Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Chris Ellison, a brash Australian billionaire, made global headlines in August when he declared that he wanted to keep his staff at his company’s head office in Perth “captive all day long”. The founder and managing director of Australian miner Mineral Resources singled out staff leaving the building to buy coffee as the sort of thing that costs companies money.
Ellison is now cutting a more humble figure after stepping down as managing director of Mineral Resources after a review found he engaged in “profoundly disappointing” conduct in relation to payments to companies connected to him. The review also accused Ellison of using the company’s resources for his own benefit — such as using employees to work on his private boat — and questioned his integrity. Mineral Resources fined Ellison A$8.8mn and is seeking to claw back remuneration and benefits worth up to A$9.6mn.
Ellison, who has said he is “deeply sorry” for the impact on his actions on the company’s reputation, has thus been added to the growing list of corporate casualties as scandals and controversies have engulfed some of the country’s largest businesses in recent months.
That has acted as a catalyst for a bout of boardroom self-reflection. The retrospective board review, and a firm commitment to improve corporate governance, is becoming a familiar trope for Australian businesses.
It is only two weeks since the chief executive of software developer Wisetech stepped down from the company he founded 30 years ago and built into a company with a market capitalisation of A$40bn, the biggest for an Australian tech company.
That followed a string of reports on Richard White’s private life and connections with several women, including one who joined Wisetech after starting a now-ended relationship with White. Australian media has reported the woman was given a A$7mn waterfront mansion by White. The businessman also recently settled a high-profile civil court battle over a claim of an unpaid furniture bill with a wellness entrepreneur he is alleged to have had a relationship with.
White denied that he had acted inappropriately during discussions with the Wisetech board but further reports, including an accusation of a bullying culture within the company from a former board member, proved to be the catalyst for White to step down from his executive roles. Wisetech said White would continue to act as a consultant to the company.
Elsewhere, Nine Entertainment, Australia’s largest local media company, published a damning report into its corporate culture last month. It found “that Nine has a systemic issue with abuse of power and authority; bullying, discrimination and harassment; and sexual harassment”.
And airline Qantas published in August an external review into its culture after a tumultuous period under former chief executive Alan Joyce. That period transformed what was widely seen to be Australia’s most beloved company into a “national pariah”, according to The Chairman’s Lounge, a new book by journalist Joe Aston about the airline. After the review, Qantas docked Joyce’s pay by almost A$10mn and criticised the company’s former board for “too much deference to a long-tenured CEO”.
White and Ellison have pointed to the fact that they disclosed to the board many of the issues that have now spilled out into the open. But a common thread of the scandals has been questions on whether boards of the country’s largest companies have bent to the will of powerful executives.
Andy Schmulow, an associate professor at the University of Wollongong, said that the spate of corporate scandals reflected a “too timid” boardroom culture in the country that has allowed “a sense of entitlement and greed” to fester. “Our corporate governance model has enabled a directorial class to emerge that is accountable to no one and can do whatever it likes,” he said.
The scandals, which have led to sharp share price falls in Wisetech and Mineral Resources, have prompted Australia’s powerful pension funds to exert pressure on the boards of those companies and others over corporate culture. Schmulow said that those funds might have to stand up to boards more often to force change as the country’s politicians and regulators have failed to do so.
Australian investors are known for backing a founder or leader with a vision capable of conjuring up a success story through hard graft and determination. But boards have surely now been put on notice to take corporate governance very seriously indeed.
Read the full article here