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(generated from captions) 24 years and fathering her

seven children has changed his

plea. In his first court

appearance yesterday, Josef

Fritzl pleaded guilty to rape,

incest, forced imprisonment and

coercion but not guilty to

murder and enslaifrment. Today

he changed his mind and

declared himself guilty of all

charges. He said that viewing

the video taped testimony of

his daughter, Elisabeth had

caused him to change his plea.

The murder change relates to

the death of one of the seven

children who died at birth.

NSW authorities are secretly

combing through phone records

of more than 90,000 people a

year. The figures have come to

light in the Attorney-General's

annual report on telecommunications

interception. As Charlotte

Glennie report, civil

libertarians are among the

critics demanding to know why

so much snooping is going

on. If you think you can make

phone calls that no-one knows

about, then stop and think

again. Police and other

agencies are looking at who

you're call ing. Of the 183,000

telecommunications records

accessed nationally last year, Federal Government authorities

looked at 12%. But NSW

authorities including police,

the Police Integrity

Commission, the Crime

Commission and the Independent

Commission Against Corruption

accessed more than half the records. In Victoria,

authorities looked at close to

48,000. Queensland looked at

10,000, SA just under 8,000,

with the Northern Territory and

WA trailing well behind. We

don't know why NSW law

enforcement agencies are using

this type of information more

than any other State. Is there

an abusing going on? We will

never know. Police and other

agencies are also monitoring

who people send text messages

too. And who sites they visit

on the Internet. Michael phrase

ser a lawyer special ise ing in

communications who says she

concerned about the possible

abuse of power. Law enforcement

can authorise it themselves.

And we need to have some checks

and balances in place. Somebody

independent such as a judge

should be authorising those and

looking into what whether

they're really warranted or not. Government organisations

also listened in to more than

3,000 phone conversations last

year, almost half of them

authorised in NSW. No-one from

the NSW police or State

Government was available to

discuss this issue on camera.

But they all said that tracking

phone calls an tapping

conversations gets results. A

spokesman for the Police

Minister says these methods have helped secure convictions

in a range of cases, from child

pornography to bribery and drug

offences. NSW police already

have more powers than anywhere

necessarily the country to

search the homes of people

suspected of crimes without

them knowing about it. The Council of Civil Liberties says

privacy is being sacrificed bay

Government bent on getting

populist vote. The NSW

Government has delivered to the

police whatever powers the

police have asked for when

they've asked for them and has

not subject the police to

enough scrutiny about the way

they exercise their powers. We

need some balance. We need to

work out how to protect our

privacy while at the same time

keeping our community

safe. Last December Bassam

Hamzy was masterminding drug

trafficking using a mobile

phone in a NSW maximum security

jail. He made 19,000 calls in

six weeks. Hiding the phone

from prison guards by passing

it to other inmates under his

cell door using dental floss.

Hamzy's mobile phone Caz

eventually seeds. Despite the

ultimate success of authorities

in this case, only a fraction

of criminal calls ever come

under scrutiny. The Defence

Force has released the name of

the Australian soldier killed

in Afghanistan this week. He

was Corporal Mathew Hopkins.

The 21-year-old was shot by

Taliban insurgents on Monday,

during an intense fire fight

north of the Australian base at

Tarin Kowt. He had been working with the Mentoring and

Reconstruction Taskforce, drawn

from Darwin. Corporal Hopkins

was married with a young son.

His wife has released a statement, saying his most

important job was as a father,

husband and best friend. Mathew

Hopkins is the ninth Australian

soldier killed in Afghanistan

since the war began. Kevin

Rudd's ambitious foreign policy agenda is said to be at risk

because Australia's diplomatic

ranks are chronically underfund

and overstretched. The

independent think-tank the Lowy

Institute says a diplomatic

nation's trade deficit is threatening the

nation's trade and security.

From Canberra, Emma Griffiths

reports. A new engagement with

Asia, stamping out nuclear

weapons, a seat on the UN

Security Council, the Prime

Minister has big ambitions for

Australia's role on the world

stage, but it may be too

much. We have too few staff at

too few overseas missions doing

too many things. The Lowy

too many things. The Lowy

Institute has found that

diplomatic corps has been

hollowed out by years of

underfunding. I've heard of it

of a post - major post at which

a staff are not allowed to use

mobile phones because they're

too expensive. The think-tank

concluded that Australia has

too few staff at too few em

BASSies. It pointed out even

Iceland has more overseas

Consolidated missions such as its

Consolidated Media sul ar

office in Canberra. It found

Australia has no presence in

areas emerging as powerful

economies like central China

and all of these will cut into

Kevin Rudd's plans They won't

happen as easily or as

effectively. There's a grap

between Government rhetoric

about the important of foreign

policy and the actual substance

that's going into it. The

Government agrees. The

department needs more money, be

but it is not making any more

promises. It requires long-term

application of resources and

that can only be done in the

Budget context, which this year

is very difficult. One report

author argues that a time of global economic strain is

precisely the time that

Australia should be out in

force in the world, to secure

trade and the one in five

Australian jobs that flow from it.

it. Now to the weather -

isolated late showers in

Melbourne and Hobart, showers

tending to rain along the Queensland tropical coast, dry

in the other centres. That's

all from us. Lateline Business

coming up in just a moment. If

you would like to look back at

tonight's interview with Julia

Gillard or review any of the

stories or transcript, you can

visit our website. Now

Lateline Business with Ali

Moore. Thanks. Tonight -

blinded by the big dollars.

Will limiting executive pay

help develop local

talent? There's been a bit too

much of the sort of Hollywood

cult - follow the US - in this

regard. I think we can do very

well with our home grown executives in Australia. Rebalancing the

world economy and a

world economy and a culture of

save ing could be the way out

of global recession. If someone

is smart they will figure it

out they didn't save their

direct saving strategies an asset bubbles that have burst

anss now an ageing generation

of 77 million baby beerges it's

a nightmare. And there real sli

no other store like David

Jones. The up-market retailers reduces costs to post a

profit. We're the only company

of all the department stores in

the world to use the jup side

to pay down rather than load


First to the market and an

early rally on the Australian

market was reversed this

afternoon, leaving the All Ords

little challenge from

yesterday. The ASX 200 also

tinnished steady, despite another

another day of heavy trade. In

Nikkei posted its highest close

in five week, largely on the

back of banking sto stocks.

HSBC led the hang essential

nearly 2% higher. In London,

the FTSE has given up its

modest early gains. As we heard

in Lateline, executive pay is

in the headlines again with the

Government move ing to reign in

big - rein in big

big - rein in big payouts.

Later in the program we will

talk to Nick Sherry, the Minister for Corporate Law and

we will hear from Bruce

Teele. But first to one

business that would be the envy

of its competitors - up-market

retailer David Jones has lifted

first half earnings by 2.5%,

despite a large fall in sales.

Andrew Robertson reports.

Profits may be up at David Jones

Jones mainly due to cost

cutting but trading conditions

are tough and they won't be getting better any time

soon. We do see conditions

deteriorating for the whole of

calendar '0. DJs is predicting

the down turn will be longer

and deeper than last recession

in 1991, which is why it's

taken measures such as cutting

staff and slashing ib ventry.

Net profit was up 2.5% on the first

first half last year, despite

sales dropping nearly 6.5% to

just over a billion dollars. To

deliver profit growth in this

environment is a particularly

strong credible result and it

really was a strong performance

on cost, that saved that e bit

margin and kept profit in the

black. DJs is stand ing by its

full years earnings by up to a 5%

5% invees dlees profit but Tom

Hodson believes the cost

cutting strategy will become

hard ter longter downturn

continues. There are some costs

that can still come out of the

business but our view would be

that the Lions share of the

easy costs have been taken out.

And no it's really just about

squuez squeezing out those

incremental dollar s where you

can and continuing with that

program. A bright spot for

David Jones was the performance

David Jones was the performance

of its American Express branded

store card. It contributed $20

million to overall profit and

importantly, according to Mark

McInnes, it's an alliance which

has allowed the retailer to

restructure its balance

sheet. We transferred $374

million of debt funded

reseefables to American

Express. We released $35

million worth of working

capital. We've transferred the

operation of our store card to

American Express and we

achieved 7.5% ebit

growth. While many companies

are struggling under a mountain

of debt at the moment, David

Jones isn't one of them. Mark

McInnes has been to point out

that DJs' net debt stads at

$100 million, which he says

means the company will ride out

the economic downturn in

excellent shape. We're the only

company of all the department

stores in the world to use

stores in the world to use the

upside to pay down debt rather

than load up debt. And when you

look at some of those nirms for

namous companies like

Nordstrams and Nehman Marcus

and Debenhams in the UK, you

will see they went through a

debt fuelled expansion stage

and we did the exact

opposite. Haven't the lowest

debt of department store peers

worldwide is a strong selling point in

point in this environment. Mark

McInnes is confident there will

be no more job cuts at David

Jones although there is a wage

freeze. Unlike many other

company, DJs has mae maintained

its interim dividend at 11

cents a share, fully tranked.

DJ shares ended close to 8.5%

higher. For a look at the rest

of the day on the market, I

spoke to Martin Lakos from

Macquarie Private wealth. The

Macquarie Private wealth. The

market couldn't hold its recent

gains today? No, a bit of a

flat, disappointed day. We were

up 30-35 points but it started

to slip at midday and we've

closed down five point ts. It's

worth noting that yesterday's

big move, 100 point move on the

ASX 200, was very much a

surprise to the market on good

volume. Good today we had very

good vol yoo.. So very

good vol yoo.. So very good

turnover today and there's been

evidence of the last two weeks

of more activity comes to the

market from the professional

institutions, with some big

portfolio trades taking place.

That's what's probably

bolstering the turnovers at the

moment. What can we read into

it that sn is it a sign of

increase confidence or more opportunistic? Probably a

little bit of both. The third

element is we've now had the

reporting season we've been

talking so much about.

Institutions and professional investors are basically doing a lot of research on those

results. They have the most

up-to-date balance sheets on

the cash flows et cetera and

therefore they're in a position

to be able to make some

decisions with regards to the

portfolios going forward and

probably doing a bit of

rotation and repositions of

those portfolios. If we look

more specifically at today's

trade, a stellar day for

financials but not so good for

the miner? yes, indeed. Again,

we're continuing to see the

moment ideal and recovery in

financial stocks globally.

Interestingly again we saw the

Dow Jones financial sector up

about 3% and that had a

positive take for our market. Although they didn't hold their

highs for the day, this morning

stock likes Commonwealth Bank

still closed up 23 cents to

$32.70, having touched $33

through the morning and Westpac

a pretty solid result, touched

$18, couldn't hold it up. But

you mentioned the resources,

certainly think there is some

concerns the commodity prices

are going to remain flat for a

little bit longer. There are

probably some analysts out in

the market place starting to

further downgrade the recovery

of commodity prices and they

will be down grading their

earnings outlook and that was

reflected on BHP down 82 cents

but it did open up

but it did open up Rio down

$4.50 and of course then stoubt

the oil price and gold prices

those stocks reacteded

accordingly. Thanks for

bringing us up to date. A

pleasure as always. To the

other movers today:

As we heard earlier, the

Government is changing the law

to require shareholder approval

for all executive termination

payouts above one year's

salary. As well, former ACCC boss Fels and the Productivity Commission will hold

Commission will hold an inquiry

into the broader issue of

executive pay. The Minister for

Corporate Law is Nick Sherry.

He joined me from Canberra

earlier this evening. Nick

Sherry welcome to Lateline Business. Thank you, good

evening. Geevern to your

listeners. How common do you

think excessive golden hand

shakes and excessive salaries

are in this country? In terms

of the golden hand shakes, the

re forms we've announced today, I believe

I believe we've seen a

significant shift over the last

10 years or so and according to

the figures I've seen we're

seeing payouts terminations of

double, at least double of the

CEOs pay and this shift at a

time when workers are losing

their jobs and, as I said

today, the days of the gold

watch are being replace bade

truck of gold bars. We've got

to change this culture in

Australia. But do you think

it's common or do you think

it's the exception and how do

you define 'excessive'? I

certainly don't believe that it

is reasonable that a golden

parachute termination payment

should exceed one year's pay. I

just don't believe that that is

appropriate. And at the end of the day it is now going to be

the shareholders' call. There

is rightly a lot of concern,

genuine concern about this in

the Australian community as

well as the shareholding

community. So that one year

base salary will be the bench

mark for when shareholders get

to vote on a termination

payment. Will that base salary include accumulated benefitses

such as superannuation or

previous bonuses or share

allocations? It will be base

pay only. The one exception is

statutory superannuation

entitles. That's the one

exception because that's a

statd tripayment. But in terms

of - statutory payment. But in

terms of basic pay it is now to

be one year's not total al

package, it's one year's basic

pay. Is that going to provide

an insentive for companies to

bult k up the basic pay because

the higher the basic pay the

less likely it will look too

generous and have to go to a

shareholder vote? I don't

believe so. We've appointed

Professor Fels who will, with

the Productivity Commission,

look very intensively at the

other part of the

other part of the equation.

We've addressed today a major

focus of community and

shareholder concern - these

golden paradhuts termination. I

have to say even when payments

for failure. And the other part

of the equation I believe

Professor Fels Fels will come

up with some effective

answers. What difference do you

think a binding vote will make,

given to date non-biening votes

have only rarely elicited any

complaint? You used today a

couple of example, one was of

Owen Hegarty and that was rare

and headline make ing example.

More often than not remuniation

votes go through. I believe

this will put very significant

downward pressure. Shareholders

have haven't had the right to

determine a golden parachute.

They haven't had that right. I

believe they will exercise mitt

the current climate and we will

see significant restraint and

down ward pressure in thisary

yafrmt I don't believe some of

these golden parachutes in the

millions and millions of

dollars. I don't believe they

would have got through a direct

shareholder vote. I don't

accept that would happen. In a

moment we're about to hear the

concerns of the chairman of the

concerns of the chairman of the Australian foundation

investment company Bruce Teele.

One of the concerns he raises

as a potential issue regarding

this vote on termination

payments is what impact it will

have on companies as they hire

in the international market .

Could it be dis incentive

because any vote on a

termination payment will only

happen after an executive from

offshore has accepted the

offshore has accepted the job? A termination payment

golden handshake by its very

nature comes at the end of the life of the chief executive and

we believe it's practical and

workable. But the broader issue

of the impact and any claimed

and I must stress the word

'claimed' impact on the ability

to recruit internationally will

be examined by Professor Fels.

One of the specific terms of

reference is to look

reference is to look at Australia's international

competitiveness. Having said

that, frankly I am very

confident that we've got an

abundance of talent in this

country of senior management

talent and frankly I think

we've got a bit caught up in

the Hollywood cult over the

last decade or so. Everything

has been inspired by the need

to keep up with the United

States. Well, we've seen some of the consequences

of the consequences of that.

And I'm very confident we've

got - in the overwhelming

majority of cases - executive

talent in this country who can

fit the bill for most of these

top positions. Minister, thank

you for talking us to. Thank you. Good evening.

Australia's largest listed investment company AFI C is

investment company AFI C is one

of the big corporate

shareholders which will soon

have a binding vote on

termination payouts at one of

Australia's public corporation.

AFIC which is one of Rio Tintos

top 10 shareholders has hit the

headlines this week for

publicly criticising the Rio

deal with chien's - China's

Chinalco. Bruce Teele today

questioned the benefits of binding the

binding the termination

payments. Bruce Teele is in

Sydney for a shareholder

meeting and I spoke with him

this afternoon. Bruce Teele, welcome to Lateline Business. Nice to see you

again. If we can start with

executive pays as well as

setting up an inquiry by the presidential candidativity

Commission, the Government's

also changing the law so that

anything above one year's base

salary as a termination payment

has to be voted on by shareholders. Is that

shareholders. Is that a good

thing? I don't think it's bad

thing to look at how the

system's work. I think that's

the current mood. Arbitrary to

say one year. I am not in a

position to judge. I tend to

step back from it and say,

"What is reasonable? But also

what is competitive?"

what is competitive?" In a

sense, if you're trying to go

to the world to get world's

best executives, get them to

come to Australia, this is just

off the top of my head and say,

"By the way, one year's in

retirement" Is all you'll

get. Is all you'll get, I think

you would need to reflect on that

that because I think a lot of

the - you can't justify the

excesses but my take on it is

one of the key drivers is the

ability to go to the international markets and

somewhere along the line I

think the BHPs and these

companies need to be able to

access the world. So we just

need to be a bit careful. I

would need to give it a lot

more thought. There's another

issue as well, though, with a

binding vote because even with

a non-binding vote, as there is

now, it seems so often big

shareholders don't exercise

their power. I am not sure

about that. Spl Have you voted

against rue re-muneration? We

have voted against it but we're

in the position where we see

the chief executives of the

companies in which we're

invested pretty well every six

months, if we've got a strong

difference of opinion, we will

take it up with the company,

certainly the chief executives

secretary chairman, we do that

quite a bit. Normally, if that

was so we would abstain first

up, but, second up, we have

voted against things. Why

abstain, though? If you're a

significant shareholder and you

feel strongly about it, why sit

on the sidelines? It depends on

how strongly and how you would

rather come at it through come

alongside and seek to influence

rather than sort of head on. I think

think we've found it works

pretty well. If everyone took a

view then a binding vote is not

going to make any difference,

is it? Yeah, although think

think with a binding voted, I

am not in favour of a binding

vote, but I think perhaps a lot

of the small shareholders would

feel that they had more

power. But that would be a

hollow impression, wouldn't it,

because - It could be, but I am

not really much in favour of

the binding vote. Why

not? Well, I think it's very

hard in a binding vote to - for

people to get the full

dimension of all the management

suggestions. How do you say to

people what are the competitive

factors, what is the experience

in gain ing, rewarding, hold

ing chief executives and senior

people? If we can turn to the

Rio Tinto Chinalco deal, this

is a proposal for Chinalco to

take up to 18% of Rio and a

couple of board seats, 18% is a

long way from majority control,

why are you deep ly worried

about significant influence? We

have discussed with it the

company. Executives and the

senior independent director

over in London. So we've said

we're troubled about these

issues, we would like a

response, we're concerned about

some of the corporate

governance concepts, the fact

that one shareholder who

happens not Chinese, got

nothing to do with Chinese,

happened to be sovereign

Government, customer,

competitor, has as far as we

can see in perpetuity the

capacity to elect, nominate two

members of the board. It's

involved in various committees

down the structure, not only in

the company but in many

industries - Is it selling the

industries - Is it selling the

farm? It seems to us to be sell

ing a lot at the bottom of the

market. We don't think they're

getting the sort of premium -

there is a control aspect, not

absolute control but influence

in perpetuity across many of

the major industries

represented. We would like some

answers. All this is happening

without shareholders having an

opportunity to participate. You

talk about the opportunity to

participate. But I guess what's

the alternative for Rio because

if there was a rights issue, it

would be deeply discounted,

wouldn't it? So? So what's the

problem with that? You wouldn't

be concerned about undermining

the value of the company? That

doesn't undermine the value of

the company. That just under

mines at the margin the price

that people are prepared to pay

in current circumstances. But

if the shareholders retain all

the value of the business, then

I think that's more proper. If

we can turn to the bigger

picture, the big investment

picture, are you optimistic at

the moment? As a long-term - as

long term I am. But short term,

very difficult to predict. And

what is your definition of short term? When will this

start to stabilise? Short term,

I reckon is maybe three years.

Medium is 10, long term is

50. So it really good take, you

think, at least three years to

be over the worst of it? I am

hopeful that it's going to be

much shorter. The key

determinant is will the capital

markets work properly? Until

that and the banking, there's a

fundamental issue that's got to

be resolved. Bruce Teele, many thanks for talking us

to. Thank, Ali. Bruce

Teele's assessment r echoed by

Stephen Roach, who is tipping

anaemic growth for at least the

next three years. He says there

needs to be a massive

rebalancing of the world

economy but he touts there is

the political well - doubts

there is the political will

power to do it. For most of

this decade Stephen Roach has

been warning about debt and

asset doubles. Why he doesn't

think there will be a global

depression his outlook remains

sobering. Ink we're in at least

a 3-year global slump where the

world GDP will grow at roughly

at 2% average annual

rate. That's well under IMF

recession's threshold of 2.5%

growth. Stephen Roach says the

solution will come from

rebalancing the global economy.

That means lifting consumer

spending in nation's that are

big savers especially in Asia

and boosting saving rates in

other economies like the

US. Consumers are smart. They

will figure it out. They didn't

save. They directed their

savings strategies in asset

bubbles that have

bubbles that have burst and now

an ageing generation of 77

million baby boom serious make

up to a nightmare. But he

doubts whether some governments

have the stomach for change and

caution s Western economies

against stimulus packages that encourage consumer demand

: While reluctant to comment on

Australia, he also has a

warning for resource based

economies This global slowdown

does not point to a sharp snap

back in economically sensitive

commodity prices and that will continue to raise some

questions about the commodity

economies and the commodity

currencies in countries like

Australia. Stephen Roach says

capitalism is not dead but

argues the current crisis will

require a rethinking of

governments. While that may

mean tight er regular lace, investors are also being called

on to play a greater role in holding companies and directors

to account. We're providing a

company to - a challenge to the

company and the ethical risks

as well as corporate governance

to include the ways in which companies are direct and

controlled. Colin Melvin advise

s 11 of the world's biggest

pension funds. He argues that

neglective governance is a

leading cause of the current

crisis an says institutions

need to become more engaged in the companies they invest.

In We're simply casting a vote

and not telling the company why

you've done it is a waste of

time. Yet that's the position

that most of the companies find

themselves in. It's a

compliance exercise and that is

a very poor use of the

vote. Tighter restrictions on

executive pay might be the

first step in encouraging a

much more activity fund

management industry in

Australia as investors become

increasingly anxious about

where their money has gone. The

World Bank has cut its forecast

of China's growth to 6.5%

because of plunging exports. In

a quarterly report, the bank

cut its previous fore cast of

7.5%, say ing China could not

escape the global turmoil. We

don't foresee any significant

rebound of China's economic

growth until the world economy

starts to recover. Now, what

exact shape or what exact

quarterly pattern that implies

we don't have an extremely

strong view about. Last week,

commune ism leaders said they

expected the economy to grow by

8% and there are concerns a

figure lower than that will

mean big job losses that could

fuel social unrest. Now a look

at the business diary. Overseas

the US Federal Reserve meets to

consider what further measures

it can take to stimulate the economy now official interest

rates are hovering around

zero. Before we go a look at

what's making news in the

business soesks tomorrow's

papers. The 'Herald Sun' report

on the 26-year-olds who is in

court defending his right to

wind uptol road company

Bris-Connections. The

'Australian' leads with David

Jones profit numbers. The Australian 'Financial Review'

examines the Government's

measures to curb executive payments and the 'Sydney

Morning Herald' looksed at the investigation into storm

financial's collapse. That's

all for tonight. As we I leave

you the FTSE is down 32 points

and the dhow futures are down

62. I am Ali Moore. Goodnight.

Closed Captions by CSI

BELLS TOLL I need a drink, Pa. Doc. Forgiven now. Forgive and forgot. What's all this? Friday Kids' Club. Oh, no. I agreed to one day a week ONLY. Popular demand, Rector. Is there no end? I asked you to take this down, Hewlett. I will not have Skimmington propaganda here. It's community information. Ah, there you are. How's the new job, Anthony? Quite a change for you having a woman for a deacon. And a Skimmington at that. Sound and fury. And a nauseating proliferation of salad lunches. Broughton certainly hasn't settled down much in my 40 years absence. Oxford is dull by comparison. As is, quite frankly, this issue of my final resting place. There's a diseased tree due to come down soon in the east corner. Oh, that'll do. So long as it succumbs without too protracted an illness. You look to be in rude health, Mildred. Bad habits catch up with one in the end, Anthony. As you know.

How did you...? Archdeacon Able wrote. And anyway...who said anything about a natural death?

Thank you, sir. PHONE RINGS Sir, I'll leave the Farlow file on your desk for Monday. No, hand that over now. I'll work on it now. I thought you were keen to get off. Not particularly. Mrs Barnaby's mother is staying for a couple of days. Ah. Cully's turning up too. It'll be two days of lurid medical discussions. And the footy, if permitted at all, will be on the portable in the bedroom. Nightmare. To complete my weekend's enjoyment, I have community liaison duties to perform in Broughton. The Skimmington village? Nothing good can come of it, Jones. Nothing good.