Well the silly season is just about over for another year, as even the most ardent holiday makers start to return to the daily grind.  So what’s been happening in the governance space whilst most Australians have been enjoying the holiday season?

In this blog we cover:

  • Recommended Post Holiday Reading “The Big Short”
  • Corpocracy – It’s Actually a Word!
  • The Accounts You Have When You Don’t Own Shares
  • ASX – Two Websites are Better than One?

Recommended Post Holiday Reading “The Big Short”

We don’t usually plug books, however if you are still struggling to understand the intricacies of the global financial crisis and can’t work out why some money managers get paid tens of millions of dollars a year, even when they lose money (which is pretty much all of us), we recommend that you read Michael Lewis’ “The Big Short”.

The crazy power and greed of the Wall Street bankers, the ineptitude of the rating agencies and the absence of regulators will leave you scratching your head. Then again, the fact that the US Securities and Exchange Commission (SEC) wasn’t on top of things should be no surprise as apparently their own books have been in disarray for years http://ht.ly/3R6wN.

From an Australian perspective we get the feeling that the reason Australia came out of the global financial crisis so well wasn’t so much good management as the fact that we were playing the 5c pokies in reception whilst the Wall Street guys were playing in the private high roller room.

Corpocracy – It’s actually a word!

It’s funny when you think you’ve come up with a word off the top of your head (because society needs it) only to find out it’s already in the dictionary, although the definition lacks conviction.

The word – “Corpocracy”.

The Dictionary.com definition: “a society in which corporations have much economic and political power”.

The blogger’s definition:  “a society in which executives (real people) hide behind “corporations” (not real people) and remain unaccountable for their actions whilst simultaneously justifying massive salaries (because no one else could possibly have the skills these guys have) and syphoning wealth from the 99.9% of humanity that haven’t worked out that corpocracy is actually a word”.

A few examples as proof of this concept:

  • Deutsche Bank admits criminal wrongdoing for taking part in fraudulent tax shelters that let clients hide billions of dollars, and agreed to pay $US553.6 million to settle the case http://ht.ly/3sNSU. And the “people” responsible for this “criminal wrong doing”? Don’t worry they had already set aside money to cover the fine and advised that this small misdemeanour will not affect profits (read bonuses).
  • Ernst & Young is charged with “fraud” for helping Lehman Brothers remove tens of billions of dollars in securities from its balance sheet “in order to deceive the public about Lehman’s true liquidity condition” http://ht.ly/3sNOi.
  • A bit closer to home Toys “R” Us gets nailed by the Fair Work Ombudsman for underpaying young workers $1,000,000 http://ht.ly/3MWEm. This is a multi-billion dollar corporation underpaying Australian kids.   No worries, they have pledged a $300,000 donation towards the cost of education and training needs of young and vulnerable workers and the protection of their rights at work.  That makes it better.
  • Last but not least is AMI (Advanced Medical Institute) the erectile dysfunction company with the dysfunctional management team.   But when it comes to scams these guys are right up there, floating their company on the US Stock Exchange and then promptly using investors funds to purchase for $24 M an Australian “Innovation Patent” that they have secured for the grand sum of $150 http://ht.ly/3xMcJ.

The Accounts You Have When You Don’t Own Shares

You’ve just got to love Dr Geoffrey Edelsten, flying high at 67 and still looking fresh from his $3m, 500 guest wedding, which featured Seinfeld’s Jason Alexander and Fran Drescher from The Nanny.

Over the break Allied Medical Group (AMG), the company that is apparently wholly owned by his former business partner Trevor Thompson, and with which Dr Edelsten is “associated”, managed to lodge 5 years of financial accounts with ASIC in one hit.

Not a bad effort for a company that specialises in providing “administration services” and whose auditor is quoted as saying there is “material uncertainty” regarding its ability to continue as a going concern because it apparently has a deficiency in net assets.  It seems small details like financial accounts and net asset deficiencies can’t hold a good man down with the chain of medical clinics reportedly being worth $200M http://ht.ly/3xOXE.

ASX – Two Websites Are Better Than One?

Has anyone else noticed ASX’s two website policy?   Google ASX and you will find www.asx.com.au. Pretty straight forward. Click on About Us or ASX Compliance and you are taken to a beautiful new site www.asxgroup.com.au which, low and behold, actually has a clearly marked corporate governance section. We hate to say we told you so however we did, in our August 2010 blog when we challenged readers to find the ASX’s own corporate governance disclosure.

Looking for your feedback

The unfortunate thing about good corporate governance is that the organisations that practice it tend to keep out of trouble and thus avoid the media spotlight.  In short it’s much easier to find interesting stories that illustrate bad corporate governance than it is to highlight examples of good corporate governance.  Either way we are interested in your view.   Leave a comment or drop us a line if you find something that you think might be worth including in our monthly blog.

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