RBA, gaming policies, The Age should sue Herald Sun, Rio rolled and Coke protest
July 22, 2008
Here are Stephen Mayne's six stories from the Crikey edition on Thursday, 4 May, 2006.
6. It's time for the RBA drip to stop
By Stephen Mayne
The Crikey editorial and Michael Pascoe yesterday both tackled the fascinating question of official leaking by the Reserve Bank to a couple of favoured financial commentators. I reckon there is something in this, mainly because the RBA lacks transparency – it doesn't release minutes of its meetings, hold media conferences or even grant media interviews with governor Ian Macfarlane.
During three years as business editor of the Herald Sun in the 1990s, I was amazed how emphatically and correctly Terry McCrann would predict movements in official interest rates.
McCrann was on the money again this time, as was The AFR's Alan Mitchell, another tipped recipient of an official steer from someone inside the bank. Alan Kohler is clearly not getting an inside steer and he fessed up about getting it wrong on ABC TV last night, humorously displaying a piece of humble pie with sauce to a national audience of almost 1 million.
SMH economics editor Ross Gittins has been mentioned previously in this esteemed company, but he's been missing in action for the past few weeks, so we can't judge his tips. Peter Costello's ban of Ross Gittins a couple of years back might have been too hot to retain for the Martin Place central bankers.
The deal here seems to be that this select group of leakees adopt the role of a virtual media liason officer for the Reserve Bank. In return for this privileged access to our most important economic policy-making institution, the chosen ones must defend the bank, espcially at critical times like now when the Howard Government has come out swinging after the sixth straight rate rise.
Whilst not wishing to advocate the disclosure of sources, the practice has clearly got to stop now that there is public discussion about it. When Ian Macfarlane retires after 10 years in September his successor Glenn Stevens should try a new approach – greater transparency, including the release of RBA board minutes.
In fact, even having a Reserve Bank board seems odd these days with everyone's heightened focus on good corporate governance. Peter Costello has simply stacked the RBA board with mates, when many of them have large conflicts of interest. Take Woolworths CEO Roger Corbett. He has a $100 million personal equity play on Woolworths shares and every increase in official interest rates will reduce the value of his holding and slow down the growth of retail sales at his stories.
Given the debt-funded consumption binge of the past few years has put Roger within sight of the BRW Rich List, surely he would not regard any increase in interest rates as justifiable. He's not much different from the Howard Government, which rarely agrees with an increase, thereby demonstrating the importance of making the bank independent from politicians.
The government recently abolished the Austrade board, so maybe it is time the same was done with the Reserve Bank. Three expert economist or central banker types are more than enough to get the job done.
12. Deploying the Crikey Army on Victorian gaming policies
By Stephen Mayne, shareholder in Tattersall's, Tabcorp, Aristocrat and PBL
Nick Xenophon's inspiring 21.5% statewide upper house vote in the recent South Australian election has got a few people thinking about the prospect of importing the phenomenon of a "no pokies" political campaign to Victoria.
As someone who hates the pokies, I'm contemplating having a red hot go at them as a candidate in this year's state election on 25 November. To that end, a vehemently anti-gambling four-page submission will be lobbed before today's 5pm deadline for the Gambling Licences Review.
Victoria has the richest racing industry in the world, partly because the Kennett Government gifted it 25% of Tabcorp's duopoly pokies licence as part of a compromise before the 1994 float. Tabcorp and fellow duopolist Tattersall's only have their licences until 2012, and that's why the government is conducting this review, the results of which will be announced in 2007 – after the election. However, the government has stipulated that there will be no change to machine numbers or problem gambling policies, which are summarised here.
The internet makes submissions so much easier these days. The Bracks Government will no doubt announce how many submissions they receive, so how about a solid deployment of the 35,000 Crikey Army to boost their numbers.
Email the following message to gamblinglicencesreview@justice.vic.gov.au and you'll be contributing to policy formulation in Australia's most cerebral state, albeit one with an estimated 100,000 citizens who all-too-often stare blankly into these mind-numbing machines:
What sort of review doesn't consider problem gambling and the number of poker machines? Victoria's 30,000 machines is way too many when you understand that $2.4 billion a year is lost by punters and 84% of problems gamblers cite the pokies as their main vice.A couple of thousand of them might cause a bit of a shock. Of course, everyone is welcome to design their own missive, and please feel free to CC me in: smayne@crikey.com.au.
For goodness sake, get them out of pubs, reduce the total number to about 10,000, force venues to close from midnight to midday and introduce WA-style machines that minimise losses by requiring players to stop and think.
What sort of civilised society can gloat about having the lowest smoking rate in the world – 17% and falling – and simultaneously suffer the highest per capita gambling losses. Retaining 30,000 machines when the Tabcorp and Tattersall's licences expire in 2012 is not tackling an insidious sin industry that is estimated to cause 1 suicide a week in Victoria.
Russia had a massive increase in the distribution of Vodka under Tsar Nicholas II because he enjoyed the tax revenue, yet big-drinking Russians are still paying the price today. Surely Victoria in 2006 is rich enough to not deluge misery on an estimated 2.3% of its pokies-addicted citizens just because the government likes collecting 24.2% of their losses in taxes, plus a $1,533 annual levy on all machines.
Member of the Crikey Army
20. Why The Age should sue the Herald Sun
By Stephen Mayne, subject of a classic Peter Blunden "jihad" for six years
Herald Sun editor Peter Blunden has rarely copped a towelling like he got on Media Watch this week and it is a little surprising that no other outlet, including The Australian's Media section, has yet cottoned on to this fascinating example of media power.
The Herald Sun, like any other serious journalistic enterprise, relies on people answering questions that are put to them, yet when it came to answering Media Watch's detailed and well-researched questions, Blunden was left wanting and replied only with vitriol (as you can see here).
The full exchange is quite illuminating about what is being alleged here. It looks like Blunden and his Herald Sun colleagues are more than willing to both threaten and actually follow through with negative coverage against anyone who does a commercial deal with The Age.
As we've reported many times, Blunden also breathes fire and makes threats of adverse consequences to anyone who dares to give The Age a scoop.
Crikey has even heard that a small operation called Sorrento Ferries was subject to harassment by the Herald Sun after doing a deal with The Age. It seems the abuse of market power by Australia's biggest selling paper is quite widespread.
There's another lovely irony in all of this. The Age executive who has been swanning around town doing all these generous circulation deals with Telstra Dome and its resident AFL clubs – Essendon, St Kilda and Carlton – is none other than Anthony Catalano, the former Sun News Pictorial police reporter who has been subjected to several negative Herald Sun articles over the years.
Blunden never misses an opportunity to kick The Age, as his attacks on Catalano demonstrate, yet when The Age reported the tabloid editor's drink driving conviction in 2003, he declared one of his irrational jihads on then editor Michael Gawenda, even though it was a perfectly legitimate story.
The Age's current editor-in-chief Andrew Jaspan is said to enjoy email correspondence with Blunden, who then laughs at him with his underlings at news conference. Maybe it's time Melbourne's polite broadsheet finally took the gloves off after years of abuse. A formal complaint to the ACCC about the Herald's Sun inducements to Carlton to break its contract would be an obvious start.
Somehow, I can't see Fairfax chairman Ron Walker, an old Herald Sun favourite, signing off on such a strategy, even though it is clearly in The Age's interest because the publicity would damage News Ltd and Blunden's bullying tactics would almost certainly be curtailed in the future.
22. Rio Tinto rolled, berated and embarrassed
By Stephen Mayne, owner of eight Rio Tinto shares and in a Latrobe Street net cafe
Rio Tinto, the world's biggest mining company, got pilloried by shareholders, West Papuan refugees and environmental activists at its AGM in Melbourne this morning but, most extraordinarily, normally passive institutional shareholders turned on the board and voted down a resolution to change the constitution.
In one of the worst displays of arrogance I've seen from a company chairman, Paul "I've got a plum in my mouth" Skinner:
- Had the general debate at the end, after more than an hour was taken up dealing with the 12 resolutions;
- A show of hands was banned so the mood of the meeting was never captured by the meaningless polls;
- Refused to disclose any proxy votes, even after the debate was over and despite repeated requests;
- Refused to disclose the scale of the defeat on the proposed change to the constitution which will never be revealed; and
- Pretended he didn't know what the problem was with institutions when he must have been told it revolved around limiting the ability of the company from being sued in the US
Holding 11,000 proxies delivered by an Australian Shareholders' Association member, "Marcus" pleaded with the board to "please help the people of West Papua" in the face of brutal attacks by the Indonesian military. Chairman Skinner and CEO Leigh Clifford returned to this issue on numerous occasions during the meeting and the defences to the refugees and the shouting environmentalists included the following:
- There's no alternative to dumping the tailings in the river given the mine is at 4,000 metres altitude and all that tropical rainfall;
- Freeport is a great company, we encourage them to do their best and they even have a former judge on their board;
- The Catholic Church, along with the US and UK governments, have all signed off on the human rights issues and the company's dealings with the Indonesian government and military;
- The mine is Indonesia's biggest taxpayer, delivering more than $1 billion a year;
- Sure, we contribute $5.5 million a year to the Indonesian military but Freeport's private security force at the mine is not armed.
SM: Vote against Sir Rod Eddington's election because he disgraced himself and let News Corp shareholders down by tolerating Rupert Murdoch's deceptive poison pill acrobatics after the move to Delaware.Now obviously there's a bit of editorial licence on some of this paraphrasing, but it was a most unsatisfactory performance by the chairman and I'm predicting he will deservedly get a bollocking in the media. The news angles were coming thick and fast, so it will be interesting to see which way the media jumps.
SKINNER: Sir Rod's a fine fellow who took British Airways "from worst to first". News Corp is nothing to do with us.
SM: Given that Ashton Calvert was secretary of DFAT when Saddam collected most of his $300 million from AWB, will the board take into account the findings of the Cole inquiry?
SKINNER: Ashton's a fine fellow, we consider everything but he hasn't been directly dragged into the inquiry so far.
SM: Well done on dealing with those upstarts from Cazaly Resources over the Shovelenna deposit in WA. Great lobbying of the WA government, but how'd you pull it off?
SKINNER: We just presented the facts, no arm twisting. They'd banked our rent cheque for goodness sake. Of course we should have retained it and were very satisfied with the outcome. No mention of ever actually developing the dirt.
SM: Why don't we get the hell out of the giant Grasberg mine run by Freeport in West Papua? We've made a huge profit, the situation is deteriorating, the Australian government has deemed it unsafe for the 43 refugees to return. We don't need this.
SKINNER: Yes, a very tidy profit indeed. Not going into the detail of any potential sale mechanisms given is an unlisted direct 40% stake in parts of the operation. Freeport is the operator, of course, but I did spend a weekend there last year and everything looks fine.
SM: Stop treating us like mushrooms. History has been made with this resolution being rolled. Tell us the proxies.
SKINNER: Get stuffed!
25. Shareholders' Association gets an AGM grilling
By Stephen Mayne, dedicated ASA member
On 364 days a year, the Australian Shareholders' Association is dedicated to holding Australia's top 150 companies to account and, if necessary, grilling boards at annual general meetings. However, the tables were turned yesterday when the ASA board fronted its own AGM in Melbourne and we had a solid 90-minute debate about its performance, policies and financials.
Stagnant membership numbers of just over 7,000 for the past five years is now the subject of special board meetings – how can the ASA boost its numbers, generate extra revenue and become a more effective advocate for shareholders? After several members offered up suggestions, I got up and gave an explanation of the Crikey model, which would substantially boost the ASA.
Firstly, get rid of a password protected member only website. As one member correctly pointed out, how can the ASA maximise proxy solicitation if non-members are locked out? Throw it open to everyone as a window for prospective members to sample what is on offer if they pay up just $95 a year.
Secondly, cut the costly printed magazine Equity down from six to four editions a year and introduce regular email updates whenever you've got something to say. Despite its elderly 55-plus demographic, 60% of ASA members are on email and this is growing every year.
Next, stop having private pre-AGM exchanges with companies because it telegraphs the punches and reduces the ASA's presence at the actual public meetings, which in turn means they generate fewer media mentions – a vital ingredient for growing the membership base.
I've lost count of the number of times an ASA representative opens up by saying: "good morning chairman, congratulations on the wonderful performance, thank you for answering my 12 written questions and inviting us in for a cup of tea last week, now can you please just clarify this one point."
Towards the end of yesterday's exchanges with the rather defensive ASA chairman Stephen Matthews, I pointed out that the very debate we were having – unscripted, no forewarning and bouncing off what other members were saying – was exactly how the ASA should approach the top 150 companies. The argument that chairs might not be able to produce an answer is wrong, because the full board and management team is usually present to assist.
Finally, just because profits and dividends are up, doesn't mean there aren't still interesting questions to be asked and – heaven forbid – occasionally they should even stray into non-financial areas, such as problem gambling at an outfit like pokies giant Aristocrat Leisure.
My approach is to underwrite the debate at an AGM. You start out perfectly happy to say nothing, but if no-one else is contributing then you keep hammering away up to a maximum of two hours, provided the audience is with you. The ASA should do the same because there is no point attending an AGM of a booming company and saying nothing.
When it came to the re-election of Matthews a deal was proposed – if the ASA ended its record of recommending against all 22 of my public company board tilts over the past six years when a tilt at Macquarie Bank materialises in July, Matthews would have my vote. It was a joke, of course, with a bit of a kicker about the ASA's reluctance to endorse outsiders.
The only other points I raised were a request for the age and backgrounds of directors to be published in the annual report and a criticism of the ASA for supporting the 100 signature requirement for shareholder resolutions. The government came up with a proposal to reduce this to 20 signatures – something Matthews wrongly suggested I was responsible for – but then backed off when companies complained and the ASA inexplicably advocated no change.
If owning $US2000 worth of stock is good enough for a shareholder resolution in the US, surely 20 signatures would suffice here and help us develop a greater culture of shareholder pressure. All this paranoia about special interest groups taking over is rubbish when you consider that 100 signatures have only been successfully gathered 24 times over the past 15 years across the entire 1,600-plus companies listed on the ASX.
The ASA does a solid job, but it could do better. A tilt at the board in 2007 is not entirely out of the question if performance doesn't improve, although there would be some conflicts of interest to work through, plus potential constraints on AGM activity whilst inside their tent.
26. Coke cops a major options protest
By Stephen Mayne
More proof emerged yesterday that the times are changing when it comes to executive pay, although the story was sadly missed by most of the mainstream media.
The AGM vote on a generous new grant of 320,000 performance rights for Coca Cola Amatil CEO Terry Davis was: 369.3 million for and 150.7 million against. The Coca Cola Company of Atlanta voted its 241 million shares in favour, which means the independent vote was 150.7 million against and only 129 million in favour. Bingo, that's called a revolution in the context of Australian proxy voting.
This is another example of the power of the proxy voting kingmakers, ISS and CGI. When they recommend against something, institutional Australia is mobilised. It seems the performance hurdles weren't high enough.
Despite the lack of rhetorical dressing from the media, this is a major rebuff for CCA chairman David Gonski, who also had to suffer the ignominy of announcing a profit downgrade yesterday which saw the stock tumble 3.4% to $7.02.
Interesting times. Check out the full proxy voting results here.
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