Driving the Porcelain Bus
It is hard not to be sick when reporting the arbitrary executive pay increases and undemocratic constitutional changes being made at the big end of town this week. Boral passed a resolution to increase the number of shareholders required to put special resolutions to AGMs from 100 shareholders with any number of shares, to only those groups whose combined shares total more than 5 per cent of the company (roughly 28 million shares). Once the resolution to quash the voice of the small investor was passed, the Boral board promptly raised their own salaries by 55 percent. If that wasn't enough to get your stomach turning, consider AMP, facing a $4 BILLION-PLUS NET LOSS this financial year, disclosed it had set aside an extra $38 million in sweeteners to retain 160 of its top executives...sickening.
PICKS OF THE WEEK
Funds attack AMP bonuses
AMP's plan to reward about 160 executives with up to $38.4 million in retention payments has attracted the ire of fund managers, despite chairman Peter Willcox's claim that investors wanted AMP to make the payments.
Full story: http://www.theage.com.au/text/articles/2003/10/19/1066502069487.htm
AMP arm set to cull workforce
AMP's British operations, to be renamed HHG, will cut a further 1314 jobs by June 30 next year if the demerger goes ahead.
Full story: http://www.theage.com.au/text/articles/2003/10/17/1066364487813.htm
Harvey's $21m share deal
HARVEY Norman Holdings chief Gerry Harvey will double his pay packet if shareholders approve a proposal to be put to the retailer's annual meeting next month and Mr Harvey and his wife, managing director Katie Page, want a $21 million share and options package over three years.
Full story: http://www.theaustralian.news.com.au/common/story_page/0,5744,7652365%255E462,00.html
NAB boss may get $10m a year
National Australia Bank chief executive Frank Cicutto could earn up to $10 million a year in salary and shares if he hits all his performance goals under a three-year contract signed by the bank's board yesterday.
Full story: http://www.smh.com.au/articles/2003/10/23/1066631570422.html
Perpetual AGM backs chief's $2.6m
Defying predictions of a showdown on executive pay, Perpetual Trustee shareholders yesterday backed a generous package for new chief executive David Deverall that could net him more than $2.6 million, on top of his basic salary of $500,000 a year.
Full story: http://www.theaustralian.news.com.au/common/story_page/0,5744,7618466%255E643,00.html
News share option alternative
The News Corporation Ltd is expected to consider alternative ways to compensate six executive directors whose share options were withdrawn in the face of investor opposition before the company's annual meeting this week.
Full story: http://www.theaustralian.news.com.au/common/story_page/0,5744,7581397%255E643,00.html
TAB merger will cost jobs, but chief plays down the numbers
Jobs will be lost in the likely merger of the NSW TAB and its Queensland equivalent, with the head office being moved to Brisbane, the managing director of the NSW company said yesterday.
Full story: http://www.smh.com.au/text/articles/2003/10/16/1065917555459.htm
Balance the cents and sensibility: Samuel
The nation's competition tsar, Graeme Samuel, said last night that big business should be alert to the well being of the community at the same time as fulfilling its duty to shareholders.
Full story: http://www.theage.com.au/articles/2003/10/23/1066631567835.html
Greater co-operation for ACCC in crack down
Economic globalisation and cross-border corporate misbehaviour have prompted the nation's competition watchdog to strike co-operation deals with trade authorities in Britain and New Zealand.
Full story: http://www.theage.com.au/text/articles/2003/10/17/1066364487828.htm
SEC plans to expand review of governance at NYSE
The US regulator is set to get tough after Richard Grasso's $198.5 million lump sum payout controversy, writes Otis Bilodeau from Washington.
The US Securities and Exchange Commission may ask the New York Stock Exchange to account for how it spends money to police traders and listed companies.
Full story: http://www.theage.com.au/articles/2003/10/23/1066631565101.html
Judge hits CBA's small print for six
A Federal Court judgement against Commonwealth Bank will force businesses to be vigilant about using the phrase "terms and conditions apply" to cover exceptions to what they advertise.
Full story: http://www.theage.com.au/text/articles/2003/10/20/1066631353151.htm
Ageism on the way out
Wind Down, Step Down, Time Out and Ease Down sound like a menu of happy hour cocktails served after work on a Friday night, but these tempting concoctions have been dreamed up by British Telecom to entice older workers from the brink of retirement.
Full story: http://www.careerone.com.au/resources/story/0,8523,7072175-22548,00.html
THE PROBLEM WITH BORAL
Boral crushes small investors' voices
Boral chairman Ken Moss faced down angry shareholders and a Labor senator over changes to the company's constitution at yesterday's annual meeting as a profit upgrade sent the share price surging.
Full story: http://www.smh.com.au/text/articles/2003/10/21/1066631428008.htm
Labor threatens Boral board
Labor has promised to take its battle with the Boral board to parliament after Opposition financial services spokesman Stephen Conroy took the unprecedented step of confronting directors at yesterday's annual general meeting of the building materials group.
Full story: http://www.theaustralian.news.com.au/common/story_page/0,5744,7630779%255E643,00.html
Boral contempt makes shareholders see red
With the erosion of the rights of small shareholders at stake, Crikey's Justin McMurray headed along to Boral's AGM in Sydney yesterday. He reports on all the colour, surprise appearances and fiery encounters of the day.
Full story: http://www.crikey.com.au/business/2003/10/22-0001.html
NEWS HIGHLIGHT
Where have all those jobs gone?
By Alan Kohler of the Sydney Morning Herald
China will float the yuan when it's good and ready, which means when it doesn't matter any more and currency arbitrage is no longer contributing to its cost advantage. That could be a decade.
In the meantime, corporate leaders should prepare for the next wave of moral pressure on them - this time about the exporting of jobs to China, India and the rest of the developing world.
In some ways outsourcing, or "offshoring" as it's become known, is a more difficult problem for directors and executives than executive salaries and corporate governance, the issues on which they have been hammered for the past couple of years.
That's because on the subject of excessive salaries and poor governance, community and shareholder interests are in alignment. The political solutions that have emerged - Clerp 9 in Australia and Sarbanes-Oxley in the US - have the full support of shareholder groups. In fact, in Australia the new law is based on work first done by the investor bodies.
But on outsourcing - that is, the export of jobs - the investment and executive classes are as one, diverging sharply from the political establishment.
For both sides of this debate the stakes are enormous.
Consulting firm Bain & Co estimates that the cost to a US bank of answering a phone call is $US8 to $US12 if done by a staff member; $US2 to $US3 if "offshored". The cost of processing a mortgage falls from $US2500 to $US1200. For Australian companies the difference is a little less: whereas US process worker wages are about four times those of India and China, those in Australia are more like two to three times. But the savings are still too large to ignore.
And these days the quality of the work is often better. The largest Indian IT outsourcee, Tata Consultancy Services (TCS), has achieved the highest certification (level 5) according to the Software Engineering Institute's CMM scale - not only for its Indian operations but also for a new centre opened in Uruguay this month. TCS is planning to operate 70 level-5 IT outsourcing centres around the world - the Third World, that is.
Better workers, a quarter of the salary, and as Indian salaries rise the operators will simply move to cheaper locations: the business of offshoring has only just begun.
The social and political consequences of this for western countries are profound and unpredictable.
Morgan Stanley's Steven Roach calculates that as much as a third of the productivity bonanza that has contributed about two thirds of the economic growth in the US over the past six quarters can be attributed to a shortfall in domestic hiring - the so-called "jobless recovery".
Private non-farm payrolls have contracted 1 per cent, in contrast to the usual job growth of 5 per cent over a comparable period. If this cycle had been normal then the US job count, says Roach, would be 4.3 million higher.
These are enormous numbers, yet to be repeated in Australia because of the reluctance, so far, of Australian companies to join in the offshoring. So far.
US Treasury Secretary John Snow says he would "bet dollars to doughnuts that we'll see a pick-up in jobs in the next few months" - but even if he's right the political implications of what's happening are already apparent. They have surfaced in a bill in the US Congress to impose a 30 per cent tariff on Chinese goods unless the yuan is floated.
But while tariffs might work against Chinese imports, there is little that politicians can do about offshoring.
It's likely to be less of an issue in Australia, though, at least for a while. Not only is there less offshoring here at this stage but the long-term social consequences are muted by the welfare system.
America has a less well-developed safety net: the "trickle down" of wealth in the US occurs via jobs, while in Australia and Europe, taxes finance a long-term unemployment benefit and other forms of welfare. As company profits rise because of lower labour costs, at least some of it will go in taxes to finance more welfare.
In time, all the work that can be performed in cheaper places will be. Australians have only just got used to the idea that we can't compete with China in low-value factory tasks - now we must confront the loss of call centres as well.
Not only that, computer programming, even research and analysis, are moving to where global labour arbitrage takes them.
The backlash from society and politicians will be ferocious, as will the pressure from shareholders to do it. For company directors it will make the debate over executive salaries seem like a picnic.
SATIRE
Care of our friends at The Chaser..."striving for mediocrity in a world of excellence"
www.chaser.com.au
Customer feedback makes it all worthwhile for third world coffee picker
KENYA, Friday: Hours of back-breaking work were made worthwhile today for Kenyan coffee picker Abuya Wakesa when she received her customer feedback forms from Starbucks.
"Eighty-three percent of customers thought my beans were good," said Wakesa from the comfort of her one-bedroom thatch hut. "It's their satisfaction that gets me back out in the field and keeps me smiling throughout my 12-hour shift."
While many believe that the feedback forms are a mere public relations stunt, Starbucks CEO Howard Schultz assured customers that their feedback was important to the company and its employees.
"We like all of our 'partners', as we call our employees, to know what the customers are thinking. It makes them happier and more informed workers," said Schultz. "And it also serves as a warning if we want to sack them."
For those, like Wakesa, whose feedback is positive, the link to the customers is vital.
"I am always dying for the end of the month when my package arrives from Starbucks," Wakesa admitted. "Mainly to get the $3 I get paid each month for my coffee beans, but the feedback is important to me too."
For further information
Contact: Chris Owen
Email: c.owen@labor.org.au
WWW: www.bosswatch.labor.net.au
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