It seems to happen every few weeks – another big company caught ripping off workers, protecting dodgy executives, fleecing customers, misusing information or poisoning the environment.
But why are corporate scandals so common? What can be done to rein in rogue corporations? And how can we build an economy that works for people, and not just profits?
These questions are at the heart of a new book by Quentin Beresford – Rogue Corporations: Inside Australia’s Biggest Business Scandals.
A complete account of Australian business scandals would probably fill up an entire bookcase, so Beresford restricts his analysis to a baker’s dozen of some of the most notable scandals of the past 40 years.
There are some real doozies on Beresford’s list - although his definition of 'scandal' is somewhat idiosyncratic. He covers the collapse of 80s highfliers Alan Bond and Christopher Skase, the demise of HIH Insurance and Storm Financial, Seven-11’s systemic wage fraud, Rio Tinto’s decision to blow up the priceless Jukaan Gorge caves, James Hardie’s brazen strategy to escape financial responsibility for the impacts of its asbestos products on its workers, and more.
Beresford takes a particular interest in the personalities of the key players in each ‘scandal’ – he wonders what makes them tick, and what drives them reckless, risky and unconscionable behaviour. He also probes the failures of government agencies to prevent illegal corporate behaviour, and the intersection of corporate and political interests.
The role of unions in holding corporations accountable
It is, indeed, a sordid and sorry tale, and Beresford is a competent storyteller – although he has a blind spot for the role of trade unions in keeping corporations to account.
Beresford makes no mention of the unions who fought for wage justice at 7-11. He doesn’t even mention the role of trade unions, led by the ACTU, in pursuing James Hardie over compensation to asbestos victims.
This is shame, because unions are a powerful bulwark against illegal and unethical corporate behaviour – and the James Hardie scandal could have been the perfect case study to demonstrate this point. *
Nevertheless, unions can’t be expected to keep corporations to account on their own. Effective industry regulation is vital for ensuring that businesses operate in a way that doesn’t hurt people or harm the environment.
In this sense, Beresford rightly highlights the risks trend towards co-regulation in industry regulation – in which companies themselves are involved in setting (and policing) the rules about how they operate. In describing the role of the Press Council in the media industry, Beresford says:
“The idea that a near monopolistic corporation such as News Ltd could be self-regulating exposes the flaws in the concept: that the powerful can capture the regulators; that the process is neither transparent nor accountable; and that it is too soft an approach.”
The RTBU has also identified co-regulation as a major risk to workplace safety in the rail sector. In fact, the lack of transparency and accountability inherent in the co-regulation model was a key element of the union’s successful campaign to have the Rail Safety National Law reviewed and overhauled.
While industry regulations set the rules for how corporations operate, there are also higher-level rules that dictate the basic responsibilities of all business. Beresford also highlights the inadequacies of Corporations Act – although he says “the fact the Act has been used rarely used to address the big corporate scandals suggests the main problems is with enforcement of the Act, not the Act itself.”
Again, unions have played a leading role in pursuing stronger corporate regulations.
For example, the RTBU paper released in December 2018 titled ‘A social licence that means something: restoring public faith in Australia’s scandal-ridden corporate sector’, that made several important recommendations to improve corporate accountability.
These recommendations included:
• Amending Section 181 of the Corporations Act 2001 to include corporation social responsibilities and explicit obligations for directors to consider the interests of stakeholders, as well as shareholders;
• Amending the Corporations Act to establish a positive obligation for directors and other officers to make reasonable enquiries about and to prevent reckless, intentionally dishonest and illegal behaviour; and
• Establishing a new Australian Corporate Governance Authority (ACGA).
New Challenges
The RTBU continues to advocate for tougher rules on corporate behaviour. Of course, regardless of the rules, the drive to make as much money is baked into our economic system, and there will always be people trying to find new ways to cheat. New technology is opening ever more insidious ways for rogue corporations to profit at our expense.
Our laws will have to continue evolving, and we will have to ensure powerful independent agencies can keep powerful corporations in check. But most of all, we need strong e ective unions, and an informed public that understands the benefits of collectivism and is capable of seeing through corporate spin.
You can buy Rogue Corporations at your local bookshops or online at Gleebooks gleebooks.com.au
*This has been explored by Peter Holland and Amanda Pyman in their paper ‘Trade unions and corporate campaigning in a global economy: The case of James Hardie’.
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