Australian PM attacks 'corporate excess'


Howard says his government will look at recovering "unreasonable" payments to company executives

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Australian Prime Minister John Howard has weighed into the debate on corporate ethics, telling a business audience that "some people are getting away with murder, in terms of corporate excess."

Billions of dollars have been lost in Australia in the past 18 months from a raft of high-profile collapses that include the No. 2 domestic carrier Ansett Airlines, insurance giant HIH and junior telco One.Tel.

The losses have infuriated the investing public and cast a cloud over the actions of company directors, their accountants and auditors.

In recent weeks, the Australian Securities and Investments Commission (ASIC) has called for executive pay restraint and tighter corporate governance, a stance now backed by the Australian Stock Exchange.

All eyes have been on the $7 million paid in bonuses to One.Tel founders Jodee Rich and Brad Keeling, and the role of Sydney corporate identity Rodney Adler in selling his FAI insurance company to HIH for A$300 million ($162 million).

Howard warned a business gathering in Sydney Tuesday he would have to act if corporate behavior did not improve.

On Wednesday he told radio listeners that "nothing angers the average person more than people getting huge remuneration when the company they have been running has gone down the chute."

"People are entitled to be angry about that," he said.

Howard said the government was looking at changing the law to recover "unreasonable amounts" paid to company executives.

Biggest collapse


One.Tel co-founder Jodee Rich received bonus payments based on the company's market capitalization

The PM's tough talk came after the man at the center of Australia's biggest corporate collapse gave his first evidence to a hearing in Sydney.

Ray Williams, founder and chief executive of HIH, told a royal commission he may have been "foolish and gullible," but he did not act dishonestly, nor did he lie.

Instead he blamed last year's A$5.3 billion ($2.8 billion) HIH collapse (Full Story) on its 1998 takeover of rival group FAI, claiming FAI was "polluted" from the outset.

In another Sydney courtroom, a liquidator's examination continues into One.Tel, the hippest telco in the country until its collapse in May last year with debts of A$600 million ($324 million) (Full Story).

Its investors included two of the biggest names in corporate Australia: News Corp and Publishing and Broadcasting (PBL), controlled respectively by the billionaire Murdoch and Packer families.

James Packer, son of Kerry Packer, has already given evidence about how he was "profoundly misled" about One.Tel's financial performance.

Bonus trigger points

Wednesday saw Packer's fellow investor Lachlan Murdoch, son of Rupert Murdoch, tell how in 1999 he believed they could build One.Tel into a "great business."

Murdoch was questioned about the trigger points for bonus payments paid to One.Tel founders Rich and Keeling.

Murdoch told the hearing that as part of an agreement by News and PBL to invest A$400 million into One.Tel, there were intense negotiations in February 1999 with Rich about the size of a second "trigger" that would lead to the co-founders getting another $3.5 million each in bonuses.

Murdoch said he wanted to push the market capitalization trigger out from A$2 billion to A$3 billion. Rich argued that A$2.4 billion would be a fair figure, reflecting the extra A$400 million of News/PBL investment.

Murdoch left the February negotiations thinking the trigger had been set at A$3 billion. He said it was not until a board meeting in October 1999 that he learnt the trigger figure in the agreement was A$2.4 billion.

He told the hearing he assumed his memory was inaccurate and that the parties had settled on $2.4 billion in February 1999.

Ansett no longer flying

Even as hearings continue in Sydney, Ansett, the one-time No. 2 Australian domestic airline, lies idle. It was temporarily grounded in September after it lost the financial support of its owner Air New Zealand, and ceased operations altogether in March when a bailout plan failed.

Last month, the Australian Securities and Investments Commission closed its investigation over the collapse of Ansett, despite what it says was the possibility of "misleading and deceptive" financial disclosures by Air New Zealand.

Ansett had debts of more than $1 billion when it was put into administration.

ASIC concluded that the public interest would not be served by incurring the cost and risk of taking action against Air New Zealand. (Full Story)

The New Zealand carrier took full control of Ansett when it bought News Corp's remaining 50 percent stake for A$680 million in February 2000.