The business community must play its part in dealing with angry populism if wants to get the pro-business, pro-growth policies that will benefit all Australians. That was the conclusion at The Australian Financial Review's Chanticleer lunch in Melbourne yesterday.
"The old world has gone," said panelist and financial services veteran Elizabeth Bryan. "The community feels it has a right to comment on how we conduct our business". Voters, politicians and busy regulators are now just a fact of life, she said.
Ms Bryan is a director of Westpac, chair of Virgin Australia, and deputy chair of IAG. Her fellow lunch panelists agreed: John Mullen, chair of Telstra after a long career at Asciano, DHL, Deutsche Post, and Sir Peter Abeles' TNT; and Hastings Fund Management founder and AFL chair Mike Fitzpatrick.
Mr Mullen has rightly called for unity in business to make its case against rising public suspicion. The scale of the business communication problem has been shown by the sniping within its own ranks as Mr Mullen responded at the lunch to criticism of the performance of Business Council of Australia president Catherine Livingstone from former Commonwealth Bank and financial services inquiry chair David Murray.
But it goes to a wider point that business, which in public is spearheaded by groups like the BCA, needs to be at the top of its game in defending its record, and explaining why it must be left to play its role if we are to have the prosperity the community wants. Central bank easy money policies around the world have done all the heavy lifting on growth they can. The Australian Financial Review's theme for the past year is that business enterprises are the "risk takers and growth makers". But capital always has to be used the right way and under optimum conditions. Ms Bryan, for example, explained that despite IAG's other successes in Asia it was not going to put its shareholders through the risks of investing in the Chinese insurance sector.
Target for populist anger
A big part of getting risk right is how company chiefs are rewarded for taking it – another target for populist anger since the excesses of the finance industry before 2008. Mr Mullen said that greater transparency had just pushed salaries upwards, while on the other hand making matters more complicated. Remuneration committees now take up more time than audit committees – and he confessed that he did not understand his own pay package. The basic proposition, reminded Mr Fitzpatrick, was that when management did better than expected the shareholders shared some of the rewards – but that has been further muddied by the well-meaning demands for soft targets in areas like sustainability and diversity.
Australian business also gets criticised for its concentrated power in some major sectors, with ACCC chairman Rod Sims asking yesterday why even higher legal hurdles should not be put onto mergers and takeovers. But companies also need economy of scale if investment is to be effective and worth the risks involved. And as Mr Fitzpatrick pointed out, Australia's big banks might look like an oligarchy, but tinkering with the system could instead threaten financial stability.
Business is now making a huge call on voters, to reduce the amount of tax that companies pay to secure greater investment, higher productivity, and more prosperity in the future. But the tax debate is now politically stranded, with the government putting forward only a fraction of the company tax plan it took to the election: Mr Mullen does not think that the tax-cut-for-growth argument has any chance with the public. But both Mr Fitzpatrick and Ms Bryan were willing to adjust dividend imputation, a big incentive for domestic investors since 1987, in order to get a company tax cut that would flow to foreign investors in a capital importing nation, as well as helping Australians make investments overseas.
Business now has a key public task in pushing the case for growth across the economy, and must learn to rise to it.
