“We were on our own.” The words from Qantas pilot Richard de Crespigny eight years ago are a worthy reminder of leadership. When an engine on QF32 from Singapore to Sydney exploded four minutes after takeoff, propelling shrapnel through the aircraft, 21 of 22 systems failed. The first disaster of its kind for the new A380 with Rolls-Royce engines, there was no rule book for what to do next. After two hours in the air developing their plan, the pilot and crew of QF32 landed the aircraft back at Changi airport with 139m of the 4km runway to spare. The 440 passengers and 29 crew walked safely to the terminal.
The new Qantas chief executive was on his own, too. No rule book or corporate governance guidelines told him how to respond. Alan Joyce, who will notch up eight years in the job next month, recounted the story of QF32 at the first Business Council of Australia Summit in Sydney last week. The event, closed to the media to encourage frank debate, featured Joyce at the final and most important session for the day: How Do We Recover Trust? Given that large swathes of corporate Australia, from energy companies and telcos to banks and financial institutions, are discredited today, the session might have been called: Why Trust Matters. But more on that in a moment.
Joyce told a gathering of more than 200 chairmen, directors, chief executives and corporate executives that how Qantas handled QF32 in November 2010 “was an exercise in maintaining and protecting the trust we had built up over 98 years”.
Three other Qantas planes were due to take off within three minutes. “We made the call to ground all aircraft, not knowing when we would be back in the air.” Joyce said there was only one option: “We were open and transparent. We told it as we saw it. We had an unsafe aircraft. We were grounding the fleet to save the lives of our customers. We were the only airline that did it.”
At daily press conferences, Qantas explained every detail discovered or event that occurred in real time. Joyce recalled the clash with Rolls-Royce: “I had a very big argument with the head of Rolls-Royce, who said we were making the situation worse by talking every day, telling people what we knew.” Joyce stood firm. He also invited the ABC’s Four Corners to report on the near-disaster. “I don’t think there is a company here that has invited Four Corners in,” Joyce said last week. “We said we had nothing to hide, you have access to our pilots, our cabin crew, all our engineers.
“What got me, and still does, is with every decision we made, there was no thought of profitability, only concern for our customers. No 1 for us … is that protecting and building trust means the customer came first.”
Once upon a time this would have been a trite remark. Today it is a radical rediscovery of first principles. Earlier that afternoon during a discussion about corporate governance, a few leaders at the BCA summit insisted that building social capital was a critical corporate goal. Fair enough, I said, but when it comes to building social capital, start with looking after your customer. That kind of capital builds more trust than climbing aboard social bandwagons.
In his interim report, financial services royal commissioner Kenneth Hayne set down a killer list of ideas for banks and financial institutions to rebuild trust: obey the law; do not mislead or deceive; be fair; provide services that are fit for purpose; deliver services with reasonable care and skill; when acting for another, act in the best interests of that other.
Trust matters for another reason, too. The Morrison government plans to fast-track a 25 per cent tax rate for companies with a turnover less than $50 million a year. Last week, Labor agreed. Bill Shorten teased us with personal income tax cuts, too. Note the silence about tax cuts for Australia’s big companies. It is off the agenda. Worse, there is growing sentiment at senior levels of the government that hearing from business leaders is not helpful to reform prospects any more. The reason is simple: if voters don’t trust big companies to do the right thing by them as customers, it’s only natural for voters to treat what corporate leaders say about tax cuts or industrial relations reform as more self-interest from the big end of town.
Joyce is a rarity in corporate Australia. He walks the talk on building and maintaining trust with customers. His lesson last week was simple: build up a reservoir of trust if you want credibility. While most companies won’t confront a disaster such as QF32, Joyce said, “you have to do exactly the same for the smaller issues, the same principles apply”. The alternative is death by a thousand cuts. Hello, Australian banks and insurance companies.
Just after the QF32 crisis, Qantas recorded trust levels among customers of 90 per cent. Today, it’s 97 per cent, the highest it has been. With those levels of trust, Joyce has spoken credibly on myriad issues from social policy such as same-sex marriage to tax cuts, free trade and the need for industrial relations reform. In May Joyce argued that excluding tax cuts for big companies such as Qantas would hurt small business.
“We buy six million bottles of Australian wine each year,” he said, pointing out that when big companies profit, so do small businesses. He spoke about $220m in bonuses to staff on top of a 3 per cent wage rise. “Everybody benefits when good companies do well,” Joyce said.
The latest Qantas advert, Stand up for the Spirit of Australia, could be a case study in Joyce’s leadership. The Qantas boss has standing on social issues because he fights the economic ones, too. By contrast, most corporate leaders in Australia prefer talking about social issues rather than ones that directly hit their bottom line. Their impact equals a slap from a week-old lettuce. This is not just weak; it is a dereliction of their duty to fight their shareholders’ corner.
Some in the conference room complained that when they do speak about economic issues, it is buried by a media more interested in reporting on corporate leaders talking about social issues. Fair comment, I said, but here’s how to grab a headline: if every corporate leader in the room resolved to speak up on why corporate tax cuts matter to all Australians, from small businesses to customers, to shareholders, the media would notice. If business leaders do so from a position of authority, having built up a reservoir of trust, Australians would take notice. When that happens, there might be an appetite for reform.
What Joyce lacks is critical mass. The Australian Financial Review’s recent list of the most powerful people, measuring power overtly and covertly, featured politicians, union leaders, bureaucrats, a regulator, a radio host, even a high court judge. Not a single Australian business leader rated in the top 10. Business leaders featured only in a list of business leaders, where there was no competition from others. Given that dwindling influence, corporate leaders need to step up. Or else step down from their positions so someone else can step up.
janeta@bigpond.net.au
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The Australian’s Competitive Advantage forum on November 22 will debate whether a ‘social licence to operate’ will help deliver sustainable returns or bog companies down in regulation. To learn more click here.
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