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Monday Message Board

January 4th, 2010

It’s time, once again for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language.

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  1. David Booth
    January 4th, 2010 at 20:08 | #1

    Productivity Commission final report on executive remuneration. A toothless tiger in the year of the tiger.
    I wonder if Government Inquiries can ever lead to better policies? Firstly they are always undertaken by conservative members of the elites so they only provide conservative recommendations. Then their terms of reference are written by the politicians to exclude unsavoury recommendations. Then after a suitably long gestation period a draft report emerges for discussion and after consultation with the victims and beneficiaries of change and the final report is watered down. Then the report is submitted to Government for consideration and then the resulting recommendations are further watered down to a politically acceptable result. So we have a non result after a huge delay. Rudd then uses triangulation to “get the balance right” so every stakeholder is partly happy, partly unhappy. How does the result compare to the original objective? Who can even remember? The issue is no longer relevant due to the time lag. Too cynical?

  2. Alice
    January 4th, 2010 at 21:23 | #2

    @David Booth
    This report is tragic but what did we really expect from the dregs of Howards productivity commission except perhaps to be made aware that it needs new staff who arent so biased?. This were the same group who deregulated airline charges only to say “the threat of regulation is enough to make Macquarie not raise prices too much”. Macquarie raised airline charges 40% in the very next year and laughed all the way to the bank. More of the myth of their deregulation at work.

    What else do we expect from the productivity commission? – that they listen to shareholders, the real owners of the firm, or broader social disgust at executive remunerations? It isnt about balance or getting it right on balance. If it was done on actual numbers of people affected it might be…but no, the balance is accorded to “groups”. Major groups of shareholders versus a group of a few CEOs. Not too cynical David but as it was the productivity commission reporting I am not at all surprised.

  3. Alice
    January 4th, 2010 at 21:43 | #3

    @David Booth
    The one good thing was that at least Alan Fels was appointed by Rudd to this investigation. I still fell far too short on giving more power to shareholders…they have been long suffering enough.

  4. Freelander
    January 4th, 2010 at 22:27 | #4

    Re: the executive remuneration report, sounds like a dishwater weak draft report was watered down further for the final. The commission is asleep at the wheel as they haven’t even posted the final report on their website, so if we want to see what they said we will have to wait. Usually, final reports are posted at the same time the government releases the report.
    The analysis in the draft was pretty appalling. Someone should ask in parliament how much the inquiry cost. Most would be shocked by the cost of some of these inquiries, especially when they yield so little.
    An enforceable and good recommendation would be that senior executives can only be remunerated by a salary (no packaging, no performance pay). The performance pay component is just an excuse to ladle extra money into their pockets, and otherwise, has perverse incentives. Where performance is so difficult to measure, performance pay inevitably leads to undesired outcomes. Clever people always find a way to game the system and that is what has happened.
    What is disappointing is that they had a couple of reasonable people on the inquiry, Fells and Fitzgerald. Despite these two the draft was the normal insipid commission stuff – no real analysis, just bold and unsupported claims that the market will get it right.
    As a taxpayer, I really wonder why we pay a steep price for reports that are totally predictable and why we pay for inquiries that don’t seem to take any notice of any participants who don’t already agree with the report author’s prejudices.

  5. January 5th, 2010 at 11:22 | #5

    I recently returned to this blog after a very long absence and read with interest the discussions on limiting greenhouse gas emissions. One topic I didn’t see mentioned in these discussions was the relative ease with which coal fire power plants could replace some, or potentially all, their coal use with biomass such as wood. Biomass is used for electricity generation in many places around the world and currently European power companies are attempting to purchase Tasmanian wood pellets to reduce their carbon emissions:

    http://www.abc.net.au/news/stories/2009/12/17/2774266.htm

    Obviously it is possible for Australia to use biomass to reduce it’s own carbon emissions. The amount of wood a coal fire plant can burn without modification varies, but is roughly 20%. This figure should be higher for Victoria’s low efficiency brown coal plants. The percentage can also be increased by burning a mixture of wood and wood charcoal. Coal fire plants can also be modified to run entirely off wood and/or other biomass. As a small percentage of the carbon in biomass will be trapped as ash, a 100% biomass fired plant could potentially be carbon negative. Biomass also has the advantage of not releasing as many toxins into the air as burning coal does.

    Once Australia sets a price on carbon, wind power capacity is likely to further accelerate its expansion and Australian coal power plants are likely to be modified to operate as load following plants rather than baseload plants. A significant amount of biomass replacing remaining coal use will help to reduce emissions further. Care would have to be taken to ensure this biomass is grown and harvested in a sustainable way. Currently Australia has a great deal of marginal land that could be used for biomass production. It’s even possible that in the future Australia could use current coal orientated infrastructure to export biomass to Chinese power plants to reduce their coal dependance, although that might just be a fantasy on my part.

  6. TerjeP (say Tay-a)
    January 5th, 2010 at 11:55 | #6

    Does anybody know the voting method used to elect company boards and whether it is determined by legislation or company constitutions? In particular I’m interested to know what mechanisms are used to ensure proortional representation of minor shareholders? It would seem that the Hare Clarke system (which we use to elect senators federally) would be a good approach however I don’t have a good grip on the status quo. Company boards represent shareholders and are an example or representative democracy, if it isn’t working well then perhaps the chosen mode of representative democracy needs to be tweaked. Democracy will never be perfect but perhaps shareholders can be better served. Perhaps there is also some role for some direct democracy or even perhaps qualified sortition.

  7. fred
    January 5th, 2010 at 21:55 | #7

    I was doing some research on native vegetation type issues and came across the 2004 [I think it was then or 2003, I can't be bothered checking] Productivity Commission report on “Native Vegetation and Biodiversity” and noted that the 2 commissioners in charge were both agricultural economists.
    Please let me be confident in my presumption that I do not have to spell out what is wrong there.

  8. Ken Miles
    January 6th, 2010 at 20:39 | #8

    Illustrating the long history of global warming science, this youtube video of a 1958 tv program is interesting.

  9. gerard
  10. Alice
    January 7th, 2010 at 09:51 | #10

    @gerard
    Wouldnt surprise me if we see more of this in future Gerard, from not just Iceland? Seeing the size of the US deficits and the debt falling due in the near future does make one wonder if they wont default as well. Sometimes I think the monetary bailouts to financial institutions have only delayed the inevitable in more than one country and that it (GFC) isnt over. Gloomy, I know.

  11. iain
    January 7th, 2010 at 10:21 | #11

    @Alice

    Making top 10 lists of countries that could possibly default in 2010 has occupied some recently.

    Potentially concerning are those with significant oil exports (Venezuela, Mexico), or security risks (Pakistan).

    Although with the way things are, just implying that it is possible that money lost in banking related speculation may not get expediently reimbursed by tax payers can seemingly cause some mayhem.

  12. Jill Rush
    January 7th, 2010 at 15:41 | #12

    The lack of will to address executive remuneration is disappointing. However the Productivity Commission was not the right vehicle for this kind of investigation. Unfortunately neither is ASIC.Why weren’t Treasury or
    Finance used as they may have been better placed as Productivity is too narrow a base to look at this kind of issue.

  13. January 11th, 2010 at 22:44 | #13

    Terje @ 6

    Re company board elections.

    Generally it is one share one vote and as such the board is suppose to represent shareholders on that basis. I think a ‘poll’ can be taken to overide a show of hands?

    Although, in practice this doesn’t always work (one share one vote ) as a lot of companies are controlled by intersts that have large holding, sometimes less than 20%, that then fragement the minorites and then eventually gain control of the board and appoint a management to further their interests. e.g Stokes has a history of doing this; recently @ WAN and soon @ consmedia.

    Anyway look at the Corperations Act here Division 7–Voting at meetings of members How many votes a member has 250E to M

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