‘The fish stinks at the head’ - Ancient Greek proverb

There are currently high levels of distrust in a number of key institutions that are supposed to ensure that companies are properly run.

The composition, independence and skills of boards of directors, auditors and analysts and advisers have all been called into question in light of recent corrupt practices.

These collapses necessitate a renewed focus into the legislative framework of corporate governance that underpins the confidence of investors, workers and the Australian community.

It is unequivocal that investors are today more acutely aware the clear link between bad corporate governance practises and corporate failure and collapse.

The workers of Australia who as superannuation members or as direct investors in the equity market are justified for calling on measures that improve the security of their investments.

Thousands of Australian workers have also lost their jobs, because of the collapse or poor performance of their companies, for reasons that are attributed to bad corporate governance practices. Therefore corporate governance failures have cost workers their jobs and superannuation members as investors, their money.

Misbehaviour by companies resulting in massive financial losses for thousands of Australians has so far produced no substantive action by government.

Despite community outrage at the rorts and misconduct revealed by company failures such as HIH, One.Tel and Harris Scarfe nothing has yet been done to reign in corporate excess and rebuild public confidence in our corporate sector.

ASIC Chairman David Knott in May 2002 made the case for change. He described ‘emerging evidence of management neglect or misconduct that is culpable’, ‘the failure of accounting and auditing to deliver acceptable outcomes’ and ‘complacency about corporate governance’.

New research released in August 2002 has revealed that one-in-four of Australia’s top 100 companies are failing in their legal duty under section 300A of the Corporations Act to disclose to shareholders the value of lucrative share option deals offered to directors and executives.

John Howard himself has admitted that ‘some people have been getting away with murder in terms of corporate excesses’. But he rejected the US approach of tightening corporate governance requirements, saying that ‘it’s important that we don’t overreact.’

Part of the problem with corporate failures is that even when ASIC prosecutes, it is usually too late for employees who have lost their jobs and entitlements, shareholders who have lost their investments, and clients whose commercial interests are damaged. Taxpayers often foot the bill after assets have been transferred.

Rather than the hands-off approach advocated by the Prime Minister, the government should act to improve corporate governance regulation.

Policies that improve corporate regulation are ultimately in the best interests of all honest Australians - employees, businesses, shareholders, investors and the public.

More Information

• ACTU News: ACTU Calls For A Corporate Audit Office - the ACTU called on the Federal Government to set up an independent Office of Corporate Audit to prevent company rorts and failures such as HIH, One.Tel and Harris Scarfe. (26 August 2002)
• ACTU Resources: ACTU Super, No.4 April/May 2000 - the global campaign by unions to pass resolutions at Rio-Tinto shareholder meetings for independent directors and a code of labour practice is part of a growing movement for better corporate governance.
• ACTU Resources: ACTU Super No.6 July/August 2000 - senior US Union official Richard Trumka talks about the role of unions in working globally to improve the governance and accountability of global capital.
• ACTU Resources: ACTU Super No.8 November/December 2000 - the ACTU’s Executive meeting carried a resolution noting growing union activity around the world linking investment policies with corporate governance and behaviour and resolved to hold a forum on this crucial issue.