The move to make Australia a republic failed, not because the vast majority of Australians didn't support it, but because they didn't trust politicians to do the job.
The American people are still coming to grips with the reality that 50 years of ham-fisted US foreign policy has angered some people enough to hijack aircraft and crash them into the World Trade Centre and the Pentagon. What they are also coming to grips with is that the American way of business life is under far more serious threat. A potential lethal blow to the American way of life and, by implication the rest of the world including Australia, is the fall-out from Enron energy group, the biggest corporate collapse in US history. Enron has the potential to be one of those defining moments in history. That is a big statement, but so is the magnitude of the Enron scandal - and it has nothing to do with the amount of money involved, allegations that the highest levels of government received monetary rewards, or that a reputable accounting firm put money before good judgment. It has to do with credibility and trust. The entire capitalist system is underpinned by those basic assumptions. Investors choose a venture to get a return on capital, but there is an inherent trust that although the business may not prosper, no one inside is actually stealing their money.
Shareholders intrinsically believe what directors tell them as to the prospects of the company and they trust the board to do its job. The events at Enron, HIH and One.Tel threaten that trust. What occurred at Enron would be the same, as one notable financial journalist described it, if say a company the size of BHP provided millions of dollars to re-elect a Howard Liberal Government, then demanded a seat at the table when energy policy is discussed. But the company is a sham and insiders including the board, government ministers and top management sell their shares because the whistle is about to be blown. Trust is an intangible asset. You only judge its worth when you no longer have it. Big business is on the nose. The accountancy profession is in crisis. A financial statement is rapidly becoming a creative exercise rather than a concise document on the state of affairs. Regulators aren't regulating and self-regulation is under threat. All Big Five accounting firms already are - or about to be - put in the dock and questioned over practices that may or may not have contributed to collapses and the loss of shareholder dollars.
Directors are under fire for approving huge remuneration packages for executives who walk away just as the company hits the wall - while creditors and shareholders take the losses. Shareholders are increasingly questioning the adequacy of the role of directors as guardians of their capital. In an atmosphere of trust, failure is accepted. There have been corporate failures before and there will be many more. Entrepreneurship is not at risk as long as a level of trust operates. Business and politics have always gone hand in hand. The public has also become used to the occasional scandal, the pay-off of a government official, legislation that favours a particular business interest and the feathering of some executive's nest at the expense of employees and shareholders. This is condemned - but regarded as an isolated incident. What is occurring at Enron - and to a lesser degree in the corporate scandals in Australia - is a growing suspicion that these are not isolated incidents but a massive failure of governance on a government and business level.
A recent poll found 79 percent of Americans believe executives put their own personal interests ahead of shareholders. The move to make Australia a republic failed, not because the vast majority of Australians didn't support it, but because they didn't trust politicians to do the job. Loss of trust does not happen overnight. It is a process of erosion. And the victims will be the executives, the accountants and the directors who work honestly and diligently to serve the interests of the company and its shareholders. The government response will be to introduce more regulation. Regulators will be given more teeth. The system whereby reputable professions are accorded a level of trust to regulate themselves is under threat. It is inevitable that Australia supports the ongoing fight against terrorism. The war against the loss of trust in business, government, corporate governance and our institutions is a far more serious battle - one we cannot afford to lose.
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The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.