Fear of red tape puts company growth and development at risk

Woodside and Qantas chairman Richard Goyder sounds the alarm on regulatory burden overwhelming corporate Australia.

Richard Goyder warns short-termism is another hindrance to companies and their ability to invest. Picture: AAP

Woodside and Qantas chairman Richard Goyder has sounded the alarm on the regulatory burden overwhelming corporate Australia, warning that it has sparked a fear of risk-taking in the boardroom.

“In Australia we seem to fear failure and look for answers straight away. Often the answer is more regulation and I think that is the worst thing we can do. Regulation in my view is not always the right answer,” he told an audience at the annual ASFA conference in Melbourne.

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“There are too many incentives for boards of listed companies not to take risks at the moment because of the regulatory burden. It’s almost easier to say ‘we won’t take risk’. We’ve got to encourage appropriate risk taking and drive that fear out of the boardroom,” he added.

Shareholder activism, meanwhile, was unfairly targeting companies “to prosecute a political message”, Mr Goyder said, as he called on the superannuation industry to “push back and say ‘we support your message but… that is not the business of a public company and we’re not going to entertain those sorts of things at an AGM’”.

Mr Goyder, the former CEO of Wesfarmers, told the audience he thought executive remuneration was “overdone” as an issue and that tensions between investors and public companies were inevitable in a market economy.

“It is important for Australia that we get growth in investment; that companies take more risk (not bad risk but calculated risk); and that we have shareholders who are willing to support that.

“There are challenges and tensions between investors and public companies but in a market economy we need tensions, and we need to be challenged to get the best outcomes. And self-interest always plays a role,” he said.

While he understood the “angst” over the capability of CEOs and management teams, the quality of the board and the capabilities of the organisation were more important than what a CEO is paid, he said. “And in my view equity is the best incentive [for executives],” he added.

Short-termism was another hindrance to companies and their ability to invest, he warned.

“We have boards that want to build wealth, but increasingly face regulatory challenges and management that wants to look to the longer term but are often rewarded and penalised for shorter-term outcomes,” he said.

“We’ve got to take a long-term view together and sit down with shareholders and agree a pathway,” he said.

Commenting on hurdle rates, Mr Goyder said most companies he had been associated with had brought theirs down in the lower interest rate environment. “I don’t think they’re too high at the moment,” he said.

RBA governor Philip Lowe last month called on companies to lower their hurdle rates, which traditionally have sat at about 13 or 14 per cent for investments, in the wake of borrowing costs for new projects plunging to record-low levels.