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Lateline Business -

View in ParlView

(generated from captions) of view about the Treasurer and

the involvement with no stash

yaeth evidence other than odd

little nacts that really don't

take you - facts that really

don't take you anywhere other

than some material went to Mr

Swan's home fax cannot be

relied upon. We've got big issues facing this country. The

Liberal Party have voted in the Senate to defer dealing with

climate change this week until

August. While all this rubbish

is going on we've had the

nations political process pre

occupied with these baseless accusations. Malcolm Turnbull

just going into ever greater

piroets and gymnastics to try

to justify his motion and throw

up a smoke screen. It's time we

moved on and I think the Australian people want us to

move on. We will have to move

on because we've run out of time in this time in this interview. But we

thank you for take ing the time

to talk to us tonight. Thank

you very much, Tony.

Aution's leading experts in

the fight against swine flu has

issued a warning that Australia

is now en erring - entering a

dangerous new phase. The alert

follows Australia recording its third swine flu third swine flu death, a

50-year-old cancer patient at

Peter MacCallum Cancer Centre.

It was the mother of a

35-year-old man who died last

weekend, his mother has angrily

told how she wasn't warned her

son would be publicly

identifieded. Anthony Splatt's

family are griefing their loss

but say it was made worse when

Victoria's acting Chief Health

Officer held a press conference providing details which providing details which

identified him to the small

community of Colac. Suddenly

we're just absolutely inundated

with calls from the media,

which I realise they're only

doing their job, but it was

rather a shock to some grieving

parents. People rang us up on -

because they heard it on the

news. I guess they're wondering

why we didn't tell them. The

Chief Health Officer apologised

today when officials reveal add

second death occurred in the

early hours of this morning. A

50-year-old woman who was being

treated at the Peter MacCallum

Cancer Centre. Not so much

about H1N1, it will be a bad

flu season. Every year is a bad

flu season but this will be a

particularly bad

season. Another patient has

tested positive for the H1N1

virus at the hospital. But doctors say doctors say isolation protocols

are in place and there is no

outbreak. No, no. We've put in

appropriate containment. I

don't think we have a spread in

the hospital. Both of the cases

have presented from the

community with a flu-like

illness. Director of the

influenza specialist group Lou

Irving has issued a warning to

people with chronic underlying

illnesses such as cancer and

asthma and also the very young

or very old. I think we're

seeing it as a new phase, yes.

Initial ly it appeared to be

just involved in young people,

relatively mild, self-limiting

illness. We knew that there

were risk groups. We knew it

could have consequences in

those risk groups and what we

thought was going to happen is

now happening. And fears about

Australia's rate of swine flu

cases has spread to Indonesia.

The Health Minister there has confirmed that confirmed that two people have

tested positive for the virus,

both had travelled through

Australia. "There will be

positive monitoring on

Australians holiday ing in

Indonesia. The ones we have

here are enough." Both of the

H1N1 carriers detected have

been quarantined. The been quarantined. The building materials giant James

Hardie is shifting base once

more, this time from the

Netherlands to ierlds to

streamline its management and

avoid a looming tax trap. The

company concedes the move will

affect the asbestos victims

fund but it has promised to

stand by its obligations over

the long haul. Unions don't

believe it. Ben Worsley

reports. The Dutch experiment

is over. James Hardie will now

work out of Ireland. It's time

consuming. It's somewhat

expensive but not frustrating

because it's move ng right

direction. Hardy's move to the

Netherlands in 2001 making the

most of tax convections

available under a treaty which

is about to expire. The

domicile is not sustainable.

Even thoit's a fairly new

domicile it doesn't make sense domicile it doesn't make sense

for us long-term. The Ireland moving tax coninvestigations

for shareholders and allow s

executives to move back to the

US where the market is and

Australia where the

shareholders are. What would

benefit shareholders and all

the other constituenties of

hardy is to get management

where the action is. Right no

it's not. James Hardie this

year froze its contribution to

the fund compensating victims

of its asbestos products,

citing dwindling profits. If

payment's resumed as hope ed in

two years, the company concedes

the cost of this move around 90

million dollars could take 25

million dollars from the funds.

But it says it will be better

off in the long run. The

commitments of the obligation

of James Hardie and the fund

are unchanged. There is a

short-term pain for a long-term

gain. Hardy also do what they

want to. Do they don't care

about anybody in the past or in

the future even. So hopefully

this is a positive move. Unions

aren't so optimist ic. We

always, in regards to James

Hardie and their track record

as corporate citizen, would

treat any moves they make as

suspect. Shareholders will move

vote on the in August. An OECD

report has found more than a

quarter of Australian

pensioners are living in

poverty. That's the fourth

highest old age poverty rate of

the 30 OECD countries. The

organisation blames a 26% drop

in the value of super funds and

a relatively low pension

rate: If the pension is your

sole source of income you

simply don't have enough income

to make ends meet as the pension doesn't provide enough

income to cover the costs of

living. We're about to significantly increase the

pension, one of the largest

rises to the pension ever. The OECD has welcomed that increase

but notes Australia spend just

3.5% of its national income on

pensions, less than half the

OECD average. A quick look at

the weather now - showers for

Perth and Hobart, late rain in

Adelaide, fine with some cloud

in Canberra, Canberra, snoo and

Brisbane. Lateline Business

come up in a moment. If you

would like to look back at the interview with Lindsay Tanner

or review any stories or transcriptings, you can visit

our website. Now here is

Lateline Business with Ali

Moore. Thanks. Tonight - a cut

above the rest. The Government

move to trim executive

salaries. The stumbling block

in the recruitment process is

they would only join you if

they could be guaranteed a

large payment for

failure. Unraveling the courses

of financial disasters. A

parliamentary inquiry looks at

recent corporate collapse. What

we need to understand is how

that advice led to either the collapse or individual

investors losing their money.

There's certainly a lot of

unanswered questions. And the

humbling of a printing giant der

der - can PMP survive the

impact of the recession? I

think many companies got laze

yi. I don't think p was an

exception. To the markets -

and ignoring Wall Street's

negative lead, a late rally

helped push Australian inthiers

positive territory. The All

Ords added nine points, closing

above yesterday's four-week closing low.

closing low. Reverse ing

yesterday ease slide, the ASX

200 climbed 0.25%. The Nikkei

closed half a per cent higher.

The hang essentialral id 2% and

in London the footsz combi is

also higher. They're more used

to asking the questions than

answering them. Late today the Australian Securities and Investments Commission was force ed to concede it could force ed to concede it could do

more to help avoid corporate

collapses like Storm Financial

and Opes Prime. The head of

ASIC was one of the first

people called to give evidence

before a parliamentary inquiry

into recent financial

disasters. It might not attract

as much attention as another parliamentary committee has in

recent days, but the inquiry

into financial products and

services will nevertheless be

trawling over some traumatic trawling over some traumatic

and costly collapses. Among

them, Storm Financial and Opes

Prime. Today, the Australian Securities and Investments

Commission was in the firing

line and it's become the

frequent target of investor

anger when things go

wrong. Simply because you get

one or two complaints about a particular organisation with

the benefit of hindsight of

that organisation goes under

gets read as you knew what did

you do about it? It demends on

what the complaint was and the

nature of it when you

investigated. But Tony

D'Aloisio agrees that ASIC and

the industry needs to do more

to improve standards. It is

mixed. There are overall the

industry is providing good

service to investors. But

clearly it's maivenld we, along

with financial planning

Association and others are clearly clearly working towards trying

to lift the quality and

accessibility of advice because

we see it as very important. The Financial Planning Association argues

that its members are often

unfairly maligned in the wake

of high profile collapses. And

because there is low community

understanding of the difference

between the vairtd of financial

advisers out there, we often do

get pointed at or targeted for

pretty much everything that pretty much everything that

occurs in financial

services. Jo-Anne Bloch says

the FPA is preparing a detailed

submission to the inquiry and a

key point will be to recommend

advisers be paid fees rather

than commissions for products

sold. I think commission-based

advice has done its day. But I

think our transition

arrangements and the fact that

we are talking about a slow,

steady move away from commission-based commission-based advice will

help people make the change,

will help people draw the

line. Also trying to draw a

line is the Commonwealth Bank

over its involvement in the

collapse of Storm Financial.

The former High Court Justice

Ian Kalla nan will work to mediate a settlement with

members of a class action run

by the law firm Slater and

Gordon. The Parliament ry

inquiry's clairm say it's too

early to say what went wrong

with Storm Financial and Opes

Prime but they will closely

examine the relationship

between firms and their

Banks. It is not a case about whether investors were naive or

not. In the end, investors went

to people that provided them on

a commission basis advice and

what we need to then understand

is how that advice led to

either the collapse or

individual investors losing their money. There's certainly

a lot of unanswered

questions. I think the goal

needs to be to minimise the

risk of these sorts of

collapses from occurring and to

look at the gaps that might

exist at the moment that have

created or been conducive to

some of these collapse s and to

try to fix those gaps as best

we can in a measured and

considered way. But in the

meantime there's still every

chance that another Storm

Financial or Opes Prime might o

merge as the ongoing downturn

exposes the risk ier practices

that developed during the boom

times. The OECD believes the

Australian economy is in for

more pain and is calling for

more cut s in official interest

rates. In its twice yearly

economic outlook, the OECD says

the expansionary thrust of

economic activity needs to be

maintain and monetary policy

could be loosened further.

Central to this is the expectation the Australian economy will contract nearly

half a per cent this year

before rebounding over 1% in

2010. In contrast, across all

the OECD countries in 2009, GDP

is forecast to drop 4% with

some modest growth expected in

2010. And, despite warning a

global recovery is likely to be

weak and fragile, the OECD is

bullish about the Australian

jobs market. It expects

unemployment to peak at just

over 6% this year before rising

to 7.7% in 2010. That's below

the May Budget forecast of

8.25% by the middle of next

year, climbing to 8.5% 12

months later. The writing might

be on the wall for Australia's

biggest printing company, but

PM - PP sm. Not giving up. The

fore cast 64% drop in pretax

earnings PPM has announced the

second phase of a major restructure. The chief

executive admits the company

became lazy and lost touch with

its customers when times were

good. PMP is a company in

distress with its shares losing

80% of their value over the

last two years as investors

flocked to the exits. They

spend too much of their time

trying to eat growth out of a

business that really should have been about

consolidation. And the costs

got out of hand a bit, the debt

became too my High. Which was a

result of PMP expandsing

outside its core printing and outside its core printing and distribution expertise where

its owns household names such

as Gordon and Gotch. Those

mistakes were costly and cull

mainated in a management

shake-out with new CEO Richard

Allely now faced with turning

things around: I think many

companies got lazy when the

good times were rolling and I

don't think PMP was an

exception. Already 400 job s

have been axe and two printing

presses closed as PMP has tried

to slash cost and Richard

Allely says more jobs will go

in coming months but at this

point he won't say how many.

The second stage of his plan is

to return the focus of PMP to printing and contribution,

continue to attack costs and

bring the business back in tune

with its customers Ewant to

have a seamless connection with

all our customers. We don't

particularly want to serve one

community of customers any community of customers any differently or better than any

other. For PMP's biggest

shareholder, the focus on costs

is long overdu. About 2.5

floors of head office which

have been cut to half a

floor. That's probably what

they need. They need no more

than that. And that's the bit

we see because we go to head

office but I am sure it was replicated all over the

country. And contributed to country. And contributed to PMP's falling earnings with yet

another profit warning issued

today but Richard Allely is

hoping his turnaround plan will

see a quick recovery. The changes that we're making and

the steps that we've taken

fundamentally put a cost base

in place that, as the economy

improves and as the market

improve s in volumes return

both to the market and to PMP

will benefit enormously from will benefit enormously from

that. One of PMP's biggest

customers is Australian

Consolidated Press, which is

Australia's largest publisher

of magazines. At the moment,

PMP prints most of ACP's titles

but ACP is threatening to build

its own printing press and take

all of ilths work

in-house. Richard Allely is

keeping up a brave face as he

tries to persuade ACP the

investment would be a waste of money. Yes,

money. Yes, it would hurt the

company to lose such a large

customer but it is not a death

blow. >>N On a bright er known, the Australian Competition and

Consumer Commission has

accepted undertakings that PMP

will fix problems in its

distribution business. The

company has admitted giving

false delivery information to

clients in a case which PMP has

admit s caused

admit s caused serious

reputation to that company. And

of course the company's nape is

PMP, not PPM as I said earlier. A late session

turnaround after some earlier

profit taking, why the change

in sentiment? We had a pretty

mixed start. The market was up

and slid to be down about 30

points and it looked a bit ugly

for a while. This afternoon we did turn did turn into positive

territory but it was rise ing

on rising volume. Some mixed

results. Some sectors have been

targeted as possible areas

where the institutional market

have been selling to help raise

funds for various rights issues

that are currently in the

market. The best example to

give you is that we had for

example BHP only closed down 7 at

at $33.73, Rio up 99 cents to

$49.60.S We farmers which had

seen a low of $21.20, closed up. A) pretty good results but

the banks were under pressure.

ANZ down 3, Commonwealth Bank

down 19. Talking of bank,

Westpac has announced the

departure of fill cron can.

He's been there a long time. What do you take

What do you take of that? 27

years and a veteran and he's

held some senior Roles. CFO. So

certainly a highly respected

individual within the banking

circles at Westpac. I guess to

some extent you have to put it

in context. Gail Kelly has been

there for a year and a half,

there's been a strong change in

culture. She's put other new managers in managers in the business to

revitalise it and there's been

a long succession process with

Gail already. Phil obviously

felt it was time to move on. If

we can look at the media

sector, the Ten Network is tell

feeling the pinch of the tough

ad market, yet the shares

closed higher. They're at a

$1:20 - $1.10 $1:20 - $1.10 closed up one

cent on the day. But we're

going for $16 million at the

level it came in at 9. We're

pretty much at the low end of

the market. There was 15

Magistrates Court drop-off in

television - 15% drop-off in television revenue which was

not expected to be that bad.

Certainly it will take some

time for advertising revenue

growth to recover. It certainly

seems to be one of the tail

enders in terms of business

expenditure going forward.

We're still really waiting for

business investment to kick up:

It will be a key cry tear yar

for us going forward.

Unfortunately the media

companies are bearing the brunt

at this time. To the other

major movers - insurerers were

back in favour with back in favour with investors.

Suncorp Metway jumped 5.5%.

Shares in Westfield added 5%.

While higher oil prices caw

Woodside Petroleum climb the%

p..- 2%.

The Federal Government has

introduced draft laws into

Parliament aimed at making it

harder for executives to be

granted big golden handshake

payouts when they leave a

company. The law also mean

shareholders will have to vote

on any termination payment

above one year's annual salary,

compared to the current seven

times the director's pay. The

legislation comes as the Productivity Commission

continues its public hears into

executive remuneration. Today, hearing submissions in

Melbourne, ahead of a December

deadline for its final report.

For their thoughts on executive

pay, is it too high and should

it be regulated, I it be regulated, I was joined

in Sydney earlier by Colvin,

the CEO of the Institute of

Company Directors and from Melbourne by Martin Lawrence

from the governance advisory

firm Risk Metrics. John Colvin

and Martin Lawrence, welcome to

the program. Thank you. G'day,

Ali. If we can start with the

legislation regarding golden

handshakes that's been introduction introduction ition introduced

into Parliament today, John

Colvin you say one year's base

pay is too low a bench mark for

a shareholder vote. I wonder,

though, why do we pay CEOs at

all when they leave a company?

Aren't theyry warded enough on

the way through? I think you

have to discern between a

termination payment as in a

notice payment and just about

everything has a notice period

in their contract. The other

Australia aspect Australia aspect we're talking

about legislation bring ing

limits in. Previously we had

seven times normal pay and the

Government have brought it down

to 12 months base pay, yet to

be defind. We're saying

bringing in such strict rules

doesn't assist. It also

distorts in many ways the way

you structure packages, which

in the long term is not the

best way to go for

Australia. So if it has been or

still is anything above seven tienls

tienls you have to vote on, the

legislation is above one times

what do you think it should

be? We've said in our

submission that we thought

seven times was too much, based

on the oldy fined benefits

schemes. We said why not have two years full-time. That gives

a bit of head room. If you have

an overseas executive and want

to employ them in Australia,

their big risk is up front so you

you want flexibility.

Australian executives are

completeding at this level, the

top 100, they're competing

globally and it's a global

search. We put Australia at a

disadvantage. US has up to

three times. Europe has about

two times and England doesn't

have any times they just have a

what if, please explain. Martin

Lawrence what,, what do you

think of that argument, think of that argument, the

argument for paying more on the

way through and not just the

golden handshake. There is no

question that depufs are to a

certain extent globally mobile.

If you're a good executive

anywhere in the world you will

be attractive to a range of

employers. We recently did some

work on behalf of a client of e

ours look at how often the top executives in the top companies

were poached by overseas

employers. I doesn't employers. I doesn't happen

very often. With respect,

though, I don't think that is

the issue. If you listen to the

and talk to the global search

companies, they say at the CEO

level for the top 200 and it's

a global search. They say it's

a global search for the direct

reports. With respect, a global

search company is un likely to

say anything else. That is a

fair point. They do have their

own argument to make. Martin own argument to make. Martin

Lawrence, do you think one year

just to fin wish this

legislation that was introduced

today is run year about right? It's one year base

pay. I am quite happy to have a

notice period of one year's

base pay. One year's base pay

is not the limit. If a company

can make a very good case why

it's appropriate to pay more on

termination, let them do it and

the shareholders if they're given given enough information and a

sufficiently compelling

argument will accept it. The

idea that I find puzzling is

that, surely if you're looking

to recruit somebody and the stumbling block in the

recruitment process is they

would only join you for a large

payment for failure that would

ring alarm bells. Paul Anthony was brought over

was brought over on a

stupendously generous package

23 he was terminated. 18 months

later he wasn't at AGL. We're

talking about rule, regulation

and if you like constricts

people into areas. We would say

good boards would have that

argument and they would make

the appoint sment s, when I was

doing those negotiations if

somebody came up and said you somebody came up and said you

wanted to be paid for failure

that would probably be tend of

the negotiation. Isn't the

point that we are siege and

have seen that after a CEO has

left with a very generous

retirement benefit the company

has relatively rapidly gone

down the tubes. Well, that's

true in some case and there

have been examples of payment

for failure and there have been examples of probably

overpayment and boards getting it wrong. it wrong. But we're talking

about a system which is meant

to be in place for the benefit

of all companies, and do we

really want to have laws which

we would argue are un

competitive internationally and

force companies into saying we

can't do that particular aspect. The recession of rest

of the world in the developed

world can, they can argue and

have discussions about that, we

can't. We will have to think of

something else. It know in something else. It know in the

Institute of Company Directors'

submission to the Productivity Commission inquiry it very much

follows that line of argument

that with the benefit of

hindsight there's been some

mistake bus joent over regulate things are changes. Do you

believe there is a role for

regulation and I guess the next

question has to be can you regulate

regulate without being too

prescriptive? I broadly agree

with John that the system we

have in Australia work s have in Australia work s pretty

well. It certainly is a much

better system than in the

United States or Brendan Nelson

in the world. There are a

couple of areas and there's

only a handful of them where

some regulation to empower

shareholders - I am not saying

Government coming in to say

thou shalt not pay more than

that. By for example on

termination payments say ing

you can't pay more than 12 months base

months base power without

amoval, it would give them power. We've got the legislation regarding termination payment. What would

you like to see regarding

broader remuneration? At the

moment there's a non-binding

vote on a remuneration report.

Do you suggest that vote should

be binding? No, we don't. And

not a lot of people do, to be

honest. It is far too broad a

thing to turn into a binding thing to turn into a binding

vote. One area where we think

where there used to be a

binding vote and we thought it

would be brought back relates

to the specific issue of

securities and xeskly executive

directors. By and large the

system doesn't need a dramatic

overhaul. The issue is making

sure that shareholders are able

to hold boards and companies to

account when they feel their

interests are at stake. John interests are at stake. John

Colvin, is it as much as that

or is it more? I I just wonder

whether education and encouragement actually

works. And it does. The

advantage that has is you

educate people as to how to

negotiate, what the pit falls.

You are going to get a much

better sustainable, you know,

view of the market in this

area. That's the best way to

go, the eer thing we have to

remember - as Martin has remember - as Martin has

rightly pointed out, this is

not America, this is not someone somewhere else.

Australia has probably some of

the best corpsate governance in

terms of director, regulation

an regulate ors in the world.

We are being looked at by the

rest of the world as a model.

So we shouldn't throw otd the

bath water because there are

problem s where in the

world. One of the issues with

this Productivity Commission

inquiry is that, while they inquiry is that, while they

acknowledge a differences of

opinions and what they call automatic mechanisms working -

if you're not happy with the

company you sell the shares -

they also say there is scope to

make markets work better and

they talk about improving

accountability and transparency

and nfrg flows. John Colvin, do

you think you're going to get

something quite tough out of

this inquiry in terms of

regulatory change? I hope not

because I think that would because I think that would be

counter productive. We've seen

where laws have been introduced

in the United States for

example where $1 million cap of

deduction s were introduced in

the United States. That caused

in many ways and in many

commentators a shift towards

non-cash and equity which then

sent the executive salaries

through the roof because they

were being rewarded for entrepreneurial activity which entrepreneurial activity which

might not have been the agency

type relationship between

senior executives might occupy. Martin Lawrence, do you

think like it or not there are

going to be some strict er

regulation? I hope there there

be a tightening up fof a few

areas, particularly around

equity securities. I wouldn't

think there's going to be

terribly dramatic change. You

might see a greater emphasis on might see a greater emphasis on remuneration when regulators

look at companies and APRA

seems to be moving that way but

not in a prescriptive way. But

not necessarily say thou shalt

do this or that. John Colvin, Martin Lawrence, many thanks

for talking us to Thanks, Ali.

It's not often we report on

an upturn in the middle of an economic downturn but economic downturn but there are

pointers today that confidence

among employers is on the rise.

A new survey shows that for the

first time since the global

crisis hit more employers are

planning to higher than fire. The Chicane Marketing

agency no longer feels like

it's being sand bagged after a

year it would rather forget the

company's fortunes are back on

the rise. So much so that we're needing to

needing to recruit additional

employees which can something

we didn't they we would be

doing. They're not alone. A

survey of 6,000 companies lie a

leading recruitment firm shows

local firms plan more hiring

than firing in the next three

months. For first time in five

quarters we've seen positive

sentiment in the employment

outlook. Mark Steyn says WA is

experiencing the biggest bounce experiencing the biggest bounce

in high ing intentions. I think there's confidence returning to

the resources sector, one. Two,

there's an incred ibly strong

pipeline of projects that have

been oi proved in WA. It's

backed up in another survey by

consultancy firm Mercer. The

research shows Australian xaebs

plan only modest staff cuts in

the next six months compared with firms in aishand with firms in aishand Europe.

While there are some good

economic signs there are also

plenty of other once like that

from the World Bank.

Australia's unemployment rate

stands at 5.7% and economists say - (PROBLEM WITH SOUND) .

Incoming vehicle, clear the bay. Right lads, clear the bay.

All clear.

Six, eight... Come on, get a move on. There's pubs to be got to! That's 47, 48, 47, 48. Hang on, hang on, hang on... I'm on it!

Dave? Dave? What's going on? Don't worry, the generator'll kick in any second. All right. OK, OK. There you go.

Get down! Down! Keep your eyes on the floor!

Is everyone all right?!

Dave? Oh, my God!

How much did they get away with? Not sure exactly. About ?600,000 used notes. Untraceable, on their way to be shredded. Yep. So which one of the buggers was in on it? Did you know him, sir? Yeah, we both did. He used to be one of us. He was chucked out the force five years ago for possession. Dave Compton was not a druggie! They found drugs in his locker. I knew Dave 30 years ago. We joined on the same day. He stood next to me during the miners strike in '83. He stood by me when my family wouldn't speak to me. I think I'd know!

I'll never believe Dave was a user.