Make no mistake. There were generous and inappropriate gifts handed out at Australia Post, but they weren’t the Cartier watches awarded to senior executives by Christine Holgate.
Instead, they were the Australia Post directorships handed to the federal government’s friends. In a governance sense, making politically motivated board appointments is a recipe for disaster.
When you look at this Australian government enterprise through a governance lens – like the one that applies to privately listed companies – it’s clearly dysfunctional.
Christine Holgate’s biggest mistake was taking the job without a proper appreciation that having only one shareholder meant the normal rules of corporate governance wouldn’t protect her.Credit:Alex Ellinghausen
There are factions within the board, there was an obvious discord between the chief executive Holgate and the chairman, Lucio Di Bartolomeo.
Holgate’s biggest mistake was taking the job without a proper appreciation that having only one shareholder, the government (in the style of an absent landlord), meant the normal rules of corporate governance wouldn’t protect her.
You would have thought the demise of her predecessor, Ahmed Fahour, would have been a sufficient portent of the dangers of the post. He was dispatched by former prime minister Malcolm Turnbull after concerns he was overpaid.
The rule of thumb in corporate governance circles is that those companies with a large controlling shareholder are the least likely to adhere to the conventions around governance or, for that matter, culture.
For example, Gerry Harvey’s Harvey Norman, James Packer’s Crown Resorts and Kerry Stokes’ Seven West Media are organisations regularly criticised as examples of worst practice on governance.
All have a controlling shareholder who is able to make unilateral decisions without accountability to a wider shareholder base.
Stokes, for example, oversaw the unusual decision for Seven West Media to fund the legal costs of one of its executives, Ben Roberts-Smith, in his defence of war crime allegations.
James Packer stacked the board with friends and business associates.Credit:Getty/Nick Moir
Packer, as we have learnt from the recent NSW inquiry into Crown, stacked the board with friends and business associates. Crown’s governance was lambasted during evidence that revealed Packer had a big influence on the company’s operations even when he held no board position.
But in companies where shareholder democracy is better reflected in decisions on governance, there is a system that allows investors to clean out a dysfunctional or poorly performing board or an executive team.
In recent years AMP has been the subject of two board culls, the first was thanks to shareholders that took issue with the actions of certain of their members following damning evidence out of the financial services royal commission. The second was after promoting an executive after he had been accused of sexual harassment.
Westpac and the National Australia Bank were both forced by shareholders to clean out their boards and change their chief executives. Westpac’s punishment was the result of an AUSTRAC finding of breaches of anti-money laundering rules that cost the bank $1.3 billion. NAB’s purge followed responses from its chairman and chief executive during the banking royal commission.
More recently Rio Tinto was compelled to get rid of several directors and three of its most senior executives after the company destroyed culturally and archaeologically important sites in order to develop an iron ore mine.
Holgate was supposedly punished for handing out watches as a bonus – an action which she said had the approval of the board – but it doesn’t stake up. In the course of her evidence to Tuesday’s Senate committee inquiry, it became clear she did not agree with plans to privatise Australia Post.
The aftermath and the circumstances around her departure have become a case of he-said, she-said. But in a properly functioning company, (unlike Australia Post that just dresses up like one) it would have been handled differently.
And for that, the blame should fall squarely on Australia Post’s only shareholder – the government.
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