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Drain the (corporate) swamp

Today, I celebrate – my home town of Melbourne has recorded zero new infections for the second time since June 9, 2020 and zero deaths. A consecutive day of double zero. My Melbourne band Pressure Drop is planning a live streamed gig soon – our first time playing since March. Details will come when we know more about when we can do it. Something to celebrate in a bleak year. Today I am writing about the underside of neoliberalism though. Nothing to celebrate about this at all. Revolving doors, corporatisation of public service and introducing the excesses and corruption that is endemic in that private sector, more on that, and a federal government that is refusing to introduce a federal corruption body despite the evidence of widespread malpractice at that level. Why this matters is because to build a better world we need to reverse the demolition of the traditional public service by the neoliberals over several decades, which has turned a once wonderful bureaucracy (departmental structure) from a public service delivery capacity into a contract brokerage for outsourced and deregulated service delivery units, chasing profits in the private sector and cutting as many corners as they can get away with. With lax oversight these days, they can get away with a lot. And when public agencies start behaving as if they are corporations then things really come unstuck. And then we see the alarming necrosis that exists at the top levels of Australian corporations. No wonder we have just had Royal Commissions into the banking and finance sector and into the (privatised) aged care sector which have delivered such shocking results. Nothing to celebrate at all.

In recent days, the question of establishing a federal corruption commission, along the lines of the various state commissions has arisen again and once again the federal government is demonstrating its reluctance to do anything.

This is despite news over the last few weeks of:

1. Australia Post bosses and the board handing each other expensive Cartier watches as gifts for doing their jobs, which are hugely remunerated anyway. This lot have at the same time been cutting services (postal deliveries) and cutting employment of the posties who actually slog it out each day.

Update: This was revealed just after I posted this entry – Luxury hotel bill controversy for Australia Post boss – it is hard to make this stuff up. She has to go.

2. The top executives in the Australian Securities and Investments Commission, the public body which operates as the “corporate, markets and financial services regulator” handing themselves out massive payments, allegedly beyond the limits set by the Remuneration Tribunal.

The CEO was given a “more than $118,000” to receive “personal tax advice” (Source). My tax agent costs me $180 a year or thereabouts.

His deputy, who resigned yesterday, was paid more than $A70,000 over the last two years as a “housing cost payment” (Source).

This body (ASIC) was singled out by the Hayne royal commission on finance etc for taking a soft approach to known corporate corruption, preferring to do private (undisclosed) deals with the criminals rather than send them to the cleaners in a public way.

As one commentator, who really studies this sector, wrote (Source):

There has been a cultural problem at ASIC for years but it has worsened recently with disharmony at the top. It has botched a series of appointments over the past few years that reads like a script from Yes Minister.

The latest CEO, who must resign as a result of the revelations in the last week, was just appointed out of the blue by the Government after it botched the appointment process.

The Government also “blindsided the regulator with a decision to trash responsible lending laws and strip ASIC of responsibility for bank credit regulation”.

These are just the most recent cases of deplorable practice.

We also know that it is widespread in a public sector that ‘corporate’ behaviour has crept in and has compromised the quality of service delivery and capacity of the public sector to play a key role in moving us to better places.

Given we are in the midst of a dangerous pandemic, which has really undermined our societies, the study published in – Public Health Research and Practice (September 25, 2019) – The revolving door between government and the alcohol food and gambling industries in Australia – was rather prescient.

The paper was interested in studying:

… the ‘revolving door’ phenomenon, whereby individuals move between positions in government and positions in the Australian alcohol, food and gambling industries.

The motivation was clear – “The harmful impacts of alcohol use, unhealthy food consumption and gambling on public health are well documented”.

Which means that we need “strong, evidence-based public health policy”.

However, it become obvious that that need “runs counter to the interests of companies in the alcohol, food and gambling industries”, and those industries are continually trying to distort policy to advance their own interests, even if that compromises the general well-being of society.

That is the nature of capitalism.

One strategy is the “revolving door” syndrome:

… whereby (typically senior) employees move between positions in government (the regulator) and positions in industry (the regulated), or vice versa.

It is a global problem.

The evidence in Australia is that “Industry’s privileged access to government threatens unbiased policy making and creates an imbalance between the influence of industry and evidence-based public health advocacy.”

Through a series of interviews with key players, the study concluded that 36% of registered lobbyists were “a former government representative”, many of them senior MPs.

Their overall conclusion was that:

This study suggests that the revolving door that sees people move between roles in the Australian Government and alcohol, food and gambling industries is commonplace, creating a range of ethical and moral problems, and posing a risk to public health.

While this study was specifically focusing on a few sectors, the problem generalises and has been increasing over the last several decades.

And governments have rarely enforced sunset clauses (“cooling off periods”) between government service and corporate service.

A previous study – ‘In the family’: majority of Australia’s lobbyists are former political insiders (September 17, 2018) – found that “More than half of all Australian lobbyists previously worked inside government or for the major political parties, with one in four staffing the offices of ministers, parliamentary secretaries or backbenchers.”

I have been accumulating evidence on this phenomenon and was interested in a report that was released earlier this week (October 25, 2020) – Many are called, few are chosen – which was published by the organisation – Ownership Matters, a “governance advisory service for institutional investors based on local insight and years of corporate memory”, located in Melbourne, Victoria.

Effectively they seek to promote the interests of corporate owners rather than the management or the board.

Their report exposes the ‘corporate club’ that exists in Australia where corporate boards are made up of a group of ill-suited individuals who lack the talent and capacity to do the job properly.

This club is male dominated but not exclusively. The lack of talent is not gender-biased.

Ownership Matters:

… analysed the pool of 1777 executives and 4143 non-executives who have served on ASX 300 company boards from 2005 to the present day.

They wanted to:

1. Explore the rate of inclusion of women in management – that is, gender diversity.

2. The “association between board turnover rates and company performance”.

3. The “propensity of Australian companies to appoint from within the existing pool of ASX 300 directors” – that is, the ‘club’.

Their overall findings were that while the proportion of women in director positions rose marginally over the period:

1. “Boards of the worst performing companies refresh themselves only marginally faster than companies that perform the best.”

2. “There is a strong bias toward appointing existing ASX 300 directors to vacancies”.

3. The tenure of directors lengthens “with each position attained” – so once your in, your in.

Apart from the relevance to shareholders who confront the boards at annual meetings, this report bears on the sort of interests that I have – making government policy work better and benefit a wider group rather than be captured by segments of the corporate sector.

For years, we have been assailed by spivs (politicians, corporate lobbyists, etc) telling us that privatisation, outsourcing, public-private partnerships and deregulation (the self-regulation myth) would transfer decision-making to market-disciplined corporations who would deliver the best service at the lowest cost.

So a range of public services were sold off and are now being delivered by profit-seeking corporations.

The evidence is fairly clear that this era has not improved things. Rather the contrary across a range of sectors – telecommunications, transport, energy, water, etc.

And this report from Ownership Matters provides some insights into why the outcomes have been so poor in many sectors.

The report makes it clear that the corporate decision-makers are not up to it and come from a restricted ‘gene’ pool (the ‘club’) where their own self-aggrandisement and wealth capture comes before anything else.

And it also bears on the ‘market discipline’ argument.

The boards of companies that performed the worst barely changed relative to those who performed better.

It shows that shareholders are often not able or are reluctant to throw out boards of poorly performing corporations. It is clear that once a person gets through the door of the ‘club’, they can expect a long period of excessive bonuses, director remuneration and the rest of it, regardless of how they perform.

And getting through the door is a function of which school one goes too and daddy’s mates.

And once in the ‘club’, the evidence clearly shows that multiple directorships await the successful entrant. So the lack of talent is spread broadly across the corporate sector.

Lawyers and accountants dominate rather than industry specialists. There is very little cultural diversity or skill diversity.

There has been a long debate on whether workers should have compulsory positions on boards of companies.

Last year, a growing scandal emerged where large corporations were paying huge amounts to their corporate executives but underpaying workers according to their legal obligations.

Several cases are working their way through the courts now to secure the billions of dollars of backpay that is owing to workers.

The evidence has emerged that (Source):

… boards of too many ASX-listed companies have failed to govern adequately for employees outside the executive team.

The banking and aged care royal commissions have exposed rotten cultures in organisations and cases of companies squeezing employees too far in order to boost profits.

The Ownership Matters report reinforces this view.

If boards were required to have significant worker involvement – that is people who have detailed knowledge of what the firm actually does, rather than seeing the firm as just a gravy train to advance the personal wealth of the directors – then things might change.

I would see that as a first step towards improving the situation.

Conclusion

A progressive agenda not only has to end the corporate capture of the state legislative and regulative machinery but also require corporations serve broader interests, which includes their own shareholders.

And this corporate cabal of lack-lustre, self-serving revolving door individuals have been carping for the last few months about the Victorian government’s tight lockdown that has been the most successful defense against a second wave anywhere in the world. All the corporate voices wanted was to ‘open up and let us get on with business’.

Which we know translates to – who cares how many vulnerable people die as long as we can engorge ourselves with corporate excesses. I am glad the Victorian government had the steel to ignore them.

That is enough for today!

(c) Copyright 2020 William Mitchell. All Rights Reserved.

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    This Post Has 15 Comments
    1. IMHO, if there is to be a law to force Union reps. or other workers reps. to sit on the Board of companies, then the number of such should be 3. Just one is too easy to bribe or turn with threats (i.e. “offers he can’t refuse”). Five would be even better.
      I see the whole idea as being to put ‘spies’ on the Board so that what it does, isn’t hidden behind closed doors. With 3 spies, if one leaks a dark secret, the comp. doesn’t know which one it was.
      .

    2. The age old battle of financial capitalism v’s industrial capitalism that has caused so many world wars regardless what the historians say. Historians are trapped in their own GROUPTHINK and The sciences and arts. It’s not just economists who suffer from that syndrome. GROUPTHINK is the glue that stops everything from falling apart. The cement the upper classes pour on the bricks that keeps their house in order. So they can pass their capital gains onto their siblings and entrench their power.

      The age old battle of capital v’s Labour. The age old battle of Christians against muslims. The age old battle of the West v’s the East. The more I reflect on my life nd look back. The more I realise democracy is a sham an illusion. An illusion we are forced to buy into. When we are taken away from our parents at a very young age and educated to accept this is the way things are. Resistance is futile, assimilate or be punished.

      In 2020 voting changes nothing the establishment learns from their mistakes. They absorb their mistakes and learn from them so they can never be repeated. What used to be changed by a majority of votes is simply no longer the case. Democracy has morphed into a circus and the clowns are hand picked and then trained to promise change like a performing monkey and then make sure they never deliver it. Rewarded greatly at the end of it as they are handed the keys to whichever revolving door they desire. Then enter like Alice in wonderland into a world of sociopaths and psychopaths. Who divide their capital gains between them and then pass their disease onto their children and grandchildren.

      As we have found out over many years. Not to mention the most recent coordinated attack over the last several weeks or so. Where our opponents seemed to have got organised and came together and mounted yet another financial capitalism / geopolitical attack on MMT. If we can’t pass it on via the ballot box then where do we go from here?

      As it currently stands in this moment in time. Anyone who thinks we are going to change things. I think it is time they had a meeting with themselves and face reality. Our opposition is as strong as it ever was and on reflection we have barely scratched the surface. You’ll see, after the virus when they slash spending and attempt to cut deficits and debt. With songs of the past blaring from Alexa and our dumb phones and dumb TV’s preaching the gospel. Financial capitalism will lead the charge, leaving industrial capitalism buried 6 feet under a sea of mud.

    3. If you would like a snap shot of how financial capitalism learns from its mistakes.

      Look at an old photograph of how the police dressed in 1908

      Look at how the police are dressed today in 2020.

      Learning from its mistakes in a nutshell.

    4. Yes, and in a lot of cases with the Job Keeper “business stimulant”, it is nothing more than corporate welfare, I personally know of a case where they ( the business) re structured the pay so they could claim JK

    5. That will be the next scandal.

      Business paying people off and then keeping the furlough money for themselves. There’s been huge amounts of money being credited into accounts and if they are keeping track of where it is going then slap my arse and call me Shirley.

      Well not a scandal because there is no way they will never find out what really has gone on. Filed away in the whitewash box as the larger companies swallow the smaller companies as financial capitalism breaks medium sized companies up and sells the pieces off like a box of chocolates when it’s all over. Screaming competition as the monopolies and competition authorities turn a blind eye as ever bigger monopolies are formed. Whilst they get a few quid and share options rammed down their throats to keep quiet.

    6. Great article. We need to really start chipping away at their infallibility as portrayed by every form of media outlet. That is a good cause.

    7. @Derek Henry,

      Your first comment reminds me of a passage I read lately by Lenin, “A democratic republic is the best possible political shell for capitalism, and, therefore, once capital has gained possession of this very best shell (through the Palchinskys, Chernovs, Tseretelis and Co.), it establishes its power so securely, so firmly, that no change of persons, institutions or parties in the bourgeois ­democratic republic can shake it”

      As for voting, Lenin said, “They [referring to SRs and mensheviks] themselves share, and intill into the minds of the people, the false notion that universal suffrage “in the present­ day state” is really capable of revealing the will of the majority of the working people and of securing its realization.”

      I am not trying to say Lenin is always right. However, looking at reality, I cannot help but agree that our teachers and professor and so on are performing this con job to further this rotten system.

      Clearly, people do NOT vote themselves into poverty and destitution. But that is an insane idea that must be a logical end point if one accepts democracy in its current form.

      Power makes things happen my friend. Lets build connections, unions, and educate the public on MMT & socialism etc. We have to forge ourselves up and spread the word.

      As the primary societal contradiction of class contradiction sharpens, we will have easier and easier time. We can be sure of this.

    8. @ Derek Henry

      Dear Shirley
      ….

      Please tell me it can’t really be as bad as that, can it? Are there no bright spots at all?

      (One that occurs to me is that I shan’t be around for long enough to find out. Some “bright spot”!)

    9. @Steve American: The suggestion made here Oct 27,2020 13:57, may have been helpful 45 years ago when unions really were a tight knit band of brothers and sisters; however, in today’s world of unions that type solidarity is severely degraded.
      Decades of corrosive effort by the neoliberal establishment has changed the unionized work environment so much as to be unrecognizable to its past.

      Today’s union worker can be as exploitative toward the non union gig contract workers and newer union members they operate in parallel with, as capitalist bosses have been historically. Many union members in leader positions were long ago co opted by their immediate supervisors and managers, and have already assimilated all of the neo liberal attitudes and narratives.
      So good are the relations, many times a union steward or lead hand is promoted to management ahead of more qualified individuals as reward for services rendered. In places like post offices such widespread use of the poorly qualified can become a root cause of failure of the entire organization as a service provider, much the same way once valuable infrastructure neglected through neolberal austerity rots and crumbles.

      it’s hard to see how putting them into the pit with real vipers would be helpful, it would only allow for the ego’s of 3 to 5 individual workers to be stroked further into submission.

      A lot of work will have to be done to repair the fabric torn by the neoliberal era. A major cultural shift were neo liberal views are quickly dismissed as quackery by all, is the only way out of this disaster.

    10. I think that Lenin’s critique of capitalism would be most pertinent – if only it hadn’t come from him.

      As it is, it’s merely the pot calling the kettle black. Not only did bolshevism do exactly what he describes capitalism (once ensconced within the “shell” of democracy) as doing, but it did so at the cost when it had finally run its course of an unimaginably-gigantic toll in human lives. Human lives counted no more for Lenin than for Stalin, and that’s saying something.

    11. Bill’s argument here crystallises what Neoliberalism stands for. The hollowness of its stated Mantra is becoming clearer every day. The laziness of the political class, that of giving away what are real and necessary benefits for the vast majority in favour of corporate largesse and spin is too obvious today to defend.
      Instead of governing for the common good, privatization asset strips, hollows out pertinent governance and fails to fulfill its obligations. Take the Trump based disaster regarding CoVid 19.The Neoliberal attitude is one of Laissez faire unless profit is threatened. Voices all over the USA have belittled Fauci and other experts. They do not aim at a plan to resolve the troubles to improve the pandemic response, to save lives etc.,
      Neoliberalism fails the basic tests of adequate response. profit can be no excuse for failure to deliver the services required. But it is showing enough incompetence that the governments need to get off their back foot and reverse course, a s a p!

    12. I hope you are right Tom.

      Watching Michael Palin sort through his sock drawer would be far more interesting than voting for these liberal clowns that call themselves left wing nowadays.

    13. I wonder if the association of profit with efficiency is not another major case of groupthink framing language?
      I don’t know if any engineer would agree with the proposition that the larger the leak of the primary lubricant the more efficient the engine.
      For any given product it would appear clear that, after fixing all other factors, the lower the profit, the lower the price.
      Associating profit with efficiency is highly counter intuitive indeed.

    14. Most Victorians can’t remember the State Electricity Commission, The Melbourne and Metropolitan Board of Works and the other government utilities lost to history.
      Not perfect but set up and operated for and on behalf of the people. The old saying goes “you don’t know what you’ve got til it’s gone”.
      Neoliberalism has been a monstrous failure for most of the populous, profit before service is in its death throes but what will rise from the ashes?
      That’s supposing there is a habitable environment left to rise from.

    15. It’s almost to the point now where the Australian government can’t make a new appointment without running past Goldman Sachs for approval.
      The amount of people who worked for that firm suddenly popping up in a government advisory or regulatory capacity seems over represented to say the least.
      It works the other way as well. Companies that specialise in tax minimisation dangling carrots to ex ATO employees…….and so on.
      Economists , Accountants, and other financial stream students in general will do anything for a dollar and they don’t care how it will impact those doing it tough.
      Maybe admission criteria to course should look at addressing this issue.

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