This is Brett Stevenson’s keynote speech to the Sydney Governance and Strategy Discussion Group.
I have attached my presentation to the CPA Governance and Strategy Discussion group meeting last night. Also some associated handouts. It was great to meet many of the members concerned about these issues at the meeting, many of whom have been very outspoken themselves.
In summary I was trying to convey that CPA Australia has set a very low bar and poor example of corporate governance over the last ten years for an organisation which purports to be a standard setter.
I called it a case study of Shirkers and Looters? which refers to the common agency problem in corporate governance of the board and managers (‘controllers’ of CPA) not acting in the best interest of the members (‘owners’ of CPA). Terms that I borrowed from Bob Baxts Company Law text to describe this problem.
In effect the board and senior managers of CPA Australia have a duty and responsibility to ‘look after’ and manage CPA Australia. To do that they have been very handsomely rewarded. Very very handsomely rewarded. So handsomely that perhaps scandalously so is a better descriptor.
So they certainly were happy to receive the reward for their efforts.
But the other side of the ‘deal’ is that they are to be held responsible and accountable for they way they have overseen and managed CPA Australia. The law is very clear on this.
The problem at CPA Australia is that the board and senior managers (and it would seem the Independent Review Panel is of like mind – and hence my main criticism of it) were happy to take the rewards but are not so keen to take responsibility for the failures (which are legion as the preliminary IRP report certainly confirms, and what has been exposed over the last 9 months).
In other words all the failures at CPA Australia over the last decade are being recognised but the people responsible are not being held to account.
Now that is Corporate Governance CPA Style – and its wrong however you want to describe it.
Let me be more specific, and in so doing possibly provide the reason why the IRP are not recommending firmer action against the relevant persons from the board and the senior management, by just highlighting three matters. The board and senior management is not some amorphous group – it comprises specific individuals who need to be held responsible and to give an account of why they approved these things.
CEO Termination pay of $4.9 million – this was approved and paid by the six directors Dickson, Wade, Petty, Dolin, Portelli and Youngberry. To recoup the $4.9 million means these directors need to be held to account for the decision.
CPAA Advice remuneration to CPA directors and senior management ($1.5 million over 19 months with a revenue of just $47,000, and apparently within budget if the IRP report is any indication) . This was recommended by the CEO 9Alex Malley) and approved by the remiainng CPA board not involved with receiving these moneys – they being Spong, Dickson, Alston, Portelli, Ryan, Ebbeck, Ong and Dowling.
The examples are many but you can catch the drift of the argument I am making.
The directors and senior managers who made the allegedly very poor decisions over the last ten years (read the IRP Preliminary Report to get an idea of what many of these are) should be held accountable for them.
But I’m afarid that the IRP in its ‘wisdom’ has decided not to action any of them, or perhaps more correctly to recommend any action on them.
Take for example the CEO Termination Payment to Alex Malley – the only recommendation flowing from this is that the CEO’s remuneration levels from now on need to be more correctly ascertained. The elephant in the room is well what about the scandalous termination pay? They just say zip.
This is a cameo of the whole IRP’s modus operandum (I suggest) – let bygones be bygones, forget the failures of the board and senior management over the last ten years and lets just move on.
I suggest that is not good corporate governance, that is just avoiding the obvious.
As for me I stand by the title I had for the presentation – Corporate Governance CPA Style – A Case Study of Shirking and Looting?
Some may be interested in the chart I did of all the board members by year along with a timeline by year of some major decisions which these people made. It is a quick way to see just who made what decisions rather than this hiding behind this term ‘board’.
And I should have added that through all this period the three senior managers were constant – Alex Malley as CEO, and the two COO’s – Adam Awty and Jeff Hughes.
I shall add the extra handouts in a following post if they don’t all fit onto this one. Hope you can follow the drift of what I have contended from my roughish handout.
The handouts can be downloaded from here: http://cpamembers.org/viewtopic.php?f=7&t=550