July 22, 2005
insider trading
Renee Rivkin is jailed for one count of insider trading. Steve Vizard receives a slap on the wrist for his three counts of insider trading, whilst he was a director of Telstra. So he was dishonest.
I reckon Pryor misses the point on this:
It is the corporate regulator, the ASIC, who should be in the dock for striking a cosy deal and for letting Vizard walk.
Why not jail--periodic detention---like Rivkin? The ASIC wimped: it requested only a five year ban on directorships and less than the maximum fine per offence of $200,000.
Commentators talk about Vizard being punished through the loss of reputation in political and business circles. What about the reputation of ASIC as a regulator being in tatters? Didn't Vizard create an elaborate corporate structure to avoid detection? Doesn't that indicate intent?
Posted by Gary Sauer-Thompson at 02:12 PM | Comments (0) | TrackBack
December 04, 2004
James Hardies: corporate governance
The saga of James Hardies' evading its responsibilities and liabilities for the abestos-related diseases (eg., mesothelioma) caused by the use of asbestos in its products from the 1940s onwards, is accurately captured by Allan Moir.
James Hardies first knew that asbestos was dangerous as far back as the 1930s. Not only were the workers kept in the dark about the danger of blue asbestos causing cancer, the company grossly under-funded the Medical Research and Compensation Foundation, the fund which allocates compensation to asbestos claimants. James Hardies Industries was not willing, to properly fund it. They gave the MRCF $293 million, and washed their hands of the whole compensation problem.
The AMWU anticipates that around 53,000 people will be affected by their contact with asbestos products between now and 2020. Most authorities predict that claims will total $1.5 billion plus — a figure that would leave an unfunded liability. The Foundation is facing liquidation.
James Hardies washed their hands of the whole abestos compensation problem by packing up and leaving Australia for good. They moved their headquarters to the Netherlands in 1996, and JHIL became JHINV. At the same time, Hardies set up two companies, Amaba and Amaca and handed over its asbestos products interests to the two new corporate entities.
This legal move enabled Peter MacDonald, Hardies ex-CEO, to make these kinds of public statements about asbestos products:
"The products were the products of Amaca and Amaba. They weren't the products of James Hardies Industries Ltd which was the holding company. It's never itself produced these products. So the liability lies with those companies."
This view, which implied that the parent company had no moral or legal obligations to dying Australians, was said with a straight face.
This is an act of corporate bastardry and you can see why Hardies was dragged kicking and screaming before a NSW government inquiry--the Jackson Inquiry. Macdonald was found to have broken trade practices and corporations laws during James Hardie's three-year campaign to rid itself of liabilities to asbestos disease sufferers.
Meredith Hellicar, the new chair of James Hardies Industries, apologises to victims. Offers of compensation to all victims are still tied to a statutory compensation scheme with strings attached. James Hardie Industries is moving for tort law changes to reduce victims' rights, and its strategy is to continue to play hardball.
This saga is good example of bad corporate governance in Australia.
Posted by Gary Sauer-Thompson at 04:29 PM | Comments (0) | TrackBack
July 15, 2004
prudential statecraft?
In todays Australian Financial Review there is an op-ed by Ross Cameron, the federal member for Parramatta and Parliamentary Secretary to the Treasurer, which outlines what Leo Strauss calls prudential statecraft.
Prudential statecraft is captured by Ayn Rand's Atlas Shrugged, which celebrates the role of the entrepreneurs in society. Instead of Kant's nation of devils Cameron's entrepreneuers make things happen; as they have vision and are willing to risk money to bring the vision into being. Prudential statecraft on this account is being a cautious regulator and in stopping the heavy-handed and excessive regulation so favoured by the ALP side of the Parliamentary Chamber. That is the pathway to tyranny peculiar to democratic regimes. Trust can, and should, replace bureaucratic regulation and black-letter law.
There is no need to replace existing institutional arrangements to achieve a perfect world since human beings are fallible. So the goal of political life is avoiding heavy handed regulation and fostering entrepreneurs in order to achieve prosperity.
I infer that Ross Cameron affords free rein to material self-interest so as to encourage the endless profusion of narrowly self-seeking entrepreneurs and interest groups. In a large and extremely diverse society such as Australia no one of these groups would constitute a majority. This profusion of interest groups would thus obviate the threat of the tyranny of the majority by simultaneously submerging "dangerous passions in the pursuit of gain," and assuring that no one interest group would be able to acquire political power.
A good society is a lumpy stew of individuals and groups, each with its own inherent "principle of motion." This stew stirs itself, and in the fullness of time, when mixed with trust out pops a creamy puree called 'the public interest'. In this way the endless maelstrom of individuals pursuing private goods produces, magically, the public good.
Alan Moir
It is real magic pudding stuff.
I for one do not stand in raptured admiration for the clockwork regularity of Cameron's marvel of a self-regulating economy. I see self-contradiction: the self-regulating economy has been able to trade upon "a dwindling legacy of cultural capital which was accumulated in sterner, more thoughtful era of Menzies Australia. The entrepreneurial system advocated by Cameron does not replenish this capital. It acts to erode it. Think Allan Bond or Christopher Skase.
Did not the light hand of market governance --going easy on business---lead to the disaster with HIH and Apra (The Australian Prudential Regulatory Authority)?
I presume that Ross Cameron does not see the malaise and nihilism afflicting our body politic that his government has contributed to. Has not the Coalition presided over the breakdown of political ethics in our political institutions? Has not it contributed to the break down of trust between government and citizens over Tampa and Iraq?
Cameron is less expressing prudential statecraft and more of an expression of the desire to abolish the political.
Posted by Gary Sauer-Thompson at 07:26 PM | Comments (0) | TrackBack
May 29, 2003
Corporate governance
Corporate governance does not just refer to the way corporations govern or misgovern themselves within the marketplace. It also includes the way that the state regulates the market. It includes the way the proceses sof the market allow the retail business to be dominated by Coles Myer and Woolworths in Australia These corporations just get bigger and bigger as they move into liquor stores and petrol chains.
And the federal government stands by and watches the duopoly grow. It basically says that there is competition between the two big retailers. Hence we have the benefits of competition. Thats all that matters. It is big business. But is it genuine market competition?
What would Graeme Samuels, the new (acting ) head of the Australian Competiton and Consumer Commission, do? He is alleged to be in the pocket of big business----the true competitive capitalists in the business world?---by some; and has a sold faith that competition is the best way to promote the public interest, consumer welfare and sustainability. Will we expect a push for some anti-trust action in the name of increasing competition?
Samuels has to work with the confines of the Trade Practices Act and case law. But that legislation has its philosophical roots in the ethos of the liberal market. So we can ask: What about the independent retailers? Or the independent fuel retailers? Aren't they meant to be the stalwarts of the free market?
Isn't the ethos of the market meant to be something like this. We should:
"....trust the dynamism of the self-organizing market and reject any attempts by bureaucrats and politicians to suppress competition...celebrate the decentralized decision-making of market capitalism and those quick-thinking, street-savvy entrepreneurs who take risks and use the unique knowledge they possess to take the opportunities open to them."
If so shouldn't we be using this:
" vision of a society of independent, self-employed producers to criticize the concentration of power in capitalist society;...to be deepy critical of the reality of liberal society in which the new forms of corporate organization and hierarchy (eg., major media players) act to make individuals subordinate to higher authority. So... [shouldn't we].... dismantle these concentrations of political and economic power and then distribute power and property as widely as possible to ensure that Australia becomes a nation of dynamic entrepreneurs."
Somehow I do not think that is what Costello and Samuels mean by a competitive market. It is Hayek though. Wasn't Hayek the public philosopher behind compettion policy? Or am I mistaken?
Posted by Gary Sauer-Thompson at 11:53 AM | Comments (0)
May 21, 2003
a good idea
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 08:48 AM | Comments (5)