CEOs have some explaining to do

Andrew Smith’s speech to the Melbourne Mining club was excellent but he did not go into the detail of what is happening to Queensland farmers. (Stuart McEvoy/The Australian)

The chief executives our big four banks and other corporate chiefs in community-sensitive industries, like Shell chairman Andrew Smith, need to learn what’s required to be a CEO in 2016.

Either they themselves — or their fully empowered number two — have to go out and fully explain the corporate position on talkback radio, TV, via social media and at press conferences etc.

The fact that the Prime Minister now requires bank CEOs to front Parliament is a simple reflection of the fact that they are not doing their job. And, make no mistake, shareholders will pay the price because the Parliament will eventually pass legislation that controls their activities and reduces profits.

By then it will be too late to re-educate CEOs or appoint CEOs who understand what the job now involves.

When the banks did not pass on all of the Reserve Bank’s rate reduction but instead lifted term deposit rates, bank CEOs, or their fully empowered number twos, should have been all over the radio, TV, press and social media explaining to the public why this was happening.

Instead, it was left to business commentators like myself and Steve Bartholomeusz to make the explanations.

So, now the bank CEOs will be required to front Parliament to do what they should have done last Tuesday. Eventually, banks will end up facing a royal commission and they only have themselves to blame.

Australia has abundant gas but faces a gas shortage because the corporate leaders in the gas industry make the same mistakes as the bank CEOs.

Yesterday, I attended a Melbourne Mining Club lunch where Shell Australia chairman Andrew Smith gave an address and so, unfairly, I am going to pick him out. My comments could equally apply to other chiefs in the industry.

Shell is a big player in Queensland coal gas and Curtis Island LNG. Shell also has big WA gas interests, so Mr. Smith enjoys the delights of living in Perth and, media wise, he comes across to the eastern states to make speeches.

But the failure of gas leaders to engage in a widespread media debate left politicians in New South Wales and Victoria with little choice to institue extensive exploration bans.
If Australian gas production is going to be increased they’ll need to do more. Gas leaders have to do what bank CEOs must do. You can still enjoy Perth but when the talkback radio station rings at 6am Melbourne time (3am Perth summer time), you or your empowered number two must be ready to go.

But there is another problem facing the gas CEOs.

Overall, I found Andrew Smith’s speech to the Melbourne Mining club excellent but he did not go into the detail of what is happening to Queensland farmers.

If Australia is to avoid an electric power and gas disaster, gas leaders need to start making people understand the transformation occurring in rural Queensland.

If you read the statute books, it says that farmers are not entitled to share in the proceeds of the minerals under their ground. But that is not happening in Queensland where the average farmer is receiving about $100,000 a year. Like the US, it is transforming the economics of their farms because it is revenue that’s not climate- or crop-related.

At the same time, whereas their children were forced out of the farming districts to the capital cities to get jobs, now there is a lot more regional employment so families can stay together.

So why does no one say this?

The simple fact is the farmers are petrified of talking about their new-found prosperity because, if they do, they are absolutely bombarded with attacks by the social activists and green people.

Life is a lot simpler for farming families if they simply shut up and enjoy their new circumstances.

Farmers in New South Wales and Victoria have no idea that if gas is found on their property it can transform the economics of farming. No one wants to annoy the Greens. It is true that in the early days of drilling in central Queensland many mistakes were made and very bad things were done to farmers but those incidents are now rare.

Today, farmers still have the manage the pipes and allow visitations by gas people but the advent of drones means that checking pipelines will no longer requires the same numbers of visits.

Gas leaders have to tell this to the farming community via all the media outlets that are available. If they engage, they will also soon discover if their people on the ground are not doing the job.

I know these comments will attract a lot of adverse remarks about what coal gas extraction does to the water table etc. Once again, Smith never talked about this in his speech.

I can’t be involved in that debate because I don’t have the technical knowledge. But Shell’s leaders should be on radio, TV and social media every day talking about the environmental effects of coal gas

At the Melbourne Mining Club Smith explained that if Australia is to grow and take full advantage of its gas resources it will need a higher population in order to gain the economies of scale in regional areas.

Australians in former decades understood the link between migration and prosperity. Currently, all too few people discuss the benefits of migration.

What Smith said was right and it took courage because it is politically incorrect. But gas leaders have enough on their plate without taking on that one. That’s the job of the politicians.