Senator CONROY (12:24 PM) —I welcome Senator Murray's amendments. I think they are coming through at an appropriate time, and I am very pleased to see that not only is Senator Murray interested in pursuing them but it appears that the government is happy to have them before the parliamentary committee, where there will be a good chance to discuss them at some length. Without pre-empting any of the discussion that will take place, Senator Murray, the Labor Party views your move in this area very favourably and I hope that the committee will have a good look at them and take plenty of time to discuss them.

I think they are particularly relevant because of an article that appeared recently in the Australian. It is an article that demonstrates the need for a corporate governance board, and I would like to quote quite extensively from the article. It is an article by Ken Jarrett, who not unknown to some in this chamber and to many people in the broader business community in Melbourne. Ken Jarrett was employed by John Elliott at Elders for a lengthy period. In the article he is talking about his experiences there, what it was like at the time and how things got really out of control. He said:

Back in the `80s, it was almost a sport to try and go as close to the edge as possible without going over, and I think that attitude has changed . . .

Generally, people are now more inclined to focus on running their business and making a profit rather than being clever legally or financially. People talk about the `80s as if they were a special period, characterised by a few prominent and dominant individuals, but it was also characterised by a very compliant community and boards.

A lot of company directors in the `80s felt that what they didn't know wasn't of concern to them. That attitude has changed.

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Executives in Elders were completely absorbed in the company and everything else was secondary . . .

You were part of a team going in a certain direction and your views about what was going on outside that group were largely dependent on what the group said was going on.

The propaganda said that the authorities were attacking John and that created the feeling that they were the enemy and we were on some sort of campaign that was right, however it looked.

On top of that, there was this view that, if lawyers advised you that something was okay then the assumption was that it was within the rules of the game that you were playing.

That situation became increasingly ridiculous as various disasters at Elders showed that they perhaps weren't right all the time.

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Holmes a Court looked like getting control of BHP, which would have given him control of Elders. He then controls John Elliott and he would have made Elliott kneel down in front of him or something. It became very personal.

John believed he was the hero of the business community in Melbourne and he had to do something about it.

I think the basic things that Elders were doing were healthy, but then I think it did become a personal thing to him. If you saw a photo of Elders it was a photo of him—part of Elders was part of John. Everyone knew him around the world as Elders.

He flew around the world in a big 737 that was owned by Elders, at Elders expense, but it was his personal plane. So he became Mr Elders and he started to believe that it was all true—that he was Mr Elders.

It was clear to everyone how John was becoming all powerful and Elders was becoming his personal plaything . . . He would fly back to Australia just to watch his football team play. It would cost $50,000 so he could watch a football game.

I don't think shareholders would vote for that if they had the chance. But at the time no one said `this is ridiculous.' Today, I think perhaps they would.

The Elders corporate entity began to be merged with the character of John Elliott.

Elders changed from being a powerful single-purpose machine to being his appendage. At that stage, Elders' original focus disappeared and the board did not know what they were trying to achieve.

He goes on to say:

It is not a question of reining in but giving support and, at the same time, some control—measuring the chief executive against the company objectives and standards . . .

The board needs to be able to provide leadership rather than be led by the chief executive . . . You need people with stronger wills and more questioning minds, not just people who will blindly follow.

A second factor in the Elders case was John Elliott's ability to divide the board and deal with one member at a time.

In the end, I don't think dissenting directors had much chance. There was no independent chairman to override the politics and, to some extent, John picked his directors. People like Jerry Nyall who did question matters at board meetings were hastily retired.

A third factor is that it is very difficult to agree on issues, particularly ethical issues, when under pressure. When Elders saw itself under attack, the board tended to agree to proposals without much serious questioning.

So how do you get around situations where CEOs have stacked a board in their favour?

This is a question that this corporate governance board is central to. Jarrett goes on to say:

Don't let them . . . Shareholders should play a more active role. A lot of these things are transparent, but people don't take action on them. I think shareholders are stronger now and institutions are playing a more active role but they should insist on disclosures.

A company should be capable of writing down what its objectives are and set out its standards, responsibilities, etc.

If you can't write it down, it probably hasn't been thought through properly.

This is from one of the insiders at the time, when the cult of personality took over a publicly owned company and bent it to its own will. A corporate governance board, duly constituted in the way that Senator Murray's amendments are suggesting, would go a long way to stopping the hijacking that took place in Elders in the 1980s. We have heard already from Senator Sherry today about the potentially excessive remuneration increases, particularly when you balance them against the performance. But the sorts of things that Ken Jarrett has described can be dealt with by Senator Murray's amendments and can be dealt with by companies if the right people, independent people, are put onto the corporate governance boards so that the sorts of shenanigans that Ken Jarrett is describing in this article cannot take place. That is important.

So the Labor Party, as Senator Sherry has indicated, will not support you today, Senator Murray, but I am pretty certain we will be going shoulder-to-shoulder with you in that inquiry looking at corporate governance and some of the issues we have already discussed today—the sorts of issues that you and Ken Jarrett have drawn attention to. That is a very worthwhile inquiry. I welcome the government's decision. There is a lot that the corporate community will support in what you are saying.

It will be interesting to see who opposes these moves. It will be disappointing if the business community are not prepared to acknowledge the mistakes of the past and to acknowledge how individual corporations have become personal playthings of individuals because they do not have a strong enough board, because the boards been stacked by directors. This is a way we can introduce into parliament, after consultation and discussion, ways to make sure that some of the problems do not happen. It would mean, in situations like that of Patrick, that if you had an independent corporate government board it would be able to look at a shonky financial structure and it would be able to say: `Just a minute. Have we got legal advice? Is the corporate strategy that has just been determined actually legal?'

You would have a situation where Lloyd Williams and Ron Walker could not continue to behave as they have done for a couple of years in Crown Casino. That is a situation where we have seen a director resign because of the corporate governance questions, the interrelated transactions, the interrelation of the entities of Hudson Conway, owned by Walker and Lloyd Williams, which merge with Crown itself and which make it the major shareholder—not the majority shareholder. A whole range of institutions and small shareholders have taken a bath in Crown, and a large part of Crown minority shareholders' bath is because of a disgraceful management agreement, agreed to by the board of Crown that is dominated by Lloyd Williams, which saw a $200 million fee for the management services. This is the management that has taken the share price of Crown and devastated it. This is management that had no idea what it was doing in the construction—

Senator Sherry —The fees did not move.

Senator CONROY —No, the fees didn't move. That's exactly right, Senator Sherry. They continued to plummet Crown into the red. How do you lose money and run a casino? That is the question that, if I were a Crown shareholder, I would be asking. `How on earth have you lost money?' The Asian crisis had not even hit and they had already gone into the red.

Senator Sherry —That was his excuse.

Senator CONROY —That was his excuse—exactly. The Asian crisis had not hit and Crown were losing money. And was there any comeback for the minor shareholders in Crown? No, they have had to cop a bath. I think in the last couple of weeks Crown shares have been trading below 60c, and that is only after the positive announcement that Crown were buying back their management rights and giving up on the fees. An analysis of that buyback was that the institutional shareholders and the minor shareholders actually voted to buy back those rights, but at an excessively generous price. But they were faced with Hobson's choice: you stick with the management structure and the management fees that you have got, and it is clearly outrageous, but if you reject the deal you will send your share price tumbling even further. That was the choice the poor small shareholder in Crown had to put up with, all because Ron Walker, the bagman for the Liberal Party, and Lloyd Williams were unable to separate out what was good for Hudson Conway from what was good for Crown shareholders. They had no concept of it.

Brian Powers' resignation is a clear alarm bell, a clear signal regarding the sorts of corporate governance boards which they have now set up—two years too late for the majority of small shareholders in Crown, but they finally set one up. They brought in somebody with some credibility outside to try to appease the markets, to run their corporate governance board. That is what this amendment and the proposed inquiry will be able to talk about. It will be able to thrash out the sorts of independent directors, policies and powers that corporate governance boards need to keep major shareholders honest.

Amendment not agreed to.