when you want to criticise some aspect of commerce, but can't actually put your finger on what's wrong with it.

I think your last paragraph demonstrates your muddled thinking on the accountability of corporate management: I mean, what's the relationship between criminal offences such as accounting fraud and non-compliance with OHS standards, and producing shoddy goods, which, as long as they cause no injury, are solely a matter between the corporation and its customers, and, ultimately, the corporation's shareholders?

Or maybe your thinking is not muddled at all: EVERYTHING that a corporation does is bad!

But it was not a good post. I was very busy yesterday so its not clear.

I had in mind the recent speech given by Graeme Samuels of the NCC (reported in the AFR) when he contrasted rules to regulate roguish corporate behaviour with everyday business practices. Regulations she said would strangle the latter.

Fair enough. But that leaves those business practices. What does the NCC propose to do about that?---hence the list.

It is the job of a regulator to address this--eg., they failed badly with HIH.

The example you mention between corporations and customers--well, I had in mind Australian Correctional Management and the Federal Government-- is not just one between form and customer. We have consumer legislation passed in the name of public interest and the federal Parliament talking about fraud re ACM.

But Samuels did not address these concerns. He should have if he says regulations don't work but only mentions rogues. ACM are not rogues---they are just doing business in a very standard rational way to ensure they make a profit.

Samuels was my target. But I could not find a link yesterday to his speech.

I still can't work out why you think that there needs to be some sort of regulation prohibiting companies giving shoddy service (other than the existing consumer protection and product liability laws). What sort of regulation could possibly be more efficient and effective than the discipline of a competitive market (to say nothing of the economic cost of additional regulation and the inhibition of freedom to contract)?

I don't see how it makes a difference that in the case of your particular target, the customer happens to be a government. Presumably, the government has the same ability to either/both seek a contractual remedy and/or replace the contractor with a competitor and any other consumer.

And if ACM has committed fraud, well, that's already illegal.

I think i'll go and bang my head against a brick wall.