Corporate Governance

It's Hypothetical

Hypothetical – September 2002

……..well they have to because one of the conditions on this particular merger is that Startel has to maintain the community standards, the special services, the bush. Yes folks, rural and regional Australia, Ra Ra still scores very highly here. There’s a prize up for grabs, Oz Media, a rare chance, particularly when the market still talks about this convergence theme, and its free, sort of. Startel could do very well and that’s where we join the board. Ladies and gentlemen, the Board of Startel, the Chair, Susan Ryan. Susan Ryan has had a stellar history in Europe, an Australian but when the Dutch took over TNT she went with them and out of transport and into the communications side. When of course the European telecommunications industry collapsed and had to be nationalised and recapitalised, and became just that single company Loop Europe, also generally known as Loopy. Susan quickly rose through the ranks until she decided that it was time to come back to Australia for a life in the Boardroom. Loopy of course was the trade sale buyer. It picked up that 15% of Startel when it was that last tranche that was sold. So, a key shareholder is very happy to have such an acknowledged expert on the Board. Susan, what sort of a board is it? What do you look for in a board?

Susan (S): What I look for in a Board is someone who knows how to turn the microphone on

Michael (M): It’s a telecommunications company, you can’t expect too much

Susan: Exactly. I haven’t been back long enough. This would never happen in London but Michael what I look for in a board is directors who really know what they are there for and they are there to maximise the value to the shareholders including us of course we have shares and options. We want directors who understand the business opportunities even the business opportunities that might not seem so strong when you are looking at this sort of clapped out old public sector broadcaster still got a lot of these creative types in it and people who produce programmes, not many, but it’s still got some of them. But still I believe that with a board like this focused on the business strategy, focused on the maximising every bit of value we can get out of this tired old thing, we can go really well. I can see great commercial opportunities in many aspects of what the old Oz Media has got and I know that my fellow directors, fellows and lady are with me on this.

M: And that’s why she got the job. Well you can rest easy because have I got a board for you. Starting with your chief executive Bill Beerworth. Bill is the great hero of Startel. He is the man who has done it all. A product of Tumbarrumba tech, a star football player in his day. He played for NSW country when he was only 19, almost beat the All Blacks that year. He of course joined Startel in the ranks, a linesman to begin with, then National Service of course and after being decorated for bravery under fire in Vietnam, he came back, studied, went in the other way, rapidly rose through the ranks, a Startel man through and through. No one knows the business like Bill. Well Bill, how’s Startel?

Bill (B): Startel’s doing extremely well Michael we only have now 93% of the market. We’d like greater market share if we can. That’s part of the reason that we want Oz Media. We need to expand to become. It’s become highly competitive in telecommunications and we need to get into a totally new area of distribution. We think that media of that style is exactly what we need.

M: Well Bill would say that wouldn’t he, he has got those 5 million options that are just out of the money. In fact, one of the features of the CEO’s time at the helm has been that never-ending optimism about the next big thing. We also have an executive director on the board, Robert Fitzgerald. He’s chairman of the merger committee. Now Robert actually is also a product of Tumbarrumba Tech. In fact they were the mighty duo packing down in the second row in that great grand final year and as they said up there in the high country if Bill didn’t beat you Bob would bash you anyway. Robert went about his career a little differently. He went off and studied Join Bly Bank, became one of the highest-flying investment bankers in the country at Bly Bank, a marvelous financial engineer, adding value everywhere he went. Then of course when there was no more challenge left in the particular occupation he decided it was time for the real world and who better to help that his old mate. Bill very quickly stepped into an executive role in Startel and everyone was the better for being there. Do you prefer this challenge Robert, I mean it was too easy in Investment Banking wasn’t it?

Robert (R): Oh yes, this is a great challenge. I mean this is a company that Susan said with real hope. I was thinking, which you were saying, we could have a ABBA tribute band, Money Money Money, that famous song it sort of we are focused on it we know where we are going and what we are doing. But I was pleased you were talking about the relationship with Bill because we are a company about family values. We really value families. My wife’s head of the corporate services and Bill’s son is head of Investment Bank and Susan’s housekeeper has got the contract for the catering so we are a family values firm and that’s what’s great making money but valuing families.

M: Thank you Robert. We also have as a director Deborah Smithers. Deborah Smithers is perhaps the shining light of the non-executive directors’ circuit in this country. She was the youngest ever CPA. Within 3 years she was a partner in the audit side of a major practice, Arthur Chance. With Arthur Chance she gave extraordinary experience in all manner of ways. In fact she only stayed a partner for three years and jumped ship again to go on the boards of half the blue chips in Australia. So when the government of course was looking for someone to chair the Government Advisory Committee on Corporate Governance, who better than Ms Corporate Governance herself, Deborah Smithers. Deborah, the life of the non-executive director, what everyone aspires to?

Deborah (D): It’s tough Michael. It’s a full time job. You have to take the role seriously I mean for all of those Board positions I’d really like it to be known I went through a rigorous search and selection process I mean there was no bias of course going on to the board of Startel and you have to take the job seriously. I do have a team of people behind me that do assist and provide me with relevant research and background but I think that just part of actually really taking on the role in the appropriate way and giving true value to your stakeholders and shareholders.

M: And that period working on the Audit at Startel that was a long time ago and has been a cooling off period.

Deborah S: Well in fact there’s such a debate around this at the moment and I really think in fact having worked on the audit of Startel it makes me more qualified to really understand the issues around the Startel Board and the organisation. I have a real insight into what’s happening in this company

M: Of course of course

Bill: And Michael before you make the point there’s no truth at all to the innuendo about our personal relationship

M: I didn’t say anything about your affair at all.

And now we come to our other non-executive director at the moment the chair of the audit and ethics committee Shane Turnbull. Now Shane is also a professional non-executive director. He is also a chairman of the Australian Advisory Board of International Optics Utilities. They’re the people who make the secret cameras that make this entire TV show you’re seeing possible. It looks real doesn’t it, they’re not.

Shane did not go to Tumbarrumba Tech. He is not related to anyone else on this board. He did serve in Vietnam of course with Bill. But where else but in the trenches could you really learn to trust somebody. Shane you’re chair of the ethics committee. What the hell’s that?

Shane: To keep the bastards honest and the condition that I accepted this job was because when the democrats gave their vote to sell the last 15%, a condition of it was that there would be certain checks and balances put in top protect my reputation that there’s a corporate governance board that I can blow the whistle on because I realise that this is a an old mates act, this board and I am here as a patsy and I am not going to get an Order of Australia at the end of the games so I have to protect my reputation by other means.

M: Does Bill have any photographs of you in Vietnam as patsy or is it something that came later?

Shane: Well, since we have this intimate relationship with this other non-executive director between us which rather complicates the ethics and relationships.

Bill: Michael, normally people take cash but when he says he took checks and balances it is only because of their friendship.

M: Well, ladies and gentlemen, that’s the board as it stands at this vital meeting because this fantastic opportunity that great pitch of convergence that would get that stock market bubbling again, push those options back up again into the money. It’s there and it’s on offer, the government is saying he is on Oz Media, take it. Of course, there are no hard assets left in Oz Media, they have already been peddled off in trusts and some property things by Bly Bank, but you still have a great name, you still have a great service and still have got that license and it is for free, almost, if they can keep those conditions for the communities and for all the stakeholders, because, you see, Deborah Smithers, has been very busy with her committee. She has come up with her framework for corporate governance and a voluntary code of conduct for boards and management. A condition of getting Oz Media for free is it that the Startel board has to consider very closely this voluntary framework. It has to also pledge to look after all of those others stakeholders. It is not money for nothing, there are issues involved. Well, the merger committee, Robert, has been working very hard of course; I can see that by your furrowed eyebrows. The merger committee has had a look at the numbers. It says, you can keep these country services going and still make money out of it with the convergence model. Is there any doubt in your mind or will this be a good thing for the share price?

Robert: Oh, there never any doubt in my mind. We are a very confident board about everything. We think it will be very good for a long-term value of the company. We want to make sure the rural community is well serviced. We want to make sure they are out there supporting us. Of course, long term, you never know what might happen and unforeseeable events might occur and you know, closures, write-offs are never on the agenda. All of those, but nevertheless we give you a ironclad guarantee that we will provide those services not withstanding a few of those difficulties that might arise.

M: Rob, this is the board you are talking to, you don’t they are here.

Robert: You know they are not all that bright sometimes.

Susan (S): But, I have come up with some very good ideas about how we can use this convergence, M, I wouldn’t like to think that I was just the type of chair who took the chairman’s fees and went to lunches. I have been thinking about this business with those people in the Ra Ra areas. They don’t need to have old fashion technology, like televisions, that have shows on them or radios that they can put on their tractors while they are driving their tractors, I thought they could just use the product they already got from us, the telephone, ring up and, you know how you ring up now and you get music in the background. Well they could just have Oz Media radio programs could just be playing. That’s a very direct personal choice.

Bill: On a timed call of course!

M: So you can just see these brains working very hard already. The business cases made very clear that there are short-term gains at least short-term gains. Shane is not sure, down the track; he is beginning to wonder if all those costs might be beginning to mount. Deborah Smithers is not 100% certain are you?

Deborah: Well, I am just a little concerned of course with the sale prerequisite from the government that the Startel complies with this voluntary code of conduct and pledges that it will look after the stakeholders in the longer term. I am a little concerned of course, because I think that there might be some bottom line issues there going forward and I am just a little worried about my position as chair of the government advisory committee and as to how best I can protect my own back in this matter.

Shane: You know I don’t think you should really worry. If the drought continues for a few more years and the rural decline continues, the numbers start to look pretty good, you know, there is nobody left in the rural area to worry about. So I think, that the environment is on our side at the moment. It is not looking too bad.

Robert: But Bill you are the guy with the options on the water we don’t have them, so we’ve got to look after you.

Bill: Well, I think M that at the end of the day, one of the things you are missing out on is really this. This is a serious issue in this country; people like Alan Feels have given monopolization a bad name. The fact the cost may rise in Oz Media, doesn’t mean we can’t raise prices ever so slightly in Startel of course. And that is the important issue and this is why we need to do this deal and that’s what we call true symmetry.

M: This is of course this commitment to maintain employment in Oz Media. But it goes for the vote, how do you vote. You’ll go ahead or not. Chairman, how do you call them?

Susan (S) Chairman: I think there is no doubt that we can liberate all those commercial values sitting there in the old Oz Media. I just think of the sponsorship opportunities. Like you could have the news, current affairs sponsored. If the old Four Corners from Oz Media was doing a program on the mining industry. We could get Western Mining to sponsor it. If we had something about child abuse and the failure of DOCS, so on, we could offer DOCS the opportunity to sponsor ABC kids. I feel that the potential is great and of course, the database you will get. Every Australian who watches Oz Media we would get all their details for cross selling of our other products.

M: Well, Chair, we have got a couple of people who are rocking the boat a bit down there. Can you assuage their concerns? Bill perhaps?

B: I think I, for example, would personally monitor the country issue. I have two country properties, one in Bowral and one in Yass and we would watch very closely to ensure that the services are maintained. So I don’t see that as being an issue to be honest.

M: So, do you need to vote on this Chair, or are you a consensus board?

B: No, it has to be done.

Susan (S): Well, of course, with our corporate governance expert here, I mean, we have to make sure that the decision is recorded so that anyone doesn’t put their hand up, well, their performance reviews, well, will be noticed. So we will call for a vote.

B: And by the way is that voluntary code thing ….

Susan (S): Voluntary.

B: I mean, this is very important to be flexible in these things, I think.

Shane: The good thing about B, he has got an open mind; the only thing is it open or just vacant? But it is good to see, our board is about consensus and certainly these doubts are there but we would want let them send them away at this proposition I don’t think. So we will just go ahead, don’t we? That’s right.

Susan (S): Well, I am comforted with the statements about the code and I feel, it sort of embracing by the board of my suggestions on the voluntary code and of course the policies of government. Of course, I represent the government as chair of the committee and I feel quite comfortable in fact going forward. Thank you.

Shane: Well, I got an open mind as long as the ethics are OK. It depends what is in it for me and how many trips I get overseas, the bill allocates to me, surveys of best corporate practices internationally and how we can set up a code being a role model for the world. There is a way in promoting yourself as abiding best corporate practices in the world as long as it is done properly. I know where the powers are, the powers are obviously with Bill, and he is a mate of the minister. He is using Bly Investment Bank with Rob’s mates to put this deal together. Susan has been promised extra honors from the coalition, as long as she make sure that this goes through quietly, without needing the Democrats’ vote and as long as it seems to be done properly and we can provide world’s best practice, I could be convinced but Bill really hasn’t talked to me privately sufficiently about this matter.

B: Well, M, I think if I may say so, you have been quite cynical about several perks of this transaction but we do have a remuneration guidelines. There are not widely published but we stay within those guidelines and we will always ensure that all committee members are precisely within those guidelines.

M: And, they are about to get a lot more interesting, because, as you can see, there is consensus to go ahead with the deal. Now the deal will take a little while to consummate because it is so important that everything is seen to be done quickly and because this is a merger, not a takeover, Heavens forbid! The board invites, indeed, insists that an Oz Media’s director joins it even before the deal if finally consummated. And who else could it be but of course Barry O’Keefe.

Now, just in case you are wondering, Barry who is an Oz Media director and is now a director of Startel as well. He didn’t go to Tumbarumba Tech or anything like that. Well actually, he went to Cooma High and they played together in the Monaro rep side. It came so close to the State championship. Barry do you remember that hospital pass Bill gave you?

Bill: I can remember the nurse.

M: I am sure you won’t forget that either.

Bill: It was all perfectly proper she wasn’t married either.

M: And of course it was that hospital pass, 5 minutes before, if he had given you the ball, well, what would history have said. Who would have been picked for the NSW country team and gone on from there if that bloody pass had come up from that lumbering forward, but we won’t go there.

Now, the great thing about this new director is that they were just looking for someone to chair the nomination and remuneration committee. Barry O’Keefe coming from Oz Media has a very interesting idea. He believes that the board should, quite properly, renegotiate, or perhaps change, the individual performance measures to include an assessment relating to the specific conditions of sale. After all, he is also a director of Oz Media, with its strong staff culture that unique union they got there, the staff management and the occasional casuals enterprise organization, known as "Smoko". He is going to look after interest across the board; Barry could you perhaps put to the board why their personal performances should be linked to this takeover.

Barry: Well, chairman, one of the things that we have got to think about is the projections that we make, both to government and to the public and there is nothing like being at least partially up front about those sort of things. I mean, there is a limit to transparency, I recognize that, it can be embarrassing but if we can get the house in order, it might not be embarrassing, so all I really need is a carte blanche in relation to the area in which I operate and know that like Natasha Stot Despoja, I will have you all behind me at the relevant time, but hopefully in a more friendly way and that if I propose, in relation to nomination for particular positions and remuneration for those positions, it would be accepted and that then would be reflected in the type of criteria that replied to various board performances. I mean you cannot expect things from the board if you are not going to expect things from the staff. But since the board has much more responsibility, then flexibility might be very important in relation to what is expected and that flexibility will depend upon, partly of the role and function of the chair of the nomination & remuneration committee.

M: But Chair, there is also an issue here if you start tying yourself to one group of stakeholders and would imagine that there is a question of conflict then between the duty of your directors to Startel and other groups. Could you confront that issue with your board and work out where you stand on it?

Bill: I think that’s a lot more theoretical than real if I might say so. The key to all these things is the words you mentioned, flexibility and balance, it is very important to be able to move on a very rubbery basis to ensure that you can capture new goals as they arise.

Shane: Look, Bill, some people regard him as a little bit of an icon and I must say, I agree with that, I mean we got the perfect balance, decrease in profits and increase in remuneration for executives. This is a balance that’s not to be undone very quickly and I feel very opposed to something that plays with that.

M: Do any of you see I conflict of interest between competing stakeholders?

Susan (S): Well, if we didn’t remunerate ourselves in the way that I believe our new director plans for us, how can we be competitive? We look around the world, what do we want to be? We want to be the best; we don’t wont to be down there. As a Chair you wouldn’t want me to be paid the 50^th or the 53^rd of them, we need to be up there at the top. It is a question of competitiveness and global quality. This is what you get with deregulation globalization.

B: M, one of the problem with transparency it is a very over-rated thing. People on the outside tend not to understand how these things ought to be done.

Shane: The staff , there are ambitious and they are aspirational and if they don’t see this, how do we inspire them to the aspirational level. Your know this is part of the cultural, we’ve got they want it; they will try harder to get it. That’s what is good about it.

Susan (S): Leadership.

Shane: That’s right leadership.

M: Deborah, in this marvelous report and study that you have done for the government that the government so likes the sound of after those embarrassments that have occurred recently in certain companies that donated so kindly to political parties and now want to be seen as doing the right thing, in your fantastic report, you of course have recommended, that boards should be structured that they should not be anyone who is actually appointed by a vested interest group that all of the boards should be independent of shareholder interest groups. Can you wear this?

Deborah: I am having a very very conflicting moment actually as I speak. Part of my problem of course is that I actually support our new chair of the nomination & remuneration committee because I am hoping in fact that in the board being measured against its adherence to my code that in fact, it will make me look very good. I feel that this organization really is a star performer (says that in the name) and I have no doubt that those conflicts that one would normally in having shareholder interests perhaps represented in the board that we can overcome because of the unique nature of people we have here and certainly from the public’s perspective as my recommendations from my role as the government chair, yes, I would have to say that there are times when certain boards would perhaps feel in conflict with the stakeholders’ representation but I think in Startel’s case we have such skills and competencies around this board table that we will be actually able to recognize those conflicts and actually overcome them.

M: Well Shane Turnbull, you are also a director of International Optics Utilities, a 15% shareholder in Startel. IOU as it is normally known, one of the giants of the telecommunications equipment world. They are not quite as giant as they used to be, after not being paid by most of their customers in Europe, North America and Asia. But in Startel they can see big things for, they can see particularly with convergence all that broadband drive through having content from Oz Media could be fantastic. You are also the chair of the Order of the Ethics committee. Lots of problems there?

Shane: Lots of problems and this is why I made a condition of my appointment to this board that we had processes in place to manage these outrageous conflicts of interests which make Debra get into all sort of conflicts and to protect the reputations of our fearless leaders Susan and our CEO and this is an unquestionable situation that nearly all companies have these conflicts and the condition that I accepted to be a patsy on this board was to set up processes to protect my reputation because I was not getting much out of Bill on the "brown paper bags", he has not come to the party there.

B: If I may say so M, this is all unrealistic and quite theoretical. The reasons that our media has reached that it has to be sold is that the directors of Oz Media had absolutely no alignment whatsoever with the stakeholders or indeed with their viewers and therefore this opportunity arises. You say that there is a conflict in having a major shareholder represented on the board, how could that be? You are saying that your are king but you can’t rule. If you own 15% why should you have a say on the board on what is going to be done with your money and that’s precisely the view I am taking of it.

M: Lets just step outside the procedural march for a minute to all the shareholders, who unbeknown to you are watching it all. What the shareholders say about that. Do the shareholders think that if you are a major interest, if you have ie. 15% and Loopy is also in there for 15%, wouldn’t it be reasonable that they have someone on the board to keep an eye on it? Just by raising a hand, who would say that is reasonable? Hands up for reasonable, hands up for unreasonable. OK who is the buddy trouble-maker down the back? You, security, security….. Yes, I think we don’t want to hear you do we, no, lets zip back up the arch and we are back in the boardroom. It is a much more comfortable place.

There was another thing that Debra’s committee came up with as an alternative model that you have an advisor board when you do have these sorts of complications and conflicts what if you had an advisory board appointed, representing stakeholders and one sort of level above, one level off to the side. Debra could you expand because I haven’t thought it through.

Deborah: This has come up of course because of public’s perception of conflict and I think this is very important that we actually overcome any sort of the public’s perception that there is any conflict of interest so to avoid that I have in fact suggested that this conception is like a dual board. Now it works in Europe and I don’t see no reasons why in fact it can’t work here and it allows a greater input I think from the stakeholders, greater representation of their views, easier access to the board in factors to what the stakeholders’ views are, particularly significant share holders to provide advice feedback as to what is actually happening out there in the community and I think this is a very worthwhile model.

Bill: M, if I may say so, it is what you call here European club trap and it doesn’t really work that well in Europe and it’s certainly wouldn’t work here. Now, if I may say so, I know you would be …….. about this, part of the reason we pay chief executives so highly is to ensure that they do have a high level of independence from the shareholders and that they can really what they wish within the company without being overborne by the resize (?) of other shareholders.

M: Well Susan, you have worked in Europe with Loopy, have you seen it there?

Susan (S): Well, I never like to disagree with my CEO but Bill I do think that perception is a word we need to use a lot these days, you know, it is a word. I think you really have a point there, we could get an advisory board now, I know Shann is in the Ethics business, he is developing a bit of a portfolio of ethics consultancies and so on and I am sure we could find a few people. We wouldn’t have to pay very much and they could be the advisory board. We could have their photos taken for the annual report and we could perhaps have them for perhaps not for lunch but drinks once a year and they could give us the feedback. Bill, I know you will say this is a bit of claptrap but I do think the old public perception as Debra says, we’ve got to do something about it. After all we are taking over a funny old national organization that some members of the public, strangely enough are still quite attached to, so we have to do something along these lines.

B: I will go along if this is a consensus, I am a consensus fellow. But could I suggest that we first try a probity consultant. Why don’t we get ourselves a probity consultant who could get us advice?

Shane: Now you are talking my language!

B: There is no reason that Shane son’s firm shouldn’t be used.

We are, as Robert says, a family firm, a family of values.

Shane: Bill you have at last taken the hint here, thank you. Besides this advisory board, I think that, Lady chair, that it would be a good idea if they advise on one of these non-executive directors. I don’t really know very much about this business because I am here representing my major shareholder. We have a lot of related-party transactions which the Taxation Department is interested in as well as some of the minority shareholders who don’t get the benefit of those related-party transactions and beside of the advisory board, as I said the condition I was here, there is an independently elected corporate governance board which is elected on one vote per investor so they can provide a countervailing force to the government block and to my own shareholder block and leave onto the chair’s block. And this gives us the perception of the way of managing the conflicts of interests, which we have to deal in when Bill appoints my son’s business to provide the probity check.

Bill: There is a lot of blocking going on here. I thought we were a company, we’ve got to get out there make things and do things and all you do is blocks. What is going to happen if the advisory committee has the union delegate on it? I noticed in this merge proposal that this media has union delegates on their board, a bit like that strange organization the ABC. What’s going to happen when we will be talking about increasing our remuneration and we want to talk about decreasing theirs? I mean how will we able to handle that sort of problems?

B: No, no, we don’t want any advisory board on our board they have their own separate meetings, their own constituency, their only involvement is to identify the key performances under which we give bonuses.

Bill: A part of the merger deal is that we got to take on their union representation on their board at the moment. Now you want to introduce other stakeholders.

M: Barry O’Keefe is a director of Oz Media, he knows the culture there, would you think you could perhaps flick that smoko rep off the board and onto an advisory board?

Barry: Oh no, under no circumstances, I mean, I come from an organization where the desire to be loved as a member of the board is strong. If you are not loved then you are not enjoying your job. It is not about money, it has nothing to do with money. Some people say it is power, but really it is about being loved. It is very a Christian approach to things and if you are loved you’ll do the right thing and Bluey, who is the union rep, knows that company well and besides if he gets the flick, they are out and we got a strike. Oh no no, I mean, you really got to do the right thing. This is what remuneration and nomination committees are about, nominating, making sure the right people get the right job at the right money and Bluey is a block you couldn’t overlook.

M: Talking of Bluey, Mark Lennon is here from the Labour Council; he didn’t know he was going to get involved in this, did he. Mark, could you stick up your hand please, sorry not from Labour Council I meant from Smoko. The staff management and the casuals enterprise organization, Smoko, now Smoko you are going to get a representative on the board of this organization without any trouble couldn’t you?

ML: Absolutely, there is no problem that Smoko can have continuing representation on the board. We might have a look at Bluey, he has been there a few years so might be time for Bluey to move on. There could someone else available, I think, I am available at the present time but I wasn’t fair with these mergers that the best way forward is clearly to make sure you have adequate consultation. But most importantly to look at case studies as we know, as we have heard there has been a couple of these mergers taking place in Europe and in the USA, so if we can get a group together and I could organise a union delegation and head that way, I am sure that it helps smooth the way forward.

M: Thank you very much. Well chair, what verdict does your board came up with. Do you have consensus?

Susan (S): As long as we can be sure that is all voluntary. That they understand that they are there to give advice that we can voluntary accept or not accept. Recommendations, is a very good word. I think, they put recommendations to helps and us to get high rating; competitive advantages that type of things.

B: I think much more work will have to be done at the executive committee, and more fees for the directors on the subcommittees.

Susan (S): The fee issue and of course, I assume that the Smoko delegate understands that a fair fee to be paid to whoever represents Smoko on the advisory board.

B: His wife has just taken the delivery of a new car, so ..

Susan (S): And I do think that the notion of an overseas study tour is most appropriate.

B: And a donation to a union of his choice will be dependant to how he performs.

Susan (S): I think we got consensus on the advisory committee, Debra?

Debra: Of course, this is part of the code, I think, in fact we have voluntary accepted that this is part of this merger, that we will accept the code.

Shane: And we will get Bill’s wife to chair the advisory board wives recreation committee.

Bill: She is overseas, Shann, this is not possible.

Shane: By that way you can keep your order advisory board through their wives.

M: So all major issues have been resolved…

Shane; Except Bluey

M: Oh he’ll get his in the end, don’t worry. So all the major issues have been resolved and the board decides that can accept the government conditions and they’ll have the advisory board put upon them, sort of. They go ahead with this fantastic offer of margin with Oz Media. The stock market of course loves it, all those analysts that have been so frustrated ever since every other takeover fell over the government recommend it, can see that great promises of convergence. The share price zooms all 5 or 10%, the deals is done, it zooms another 3 or 4% but then it seems that there might be a few more issues. It seems that perhaps people forgot about Oz Media and the way it does business whereas the commercial television stations are cutting down their news crews from two-man to one-man, Oz Media is still running 3 to 4-man crews. Oz Media, of course, one of its start regional services is the great rural breakfast where every country town station is gear up with full staff to provide detailed local weather absolutely crucial, detailed commodity news, what exactly the wheat is selling for in.. this week, detailed sales figures from every sales yard in the country. It has become the "bush bible" for many years. Of course, this is only watched by man and a dog and the dog is seeing eye dog anyway and words is beginning to get around the trap about this and the share price is beginning to go down. It seems that Oz Media might have had its own form of accounting on a lot of things, they hadn’t heard about amortization and steam power is rather expensive. There is a little bit of dissatisfaction amongst your major shareholders, chair, from a big bank and a big institution. A couple of representatives come to see you. Here is one now, you are not happy are you?

Susan (S): No, I am afraid I am not happy. The profits that I thought were presented to me at the time of our investment have not been delivered and we were wondering if there is any good news in the future.

Deborah (D): Oh, there is always good news in the future, always good news in the future. This is what we call a transitional blimp but we are having a hard look, I have got here Bill who is having a hard look at how we can ….. ….

Bill: Well, I am preparing to announce today a downsizing program and also a re-engineering program and that would be fully in accordance with our balance scorecard which of course is linked to our remuneration principles and our suicidal guidelines. It is only a question of time.

B: But Bill the advisory board has come up with an alternative strategy, as a loyal opposition to management’s views and they said…

Susan (S): I didn’t know they had met yet!

B: Oh yes, they have and they are concerned about this downsizing that’s happening, they have seen it happening with the banks and now they want us to follow the model of the Bendigo bank whereby we sort of spin off all these rule stations to local volunteer community action groups so they take command and control of their own local media outlets. In that way we get if off our balance sheet and we get the cost off and we increase your earnings and it reduces your scope and scale of operations which may be a threat to your salary, of course, we understand that but, it is a way to get the bottom line in order.

M: There is some very worrying ideas being put forward, ladies and gentlemen, however, let’s kick on with the hypothetical, because this is still not hot enough, the Perpetual Motion Fund gets in your ears, Susan Ryan, they are a bit concerned about your CEO. I mean, who else is going to have to take the blame at the end of the day because the share price is still going down. We haven’t even seen any official figures but the word is out, they aren’t good, they aren’t good at all. Susan, you were delighted to renew your acquaintance with Bill, you were together at university in the student politics. The Young Liberals, you were there together, it was very fine. But is Bill becoming, hum….

Susan (S): Well M, Bill is a big boy and he is also a fellow who likes new challenges and I was over in Chicago last week and there is a terrific fellow over there. I feel these days these global organizations, we need a CEO with an American accent. I think it is very hard, long term, to have a major Australian company run by an Australian, people don’t expect it these days. It is like in the 1950’s when you went to the movies you expected an American accent, didn’t expect an American accent, so succession planning is well in hand.

B: We will desperately need somebody for him.

M: And the rest of the board, are you going to work on them, Susan? Bill are you going to work on them, you have heard there is a plot.

Bill: Well, I think the first thing that one does is ensure that your remuneration contract is in good shape in case you need to leave hurriedly, so I would always have that covered. I am concerned myself about the option price and the market price. There is a distinct gap.

Robert: We can reset those Bill.

Bill: I still have the view though that my new plan to takeover one of the commercial television stations is probably the way forward and we are looking at one of the smaller banks. But I don’t wish to say too much about that.

Michael: How was this going to happen, how was this board going to work this out? Susan Ryan, the chair, Bill, the CEO, the star of Startel, a legend in the country and in the city. Susan Ryan, the chairman, under pressure, ladies and gentlemen, these are the boardroom days of our lives! Could we resolve this amongst the six of you within the next two minutes?

Susan (S): Well, unfortunately, this is a bit late for lunch, or I would have invited my fellow directors to Machiavelli, which is a very discreet place. When you are knifing your CEO, Machiavelli is an excellent place. But this is a little late for that so we might just have to ask Bill to withdraw and go sit outside for a few hours and when we have come to an arrangement, someone will let you know anyway, Robert will.

Robert: Lady chair, I have got a suggestion, why don’t we get your shareholders together with 15% and my shareholders for 15% and go along and talk to Rupert and seen if he would like 30% on condition that he takes Bill out.

Michael: Chair, of course, you are really only here because of Bill, that declaration in Vietnam was for dragging you out when you were wounded.

Bill: I am only here as condition the democrats’ vote that they sold that 15% to our chairman’s company.

M: and Robert, you know, the Bill & Bob Bashing Show from Tombarramba Tech.

Robert: We were not really that great mates, it is a bit difficult, but I think there are great opportunities for Bill as Susan said and I can see real prospects at about 10 o’clock tonight. I think Bill be on his way to something much more glorious than this. Deb and I have in fact been actually been to Machiavelli, we have done a little bit of a deal and whilst we like Susan’s idea, we feel there is a few other shareholders in the pop we need to talk to who might come to the party with a new leadership team. Did I say team? I am sorry Susan, just a new CEO.

Susan (S): Yes, well and I am very concerned given my position on those significant blue chip companies and also my position with the government that I do everything to preserve my one reputation and so I will be looking at the best interest of this organization going forward in any decision I might make in regards to the CEO.

M: And Barry O’Keefe, do you remember that hospital pass?

Barry: Look, I tried not to go into the details as to how I got into hospital but he just dumped me on the doorstep and I have not forgotten that. I don’t hold any grudges and as an independent director and concerned with nomination and remuneration, I am conscious of the need to be very like Debra, very protective of my own reputation. I do recognize that there comes a time that loyalty can be a misguided thing.

M: Well, it is not looking good here, Mr. Beerworth, but before the board can act, news percolates from the accounts department, the rumours the market had been hearing, that mysterious way the share price had been falling without any official figures out there. It looks like the market did know something. It looks like, in fact, it is much worst than anyone had imagined. The figures are going to be appalling, Oz Media is blowing a bucket, and convergence is not working. Do you really want to sit there with a mobile phone and load down Rural Breakfast? Heavens no. So the board has other problems at the moment, can they possibly get rid of the CEO when there is bad news about to hit, Susan Ryan?

Susan (S): I think this is the best time to get rid of the CEO really, I think this is a distraction particularly if we can do some medium management in terms of Bill having a few personal reasons have come up, requiring him to suddenly exit the contract which we sign again quite recently. I just think that we focused on Bill’s personal reasons that will distract to some extents and people might think that the price of the shares went down because of Bill’s personal reasons.

M: Well, but Shann Turnbull’s audit committee has actually been turning up a few other things. It seems that the management team was very keen for this merger to go ahead. This company has been very generous with the options’ scheme. The management team in fact had not quite disclosed some of the problems that maybe could be resolved down the track at Ox Media. Shann Turnbull it beginning to look like it is really going to hit the fan, you have a reputation as an ethicist. If you can’t stop it, is it time for you to do what?

Shane: I’ll go in my watchdog board, which we set up to go to the shareholders and to declare all positions vacant.

M: Chair are you going to let him do a thing like that?

Susan (S): No, I think Debra, it is time that you and I went to see the Minister.

Deborah: Absolutely, those contacts in government can never go astray and our Prime Minister does look good in a bush hat.

Susan (S): Well, yes not as good as the slough hat but nearly as good, his second favorite headwear. I think this is time for one of those speeches about Australia.

M: Well Shann, it doesn’t look good for the governance committee to pull on anything in public, it looks like you have all been blocked out of any public stand on this, what do you do?

Shane: Besides resigning I think their chairman’s leadership is excellent, you need to massage the government connections, she has very close connections which we won’t deal into too far and I think the whole strategy of the government of privatization is being proved without substance and it’s got to be buried in some way and the example of what they did in England with Railtrack is a good thing to do. When they lost $500 millions they just mutualised and so it had no shareholders’ funds whatsoever and the so the government took the bucket and the voters – of course we’ve got enough shareholders to elect a government in Startel, with our stakeholders we are being influential politically and we’ve got to look after the voters. So the financial bottom line really doesn’t count at all, it is the "feel-good" feelings with the people in the bush. We can cope with the "instos" and shareholders, they don’t have many votes, and we’ve got to look after them. We will do a buyback of the minority shares and we will employ Bly investment bank to do a clever restructuring to have an infrastructure fund set up and a management fee which we will capitalize for future years to dress up the balance sheet to show that the new organization is win-win for all players, especially for the government and ourselves on the board. The board might of course be sacrificed in this process.

Bill: I think it should be understood that I have been profoundly misled throughout the whole of these financials and I can only rely on my CFO in these things.

M: Of course and the executive director who is the chairman of the merger committee but it does further than that and as the audit committee digs deeper, Shann you find that there might have been something a bit stronger than aggressive accounting to get this up. You are the chairman of the audit committee; you said other than resign, what about resigning?

Bill: Never resign, can’t possibly that unquestionable, I mean we are here to represent and this is our duty to represent the shareholders’ interests, shareholders’ values and to maximize that, work on that, walking away from it we could be sued from the shareholders for not facing up to fixing the problem.

M: But if you are still sitting here when it hits the fan, do you really can be sued by the shareholders, can’t you?

Susan (S): I think this is the auditors, I think.

Bill: This is not a question of insolvency M, after all, no one knows the company as well as we do, if anyone can put it back, it is us.

B: In fact we will go with a positive proposition to the government. We will be the savior of this company, in fact, we, the board, are taking it into the future to secure it from the blight force by them and I think this is our job. Our job is to look positive, affirmative and to take a proposition to the government. Save them, save us.

M: A funny happened about the government.

B: It changed!

M: Well, George W Bush decided not to go to Iraq, so the Australian army had to go on its own with the Downer of Baghdad sending all available free troops to Iraq and that platoon was not seen again. Of course it caused political disruption, there was a change of government. There is a new government in Canberra now. Legislation has been enacted, protecting workers’ entitlements from this management with personal individual liability attaching to board members as well as the company.

Susan (S): Not the principle of retrospectivity, oh no. That’s for future boards.

M: You know Susan you can’t trust those comas, Susan, you can’t trust.

Shane: And as soon as that legislation came in, board advises all to make us the make a special issue of partly paid shares to all shareholders, $1 share paid to one 1¢ and the contingency liability was the shareholders’ cost.

Susan (S): I think Shann is absolutely right there.

B: Certainly the recapitalisation is the key, M, no question.

M: Well, what about the 60% or 70% over staff ratio you were working on at Oz Media what’s Bluey telling you about it Mark?

Mark: Bluey has moved on, he is not on the board any longer.

B: He has gone into parliament.

Shane: He has to his house on the north coast. Could I say something about this? I told Bill about this was going to happen on the way to Los Angeles on the plane and also told him to watch his back. The one thing I want to make sure is the extra week fortuitous service that he has guaranteed us on that plane and I want to get that in writing Bill before you depart but certainly we do not have any belief that there is over 70% over staffing as a matter of fact we are concerned about the number of contractors that Oz Media has been of late.

M: Anyone feeling like resigning yet?

Barry O’Keefe: Yes, from day one, I have been worried about this show. It has not always been reflected in the vote because the chairman and the CEO they do the minutes and the others don’t read them and so nothing is new. In my position you got to think of the principle, what is the principle and you’ve got to stand up for principles and besides which if you don’t jump off in time you might finish up before a Royal Commission.

M: So how do you go about resigning then Barry O’Keefe?

Barry O’Keefe: Oh very easy, I just write it down on a piece of paper and give it to the chairman. The question is the timing, that’s the important thing. To make sure that you don’t damage the company by your resignation at the wrong time and generally quickly is best and so I think tomorrow.

M: What do you say to shareholders about your resignation?

Barry O’Keefe: Well I start off by saying that of course there is a question of confidentiality and decency but a man must speak the truth and there will be a place when I can do so without damaging the share price and I can tell them that. But that won’t be before the government takes over again.

M: Has any shareholder ever seen a director promised that upon resigning? No, there is in fact another director on this board. We haven’t seen him because they never actually tell him when the meetings are on or they do but not where, or where but you know it can be sometimes, communications can break down. This token director, when he finally gets his board papers, a couple of months after the event, he always seem to get the agendas about 3 seconds before. This particular director is appalled at what is coming up through the audit committees when somehow it reaches his ears. What this director do, should this director take on the board? What could he do, Susan, what a dangerous person like this do?

Susan (S): Well of course some dissident directors have been known to actually engage with the media but even a fellow such as this, I don’t know if he would stoops to that and of course if he did we would be very keen to take any legal action we could to prevent anyone in the media in the receipt of any of this information from doing anything with it and if they did something with it, we would take great legal action against them to make sure they end up in goal. Apart from that I think Debra, could you take him to lunch at Machiavelli?

Deborah: Well, I am having some difficult time of course at the moment because of the change of government and I am not quite sure what my position is and I am doing a lot of fire fighting down in Canberra as we speak and trying to sort of sure up my position within this new government and of course on this very board. Having that former relationship with that former government so I am a little distracted at the moment.

M: Well Bill and Bob, how did you two ever let the fence-cracker Don Do Goode director onto the board. What can you do about him?

Bill: I think the first thing is to get him in and have a little bit of chat. I think Susan is right, it is critically important above all to maintain the corporation. Any untoward publicity is going to be damaging to the shareholders and therefore we should talk to him and have him play ball. If he won’t then we should, I think with some subtlety at first, remind him of the legal action we can take against him. His failure to attend board meetings had nothing to do with us or his incorrect address, the mere fact that he didn’t read the agenda until it was too late puts him exactly in the same soup pot as us.

M: quite so, quite so. Well, there is an AGM coming up, while Loopy and AOU are major shareholders, and of course there is Bly Bank with so many interests and one big bank with so many other interests. There is also perpetual motionsters, there is also a very large mums and pops shareholder base. Maybe Don Do Gooder does get active, maybe somehow through a legal minefield; a motion does get on the paper to turf out the entire board. Shareholders, what would you think of that? How would you vote the entire board to go?

Bill: I am gone.

M: One is already gone; this is one less motion to vote on. Can you afford the risk? Your shares are now down to $2.50. Can you afford the risk to get rid off your entire board at this stage? Sure they might have caused the trouble but they are the only ones who know how to fix it. Do you get rid of the lot or do you stick with them? Those in favour of dismissal raise your hands; those who would keep this board raise your hands. AOU with 15% is in such deep trouble it is in the hands of administrators, its shareholding is up for grabs, pick up by some bottom feeders, some nasty investment bankers. They are not very keen on this board, they of course went to Tumut Tech and they have never forgiven any of you. You still got Loopy there with 15%, but Loop’s vision of one big phone company right around the world with convergence and everybody on the other side of the earth watching rural breakfast, channeled down from Australia. What’s one person’s neighbours could be another person’s sheep farming Galagenbone, he is not too happy any more because that has not worked either. So with 30% gone against you, I am afraid this board is gone. So now, that’s all over, fights have been done, administrators put in for the time being. Don Do Gooder now a shining light in the Australian corporate history what are we left with at the end of this exercise? Still in character, ladies and gentlemen, chair what would you have done where and when?

Susan (S): We should have found grounds for reporting Don Do Gooder to ASIC earlier on for his failure to attend meetings. Now this is a very agreed corporate governance requirement that people attend meetings and I think we should have got rid of him earlier.

M: CEO?

Bill: I think clearly our corporate communications have been wanting. We have not been able to communicate the truth, the real facts to the shareholders and if I had my time over I would have done that far more effectively. There is a great danger in what is called shareholders’ democracy; people being able to vote their shares when they don’t rally understand what is going on. We should have sacked the b….. half at the end of the table first. Highly destructive for a good company, the second things we should have never have allowed the advisory board near us and the third things I should have sold my shares earlier.

Deborah: well, I think we should have sacked the auditors much earlier and it would have created that "smoke’s screen" where in fact the shareholders would have been so focused on the potential forth big firm going down that it would have actually taken the heat off the board.

M: Of course, of course, you are in the media, you didn’t know what you were buying.

Shane: We should have developed much stronger political connections for the government to give us a bailout.

M: Bluey could have been worthwhile keeping on for a lot longer.

Barry: I told you Bluey was a good fellow!

M: Barry O’Keefe you are the only one that’s come out this lot looking good. You quitted, you walked. People will look at you and say obviously that man resigned on principle.

Barry: well I might a job on the new board.

M: More than likely, because Don was never there.

Well ladies and gentlemen I got to tell you what happen next. Loopy decides to come back into the fray now that the share prices are down to 10¢. Loopy picks up the lot. The new labour government doesn’t want to be associated with such a sad part of Australian corporate history and quits its shareholding. Besides he was a left wing at Smoko and wrong faction guys. Loopy moves in, he considers there is no value in the bush; he closes it down with no telephone services in the bush, well you were heading in that direction earlier on, the drought took the last of them. The community service from Oz Media was never really there, I mean seriously, Neighbours versus Oprah, and soap wins every time. So we are left, ladies and gentlemen, with Startel now part of the Loopy world, excellent time calls, at a rising rate from a very caring/sharing monopoly right around this earth. Oz Media is gone, no one really missed it and our cast of characters here today, I can now reveal, I only knew their titles before we began tonight. Ladies and gentlemen please thank them while they still in their Startel clothing!

May I now hand you over to Terry Sheahan who will address them by their real occupations’ names and I hope characters maybe.

Terry S: Thank you Michael and I think while he is still standing, we should give Michael a very big round of applause. If he is the poor man to Geoffrey Robertson, I’ll take him any time.

It is now over to the audience to direct some questions to the panelists in their real personas and I think if you pick up your program of the evening you’ll get a short biography of our panelists but of course Susan Ryan is in fact the Honourable Susan Ryan AO, personally involved in corporate and community life after a distinguished political career. She has been involved heavily in the NRMA in its subsidiary and of course in the superannuation industry. So please give Susan a warm welcome.

Next is the dynamic duo from Tambaramba Tech. Tambaramba is not in the Monaro I might say to you Mr Pascoe, we are very possessive on the western side of the range but Bill Beerworth has been around for quite a long time, he is a well known lawyer in the city, now an investment banker and a strategic consultant, formerly a distinguished federal public servant and a partner in a major city law firm and Bill thank you very much for supporting us again tonight.

The chair of the merger committee is Dr Robert Fitzgerald, I am, now the commissioner of community services a watchdog body in this state, formerly a commercial solicitor and company executive and thank you Robert for joining us tonight.

Deborah Smithers is a lawyer and now a very senior executive partner in KMPG and her area of practice is focused on maximizing corporate performance. Deborah thank for doing your best with these fellows around you.

Dr Shane Turnbull is an MBA from Harvard and an author, committed to education of company directors and actively pursing that as a genuine cause in the community since 1975, thank you Shane.

And of course Bluey’s mate is the Honourable Justice Barry O’Keefe I am, who came from Oz Media sort of out of the clouds at a very late stage. Barry would be well known to you in a number of capacities, as a Supreme Court Judge as his day job, has been president of National trust for some time, he is a former commissioner of independent commission against corruption and is was also president of the Bar Council, president of the local government association and was at one stage in his distinguished career an acting leading hand porter at Central Railway Station and so please welcome Barry. I think he was also former Mayor of Mosman.

I think we should also thank Mark Lennon from the Labour Council and behind the scenes Michael O’Neal, Donna Warner and Catherine Williams in particular for helping us put this together.

So thank you all. And the suggestion is now that those of you who have been listening while these people were in roles; you might want to ask some questions to them in their real capacity.

I would like to ask a question to Susan Ryan re superannuation vote (couldn’t not get the question)

Susan R: Well the history of superannuation’ funds voting or directing their money managers to vote on their behalf in Australia has been pretty poor. It has been the case for some time in the Institute of Trustees in which I am involved we have educated trustees to understand how important it is. I think you are going to see a very different program of action by superfund trustees now. While things were going pretty well, while the returns on share investments were very good, it was very difficult to engage trustees in the idea that there was something else they should be doing as well as all the things they do by way of their duties. Now that we have had all these corporate failures including in Australia but also in the USA where pension funds that we had looked at with some admiration because of their voting and so forth, Carlperson (??) alike, still investing in Enron, still lost huge amounts in Enron and Welcome. Now trustees are saying how can we protect the retirement savings of our members. Media puma Mark Lennon’s members, low paid workers in our community, how can we protect them against the kind of things that the board of Startel has just been doing and the only really is to become active investors to equip themselves with the understanding on how to use a GM, how to use proxy voting, how to use engagement with boards in order to stop all this. We haven’t done much up until now but I think you are going to see a different story from now on.