A brave new decade for Australian free enterprise under a business-friendly Coalition government? If only! Already there are concerns about a corporate regulatory and penal over-reaction arising from Westpac’s confession of breaches of money-laundering laws. A foretaste of this new regulatory enthusiasm was given just before Christmas when APRA announced an ‘extensive and potentially lengthy investigation’ into Westpac by exercising ‘expanded and strengthened legal powers’. Curiously, APRA managed to assert both that the nature, number and time-span of Austrac’s alleged breaches by Westpac ‘question the prudential standing of Australia’s second biggest bank’ along with the contrary assurance that ‘Westpac is financially sound’. APRA has yet to show how the bank’s prudential standing is ‘questionable’ when all but a small proportion of Westpac’s 23 million breaches, contrary to the headlines, involved no terrorist, money-laundering or child exploitation issues. Instead, they represented years of accidentally unrecorded recurring (mainly foreign government pension) payments averaging less than $500 into Australia via two global banks. But the alleged failure by Westpac to carry out due diligence on twelve customers sending repeated small sums from Australia to Asia in almost 3,000 transactions totalling almost half a million dollars, does have serious legal consequences – unless the potential fines would rock the bank’s foundations.
The real bureaucratic threat to corporate Australia, however, comes from within; Australia’s major corporations have become large self-perpetuating private bureaucracies. It is unusual, and rarely successful, for shareholders to compete for a board seat against directors selected by the board. And most boards are answerable no longer to identifiable owner-shareholders but, instead, to other private sector bureaucracies (like super funds) that exercise ownership rights even though they are only managing these assets on behalf of the ultimate owners who have no say whatsoever in the exercise of their ownership. None of the top twenty shareholders listed in Westpac’s lastest annual report, who make up more than half the 610,334 total, hold these shares on their own behalf. The managers of these shareholding corporate bureaucracies have been exercising their capacity to ‘influence’ companies and are understood to have initiated the sweeping board changes at CBA. As Westpac revealed at its AGM: ‘Over the past year we have engaged extensively with institutional and retail shareholders and advisory groups to gather feedback’ – but not, apparently, with any significant beneficial shareholder-owners. With climate change, however, the need to be politically pure has widely extended the range of board engagement; Westpac’s acceptance that global emissions must reach zero by 2050 in line with the Paris targets, results from a ‘science-based and responsible approach that incorporates feedback from a range of stakeholders, including shareholders’.
So forget about shareholder democracy. And after last month’s annual general meeting of Westpac, some would say just as well. The jeering, personal abuse and offensive interjections from ratbag activists (representing a tiny minority of shareholder-owners as evidenced by the 91 per cent vote to reject their call for the entire board to resign) turned this, as with other annual general meetings, into a proselytising six-hour theatre of the absurd. Campaigners for climate change, social responsibility, gender, etc., dominate the microphones.
Maybe Bob Hawke was right; the only way to bring about real financial reform is through a consensus between big government, big business and big unions. The first two of these are now bigger than ever. But massively-diminished union membership belies the union movement’s rapidly-rising financial influence through its industry superannuation funds. It was AustralianSuper’s vote at December’s AGM that ensured the success for the Westpac board’s contested election of directors. And while APRA has gone on record requiring union representatives on industry super fund boards always to put the interests of superannuees ahead of their sponsoring unions, times do change – as do governments.
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