22/05/2007 - 22:00

'Bit' players kept in the dark

22/05/2007 - 22:00


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“Kevin, it’s Rod here, do you need any advice on your industrial relations policy.”

“Yes, please, Sir Rod. All advice welcome.”

“Ahh, Kevin could you possibly let me see it so I can advise you.”

“Don’t be silly Sir Rod, we’re keeping it a secret.”

No, this phone call did not take place, but, while imagined, it reflects the absolute nonsense of the position in which Sir Rod Eddington finds himself as the alleged linkman between business and the prime minister-in-waiting, Kevin Rudd.

In fact, if you think for longer than Mr Rudd’s spin doctors would like you to think the whole episode has been a farce – on the part of both men: Mr Rudd for pretending to listen to the advice of Sir Rod – when he patently can’t be because the alleged adviser doesn’t know what he’s supposed to be advising on; and Sir Rod for (a) accepting a job without knowing his true position as a business trophy for the Australian Labor Party, (b) for tolerating the job when it became obvious that he was being treated as a mushroom, and (c) for not realising by now that he is being kept in the dark because policy is being made up on the run and he simply does not have a role to play.

This is not just an example of the emperor having no clothes. It’s a case of two naked emperors.

If Sir Rod is half as smart as his reputation would have Briefcase believe, he should be very close to resigning his advisory role for one very simple reason – if Mr Rudd didn’t talk to him about industrial relations why should he expect him to be talking to him about tax, corporate law, and other matters of importance to business?

With due respect to Sir Rod, he is not alone in suffering the indignity of being exposed as a man ignored in a world where secrets are playing an increasing role in business and politics.

In fact, a checklist shows that keeping secrets from people who ought to be in the know has become standard fare in Australian business and politics.

Consider a few examples.

Alinta shareholders were blissfully ignorant for weeks, and possibly months, of the fact that the people they elected to run the company on their behalf were talking with investment banks about buying “their” business.

The more Briefcase thinks about this situation the more it looks like the Rudd/Eddington farce.

How can anyone honestly expect even that most casual of observers, the legendary Blind Freddie (and his dog), to believe that the Alinta situation was (a) a secret which should have been kept from shareholders, (b) that the people involved could not see that the conflict of interests was almost too horrible to contemplate.

Over time, the Alinta situation was played out. It cost some people their jobs, and damaged even more reputations.

Perhaps the outcome will turn out to be a good one. Alinta shareholders look like being handsomely rewarded for their time in the mushroom shed.

They might even be more handsomely rewarded than they realise, because energy distribution assets are going through one of their silly phases and now might not be a bad time to take the money and run.


Qantas was a re-run of Alinta, with shareholders being confronted by a senior management team battling a set of conflicts.

This time, however, there has been more thunder and lightning but less action. The bid for Qantas failed (just), and the chairman says she won’t stand for re-election, which is not quite the same as quitting.

Qantas is also different in that the owners are expected to believe that now the bid from Airline Partners has been withdrawn, it is back to business as normal.

Can it ever be?

Surely the owners of Qantas must be wondering whether they have a management team dedicated to running the business on a recurrent basis, or running the business in order to sell it for the highest price to the next bidder.

Briefcase has no problem with either approach, all businesses are for sale at the right price. But, if it were a Qantas shareholder it would like to know what’s happening with a business in which it is a part owner.


Coles is the next business behaving as if keeping secrets is in the best interests of shareholders.

Having put itself up for sale, Coles is now providing preferential treatment for some potential bidders by giving them priority access to its most intimate corporate secrets.

The process allows Kohlberg Kravis Roberts an extra two weeks to go over the Coles business, before the next likely bidder, Wesfarmers and its team get a crack.

Briefcase has two thoughts on this. Firstly, the two weeks is probably not much of an advantage – but it is an advantage that should never have been created if this really is a level playing field.

Secondly, just imagine how much more about the business these two potential bidding teams have about the business than the current owners.

Perhaps that’s the way it has to be when selling something, but isn’t it another marvellous example of keeping secrets from people who ought to be fully informed.


And now we have two!

Careful followers of the state of the world’s stock markets will have been aware for some time that the activities of debt-laden hedge funds, and private equity syndicates, represent a significant threat to long-term market stability.

If one big deal should fall over, everything else is questioned – and markets hate uncertainty.

The second big factor hanging over the market is the balloon called the Shanghai bourse.

Perhaps there are very good reasons why share prices in China should have doubled in less than a year, but that seems very unlikely.

The real reason is rampant speculation, something for which the Chinese are famous.

This prompts two questions. One, will the Chinese government prick the balloon sooner, or later? Two, what effect will a financial markets crisis in China have on the rest of the world?

The correct answer to the first question is that action is more likely to be taken sooner rather than later to simply get it out of the way before the great showpiece of the Beijing Olympics.

As to whether a crash in China will be heard around the world, the answer is yes, because all markets are inter-related these days.

Where does that leave us? Worried, because there are so many tell-tales blowing in the wind that most stocks markets, despite whatever fundamental analysis is applied, have had a wonderful few years, and just as it’s time for a change of government in Canberra (and Perth) so too is it time for the markets to correct.


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