Woolworths 2010 AGM transcripts

Moreland City Council and a possible Supreme Court challenge over differential pokies rates

Stephen Mayne: Moreland City Council in Victoria introduced what was called a differential rate - a special rate on pokies venues. ALH took them to the Supreme Court and had a win of sorts.

Moreland has now come back and re-badged their policy and re-imposed a 200% rate charge on the pokies venues in Moreland and all 5 of our venues have paid the first rate for 2010/11.

The CEO of Moreland at last week's council meeting publicly stated that he had heard that ALH and the industry had reached an agreement with the state government to overturn the power of councils to impose these special rates after the election on Saturday week. The government, when quizzed about this said "no, we are waiting to see if there is a Supreme Court challenge from Woolworths".

So my question to you is, have you accepted the rights and powers of Victorian councils to impose differential rates or have you reached an agreement with the government for it to be changed or, are you intending to launch another Supreme Court challenge to try and knock this out?

I should disclose at this point that I'm a councillor in the City of Manningham which has 5 ALH venues, and with Supreme Court and legislation permitting, we as a council are looking at imposing a differential rate on your venues in the City of Manningham in future financial years.

Chairman James Strong: You're not going to mention why? Why you think that is justified? Or is it an after thought?

Stephen Mayne: The citizens of Manningham lose about $60 million a year on the pokies - which is more than they pay in rates, and you pay less than $100,000 in rates. So the $60 million coming out is more than the entire rate base, and you put up less than $100,000.

So the argument goes, if you put up $400,00, it would allow councils to fund and deal with much of the social damage these operations cause in the community.

James Strong: Will you be applying that to every other betting form that occurs in your area and online gambling as well? Will you be levying those sorts of people?

Stephen Mayne: I think the Moreland model is the model that many councils are looking at, it's in practice in Moreland. It only relates to poker machine venues.

Australian's are the biggest gamblers in the world - $2.6 billion lost (in Victoria alone) on poker machines, and the policy which is rolling out across councils in Victoria, is that it is causing a lot of damage, councils get no revenue, the government gets all the revenue at a state level - more than $1 billion a year - and councils need to be able to fund dealing with the damage.

So are you as the largest operator of poker machines in Victoria, with almost 5000, are you going to go the legal route to deny councils the right, which legislatively they can do at the moment, and please answer the question. Have you reached an agreement with the government to have the law changed to have councils cut off at the knees?

Pause for private conversation between chair and CEO

CEO Michael Luscombe: Mr Mayne, I am not aware of any agreement that's been made by our company or the industry with the incumbent state government, but we always reserve our right to review methods, and this case, we reserve our right to consider our position going forward.

James Strong: and the same comment would apply to any appeal if we thought we were entitled to make a legal appeal, then that would be made.

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Why are you taking Manningham to the Supreme Court over ALDI supermarket?

Stephen Mayne: The experience we've had in the City of Manningham, was that, we used to have a Safeway store at Jacksons Court, and you walked away from the community. You turned it into a Dan Murphy's. The community was really upset.

The council came out and said, okay we'll offer our carpark to a supermarket operator. ALDI came along and said yes, we will build a supermarket here.

You've now gone to the Supreme Court to frustrate this. Claiming that under some 1954 land transfer, this is some sort of public charitable trust, and we can't do it. Clearly, clearly, you are gaming the planning system to deny a community a new supermarket in the City of Manningham.

I cannot reconcile, how you can do deals with the state government to totally sideline councils rolling out your hardware stores, and when you walk away from a community and convert a supermarket to a Dan Murphy's, you run off to the Supreme Court and attempt to frustrate the entrant of a competitor who is widely supported by that community.

Why are you gaming the system in the Supreme Court to deny a community a supermarket service when you walked away from that community?

James Strong: For all those assembled here, I'll just remind you that this is the annual general meeting for Woolworths - not the City of Manningham, which it seems to have become the annual general meeting of the City of Manningham. Would you like to make a comment Michael?

Michael Luscombe: We have a number of supermarkets in that area that well and truly service it. We don't actually have a problem with the ALDI supermarket opening near the Dan Murphy.

What we have a problem with is this very small car park, and this was one of the reasons why the supermarket was not all that successful, and that car park had been, by trust, given over to car parking in perpetuity, and to build that supermarket, would take away all of the parking - not just for our Dan Murphy store, but also for all the shopkeepers.

In fact I understand it is one of the small shopkeepers that first initiated the court proceedings, so we are well within our rights to protect the amenity of our business and the amenity of surrounding shopkeepers, and we'll do exactly that.

If a space for ALDI can be found without reducing the car park, then that would be great for that shopping centre.

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How do you manage the colourful Bruce Mathieson?

Stephen Mayne: I noted that Mr Mathieson who runs ALH, described on ABC radio, Tim Costello, Paul Bendat and Nick Xenophon as "the three imbeciles". I also note that he seems to have the ability to assign poker machine licenses to his his favorite football club - Carlton.

I am just curious as to how the governance and management works at ALH. Bruce is a colourful billionaire who is used to doing his own thing, yet at a big public company you don't usually get up and accuse politicians of being imbeciles, you don't usually get to assign poker machines to your favorite footy clubs.

So how do you manage that cultural challenge of a big successful billionaire melding into the culture of accountability of a major public company like Woolies?

Michael Luscombe: we do that very easily. All the decisions are made by the ALH board - which I chair. So I am very comfortable we have the appropriate governance.

Let me just correct something. We don't actually allocate any poker licenses in Victoria. They are actually owned by Tatts and Tattslotto. The football clubs themselves have to apply for those licences.

In two of the hotels for a management fee and retailing, nothing to do with any of the revenue - including the poker revenue. We get a fixed fee. They pay rent because we actually own the pub. They actually become the club fundraiser for them.

Two football clubs their term was coming up, and commercially, the Carlton Football Club offered a far far better deal, including support by the club to hold functions at the hotels, which was not the case at the two previous clubs.

So on a purely commercial basis, it was a very easy decision to endorse, but once again, those poker machine licenses are held by Tattslotto and Tabcorp, and have to be applied for through, until 2012 of course, the state government. So we have nothing to do with the licenses for those clubs.

James Strong: can I just make a comment. It is probably unfortunate that Bruce is wealthy. You would be better off if you weren't wealthy Bruce, it means some people don't like you.

I would just like to say that Bruce and his family have been excellent partners of ours in this business. We think we were smart when we teamed up with the Mathieson family when we look at our opposition, what they've had in this same area.

We've had very professional management of the hotels and of the gaming machines, it's not an area we have expertise in, and we've found the family to be absolutely reliable to deal with in every respect.

So I would just like to put that on the record as well.

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Are there incentives for your executives to increase diversity within the company?

Stephen Mayne: I want to commend you on the substantial steps forward you've made on diversity, I know you've been a leader.

I was at a dinner with 50 women a couple of nights ago, and Michael Luscombe received some plaudits for the fact he's mentoring another senior woman and he's made some time in his diary over the next year for a number of meetings. We've got female directors - the percentage is rising. So I think it is really good that Woolworths is at the forefront of this particular issue. You've embraced the ASX guidelines a year earlier than you had to.

My only question is whether you are embedding diversity outcomes, in a meaningful way, into the at-risk pay of your senior executives, so that they are incentivated to continue to bring all the talent through, and if a division emerges as particularly blokey, does the bloke get hit where it hurts - in his bonus?

Michael Luscombe: we haven't set targets officially, but all the senior team are well aware of our diversity program. Not just for females, but also for indigenous employment, people with disabilities and also people of later age. So we think there is room in Australian society, and New Zealand society of course, for all people who wish to be part of business. To see how we can make sure that every individual - regardless of sex, or racial background, or age, or physical or mental disability.

If we can make the appropriate accommodations within our business, particularly for those with physical disabilities, we end up with a fabulous outcome for the individual, but I must say, that it is a terrific outcome for the company.

Those that fall into those categories turn out to be some our most outstanding team members. I think it is something that isn't a strength in our business, but going forward will be an increasing strength.

So in terms of our female colleagues, one thing we are very clear on is to make sure every individual gets the opportunity to do their best and realise their ambitions.

We make sure that for equal capability and equal experience, there is equal pay.

We make sure, with executives in particular, that want to have a career, when they take family leave, that doesn't mean their career goes on break. We have in fact, on more than one occasion, promoted women on family leave, whilst they were on family leave.

We have got a long way to go yet, and we can learn a lot from many other companies but I think we are on a good track and I thank you for your comments Stephen.

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