Corporates have only themselves to blame if company tax cuts fail

Imagine a recent dinner in a swanky eastern suburbs home in Sydney where, after chitchat about real estate prices and the usual exchange of private school gossip, the conversation turns to tax cuts.

Over a nice buttery chardonnay, a couple of banking executives, add a senior big bank board member too, moan about the nincompoop populists who are wrecking the prospects of corporate tax cuts. They finger Pauline Hanson and Derryn Hinch as the dumbest culprits.

These apparently clever banking people then take a jab at the complacency of the wider proletariat who have had it too good for too long and can’t get their head around the need for tax cuts to crank up the economy, grow business and create more jobs.

If only corporate executives would get out more into the real world. Then they might realise that corporate Australia has the complacency problem. They might see that the real rot lies with corporate bosses and board members who can’t fathom why they should make the case for reforms such as corporate tax cuts that bolster a system that has delivered them shiny careers and tremendous riches.

Emotion-laden as it is, there is a reason the push by Hanson and Hinch to effectively strip big banks — and AMP — from any corporate tax cuts may resonate with millions of Australians. News from the banking royal commission of AMP charging fees for no service, of misleading the corporate regulator, the Australian Securities & Investments Com­mission, about this practice proves what many have suspected: customers of Australian banks and financial advisers are being ripped off.

And AMP is no Robinson Crusoe — Commonwealth Bank charged dead customers for giving them advice, a Westpac adviser’s outrageous and inappropriate advice cost nurse Jacqueline McDowall her home, ANZ charged one client $3300 upfront and $3790 annually to save her $238 a year, while National Australia Bank knew its “introducer program” was riddled with fraud months before it told ASIC.

Why reward these companies with tax cuts that bolster their bottom line and executive bonuses when customers have been treated with contempt?

The upside — if Senate crossbenchers knock back tax cuts for big banks, derailing the next stage of the Turnbull government’s Enterprise Tax Plan — is not just political. It’s about policymaking in the future.

The Prime Minister and the Treasurer legitimately can say to Australian voters: we tried to legislate tax cuts for big companies, but the Senate said no. We will now focus on personal tax cuts for all Australians. And maybe this will be the moment when corporate bosses in Australian learn a few lessons from leaders of the union movement.

Corporate tax cuts may happen down the road, but only when corporate Australia, including the banks, earn those tax cuts by making the case for those tax cuts.

Let them put as much passion into tax reform as union leaders put into penalty rates, domestic violence leave and changing the whole shebang of industrial relations in Australia. Don’t count on Canberra to do all the hard yards.

Rather than spending big money on executive bonuses, Davos trips and advertising firms producing fuzzy commercials, pump more money into advocacy so that Australians better understand the moral dimension of economic reform. That’s what the unions do, after all.

The biggest challenge for corporate Australia is rebuilding its reputation for doing good.

When trust in institutions is at record lows, the loss in legitimacy of corporate Australia has meant that the fundamentals of business are more highly contestable than they have been for decades.

What were once accepted as truths: that businesses create jobs and small and big business work together to drive growth — are right now controversial claims because of sustained attacks by the Labor Party, the unions, the Greens and GetUp!

This licorice allsorts of left-leaners won’t be defeated by corporate bosses sitting on their hands, mumbling about the evils of anti-corporate agendas, populist politicians, dimwitted voters and left-wing activists.

Corporate bosses can start by providing more support to the Business Council of Australia which, under Jennifer Westacott, has ramped up its work to make corporate Australia legitimate again.

Without serious money and sustained commitment from corporate Australia, BCA campaigns won’t make a dent in a conversation presently controlled by unions and anti-big business activists.

Corporate Australia, especially the banks, need to confront complacency and rebuild their legitimacy at a grassroots level, too. And that starts right now with the boards of the five pillars (four banks and AMP) taking accountability for the misdeeds of their institutions.

Plenty of commentators have called for the board of AMP, but especially the chairwoman of the board, Catherine Brenner, to resign or be removed. Certainly, the AMP board’s decision to remove a chief executive already slated to leave and sending its legal counsel on leave was woefully inadequate.

But the Salem-style witch-hunt against Brenner is disturbing and faintly misogynistic.

Others, too, should be accepting individual responsibility for collective corporate failures. If you earn big bucks, you attract big responsibilities, and when things go wrong under your watch you accept responsibility and resign.

It is, however, worth separating these basic home truths from other bits of hyperbole and hysteria at the royal commission. For starters, Jeff Kennett, take a breath, settle down, rather than making headlines by calling for Clayton Utz to be banned from providing legal work to the government. Innuendo arising from questioning last week between counsel assisting the royal commission Michael Hodge QC and AMP group executive Jack Regan that the Clayton Utz report into AMP’s financial advice business was not “independent” is just nonsense.

The letter of instruction from Brenner to Clayton Utz — sent to ASIC and the royal commission — makes clear that the law firm was instructed to compile a report to the AMP board that was independent of AMP’s advice business.

The report was commissioned by the AMP board, overseen by the AMP board and specifically subject to the instructions of AMP’s board and general counsel. In other words, the Clayton Utz report was only ever intended to be independent of AMP’s advice business, not of AMP as an entity.

Therefore, back and forth emails and redrafted reports between the AMP senior executives outside the advice business and the law firm are not evidence of wrongdoing. In fact, they point to AMP’s board and general counsel performing their fiduciary duty.

Indeed, kudos to Clayton Utz for producing an especially damning report to the AMP board that made clear that a large number of employees of the AMP advice business were potentially guilty of civil and criminal breaches of the law. For counsel assisting the commission to imply there was something inappropriate about Brenner or the board approving the report seems strange at best, attention-seeking mischief at worst.

Enough bad stuff has happened without making stuff up. By focusing on what did happen, we can then sort out what happens next.

Diversity shindigs and glossy PR puff about corporate social responsibility agendas won’t restore the legitimacy of the big banks and wider corporate Australia.

That will happen only when there is greater commitment to the most basic responsibilities owed by corporate executives and corporate boards to customers, shareholders and employees.

It’s time that corporate bosses in Australia, especially at the banks, earn back trust and then maybe they can start earning corporate tax cuts too.

If they can’t make the case, why should the Turnbull government do so on their silent behalf?

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