Questions being raised over the standards of corporate governance in Australia are a timely warning to boards and CEOs on this side of the Tasman.
The shock departure of ex-All Black and Kiwi Rhodes Scholar David Kirk from Fairfax demonstrated how far the rumblings of discontent in Australia about executive and boardroom performance have spread. With commodity prices on the wane and a global recession lapping at Australia’s shores, corporate decision-making has come under more intense scrutiny. Until now shareholders have enjoyed booming profits and were happy to go along with board decisions on strategy and governance. Only now are they being awakened from their stupor.
David Kirk may simply be a scapegoat for an industry struggling to come to terms with the proliferation of web based media services that have nibbled away at a previously dominant market position. But there are probably more fireworks to come. Outspoken Telstra CEO Sol Trujillo might have a blowtorch turned on him after his antics in Canberra estranged the new government and resulted in Telstra being excluded recently from bidding in Australia’s broadband network lolly scramble. Colourful Qantas board member and recently retired CEO Geoff Dixon might also be in the gun having presided over an alleged collusion scam with other airlines, the costs of which have yet to appear on the books.
Episodes like these raise serious questions about accountability and shoot dead the concept of sacred cows when it comes to board appointed management. In New Zealand we only need to look as far as our largest exporter. Fonterra chair Henry van der Heyden in a recent radio interview calmly discusses shareholder value offsets and the non-impact of San Lu on the company’s overall global strategy. No mention of the enormous human cost due to poor management practices inherent within China’s milk supply chain. For $4 million per annum in salary, you’d think their CEO would have taken a more active interest in how quality control and risk would be handled in their China venture.
Opening Fonterra’s share register to the public would be one step towards greater accountability and it would allow the wider public to participate directly in one of our few truly global entities. Fonterra’s farmer shareholders seem unlikely to sanction for change however, even though their conflict of interest as both suppliers and beneficiaries smells rather like a fresh cowpat. In that kind of perverse culture, it is unsurprising that the company has been all but silent on the fallout in China.