Down The Gurgler

Howard's ethanol hangover doesn't look like easing this week but his mates at the big end of town will be raising their glasses in celebration over the shock retirement of ASIC chief, David Knott. Chances are, Knott's replacement will follow the corporate-friendly trend of the new ACCC and APRA bosses...we continue to watch the strength of Australian corporate regulatory bodies go down the gurgler. Also this week, AMP's woes continue, the ACCC praises the unenforceable governance guidelines set out by a corporate heavyweight, Billabong puts money over motto and we ask if Gerry Harvey is serious?

PICKS OF THE WEEK

Ethanol uproar engulfs Howard

The Federal Government's own finance department slammed the decision to protect ethanol producer Manildra from foreign competition as "poorly targeted" and imposing heavy costs on Australian business and the budget, it has been revealed.

Full story: http://www.smh.com.au/articles/2003/08/13/1060588464157.html

Super funds take 95pc in exit fees

SOME superannuation funds have been charging "exit fees" of up to 95 per cent for customers who want to roll their money over to a different fund.

Full story: http://www.dailytelegraph.news.com.au/common/story_page/0,5936,6901150%255E704,00.html

AMP hit with $57m GIO bill

THE embattled AMP and parties including Macquarie Bank have agreed to pay $112 million to 23,000 aggrieved shareholders of the former insurer GIO in Australia's biggest-ever class action settlement. The settlement relates to GIO's botched defence of the AMP's hostile takeover offer in 1998, in which GIO reassured investors of an expected $250 million profit, which turned into a $750 million loss.

Full story: http://www.theaustralian.news.com.au/common/story_page/0,5744,6894026%255E643,00.html

The co-op is alive and well - and growing

They attract little attention unless they fail, but co-operatives are far from a dying breed with their turnover growing by 81 per cent in the past decade.

Full story: http://www.smh.com.au/text/articles/2003/08/11/1060588324097.htm

Women bonnie bosses

WOMEN make the better bosses, according to a new and exhaustive study certain to sway absolutely nobody who has an opinion on which sex is the superior supervisor.

Full story: http://www.dailytelegraph.news.com.au/common/story_page/0,5936,6912937%255E704,00.html

Billabong source threatens more

A MAN claiming responsibility for this week's damaging leak of Billabong International board papers suggested more documents could be on the way..."They do not give a shit about a lifestyle that millions of people globally love. They have changed our company forever."

Full story: http://www.theaustralian.news.com.au/common/story_page/0,5744,6886155%255E643,00.html

LEGISLATION NEWS

ASIC chairman's final fling in the private sector

David Knott's surprise early retirement as Australian Securities and Investments Commission chairman makes this a watershed year for corporate regulation. First, the long-serving chairman of the Australian Competition and Consumer Commission, Allan Fels, retired and was controversially replaced by Graeme Samuel.

Full story: http://www.theage.com.au/text/articles/2003/08/12/1060588390771.htm

We'll back codes, but watch out: ACCC

Australia's competition watchdog is promising to endorse voluntary industry codes of conduct and warns that it will name and shame businesses that fail to comply with the self-imposed regulations.

Full story: http://www.theage.com.au/text/articles/2003/08/11/1060588321865.htm

Samuel takes aim at banks

New Australian Competition and Consumer Commission chairman Graeme Samuel yesterday fired his first shot at Australia's banking sector.

He told the Australian Bankers Association that banks must continue to pay fees to retailers and oil companies for Eftpos technology.

Full story: http://www.theage.com.au/text/articles/2003/08/08/1060145868660.htm

Corporate heavyweights assemble for governance taskforce

A Rhodes scholar, a company secretary, a solicitor and an accountant are among the people who will oversee the introduction of new corporate governance guidelines drawn up under the auspices of the Australian Stock Exchange.

Full story: http://www.smh.com.au/text/articles/2003/08/07/1060145800994.htm

THE GERRY HARVEY FACTSHEET

Is He Serious?

Gerry Harvey, aged 63, was the co-founder of Harvey Norman in 1982 with Mr. I. Norman. Harvey has overall executive responsibility for the relationship between the company and Harvey Norman franchisees, and the property investments of the company.

Harvey has a total of 309,186,199 Ordinary Shares (included in Harvey's shareholdings are his beneficial interest in 142,629,301 shares held by G Harvey Nominees Pty Limited), with a further 3,000,000 Options issued August 1999.

On 31 August 1999, in accordance with a Special Resolution passed at a general meeting of members of the parent company, options to take up ordinary shares in the capital of the parent company at an issue price of $3.212 per share were granted to the trustees of separate trusts for the benefit of each of Gerald Harvey and family (3,000,000 options) and five other executives--Kay Lesley Page and family (3,000,000 options), Raymond John Skippen and family (3,000,000 options) and Arthur Bayly Brew and family (1,500,000 options).

Each of the August 1999 Options was not capable of being exercised prior to 1 July 2002 and the options expire at midnight on 30 June 2004.

The Issue

The above six executives were issued options over 1.5 per cent of Harvey Norman (3,000,000 shares each) at exercise prices of $3.21.

The overall value of HN stock has dropped since that time and rather than letting the options expire, Harvey is arguing for them to be re-priced down to a share price based on trading at the end of July 2002.

Harvey is basically trying to change his bet after the race has run...originally entitled to buy 1.5 per cent of the company for $46.5 million now he wants to drop the price to about $35 million.

Harvey's Reasoning

Believed that shareholders would rather agree with the re-pricing than watch the share price tumble further if the 18,000,000 stock options (6 execs x 3,000,000 options) are relinquished and have to be diluted into the market.

Further, Harvey believes that the HN Board gets less money than just one individual in most companies get--at HN outside directors get $20,000 - $30,000 per year and the Managing Director gets $250,000. Harvey gets $250,000 as chairman. Quote "I'm the only public company that I know that has these very low pay packets"

Believes he must nearly double senior executive wages if shareholders vote down the options deal. Quote: "I've got a situation where I've promised directors of this company, I've said look, take a low salary, I'll give you options so you can make a lot of money, and then of course the options are no good and they don't make any money and then they say to me, well, look, I was earning two or three times as much outside...I've either got to put their wages up to blazes or I've got to, you know, give them a new option scheme, and that's what I was trying to do because I didn't want to put their wages up, because one of the big problems is if you pay people $2 million a year and when they leave you give them another three or something like that, and you get rid of them because they're no good and they cost you millions of dollars...When I get rid of someone they cost me peanuts because they were no good and they should get no money. All these companies, the other companies are paying people out huge amounts of money and they've under-performed."

Harvey does not believe the share prices have been affected by the poor performance of executives and blames outside influences. For example, Harvey believes that Fels and the ACCC had it in for him and argues that Fels' ego affected the Australian economy in a negative way.

(Sources: ABC PM Report, SMH, Crikey, BRW, and HN Annual Reports 2000, 2002)

NB: The Extraordinary General Meeting of shareholders to vote on the matter has been cancelled--Even though he now realises he can't win, Harvey continues to argue his options philosophy and is, by all accounts 100% serious.

WORLD WIDE WEB

The Corporate Research Project

The Corporate Research Project is a non-profit centre that assists community, environmental and labour organisations in researching and analysing companies and industries. The Project is designed to be a resource to aid activism. Consequently, the focus is on strategic research, i.e., identifying the information activists can use as leverage to get the company to behave in a socially responsible manner.

The Project helps groups identify and obtain access to more specialised sources of corporate information from government agencies, private organisations or commercial vendors. The project has numerous databases and CD-ROMs that would be too expensive for the typical non-profit organisation to afford.

http://www.corp-research.org

QUOTE OF THE WEEK

10 more useful expressions for those HIGH STRESS days at work...

1. Does your train of thought have a caboose?

2. Allow me to introduce myselves.

3. Whatever kind of look you were going for, you missed.

4. Well, this day was a total waste of makeup.

5. Not all men/women are annoying. Some are dead.

6. Can I trade this job for what's behind door 1?

7. Nice perfume. Must you marinate in it?

8. I thought I wanted a career, turns out I just wanted the payslips.

9. If I throw a stick, will you leave?

10. Don't piss me off today, I'm running out of places to hide the bodies.

For further information

Contact:   Chris Owen
Email:   c.owen@labor.org.au
WWW:   www.bosswatch.labor.net.au