03/12/2009 - 00:00

Growing appetite for informal regulation

03/12/2009 - 00:00


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The corporate watchdog seems under-represented in this state.

AS boom-like conditions return to Western Australia’s resources sector, our entrepreneurial types have returned to the market.

Eight IPOs launched from WA in the past two weeks signal that things are returning to the heady days of 2006 and 2007, when about 250 Perth-based companies were listed on the stock market.

There are something like 700 listed companies operating out of WA, one third of the ASX in terms of entities and a growing proportion of its capital base, as the sunset industries of the east make way for more resources players.

The challenge for investors and regulators will be to keep tabs on things in WA, traditionally home to the smaller, more speculative and much riskier end of the listed spectrum. Perth is also home to more than a few people who don’t mind spending other people’s money.

So I was quite intrigued to see a growing appetite for informal regulation of this market during the recent AGM season.

The Australian Shareholders Association, for example, has significantly beefed up its presence in Perth, increasing the number of people it has analysing companies and, as a result, significantly extending its active interest to a much bigger number of companies.

The ASA was particularly noticeable at AGMs I attended this year and revealed it had been engaged in extensive discussions with leading directors about their roles and commitment.

In addition, corporate governance maverick and serial board nominee Stephen Mayne stirred up things with a whirlwind visit to cover four AGMs.

While many corporate types view Mr Mayne as a nuisance and pest, he is a big friend of the retail shareholder who regularly gets dudded at both the big and small ends of town.

This past year, Mr Mayne has single-handedly pushed the issue of retail shareholders losing out in share purchase plans that appear to have been structured to water them down as a block, while seemingly favouring institutional investors.

He is currently running for a board seat at National Australia Bank – yet another impossible task – claiming he was standing as a protest after the board substantially diluted retail shareholders by returning $1.85 billion of the $2.6 billion worth of applications for its share purchase plan in August.

“Nab’s retail shareholders as a class have foregone paper profits worth more than $500 million courtesy of the board’s decision to be the first major Australian bank to ever scale back an SPP,” Mr Mayne states in Nab’s own notice of meeting.

“Despite owning close to 40 per cent of Nab, retail shareholders have only contributed $1 billion of the $6 billion of new equity capital raised over the past year.”

Mr Mayne goes even further, suggesting Nab chairman Michael Chaney, one of Australia’s most lauded businessmen, is ultimately responsible.

While this is a long way removed from the mining juniors of West Perth, Mr Mayne has proved no target is too big or too small for him to provide some discomfort.

He believes Perth is so underdone in terms of this kind of watchdog activity that he has even considered moving here for a couple of years to tap into this rich vein of corporate Australia.

There is certainly cause to wonder about the formal regulatory apparatus here.

According to the Australian Securities and Investments Commission’s annual report, the regulator appears underweight in WA.

Of its 1,698 total staff at June 30, only 99 are in this state. Admittedly, ASIC has a lot more to do than just cover listed companies, but that component is still a massive regulatory role, which is only set to get bigger under the Rudd government.

It is also worth noting that WA staff slipped from 114 employees in 2008. In percentage terms, WA employees were just 5.8 per cent of the total nationally in 2009, compared to a still mediocre 6.8 per cent in 2008. Worse, ASIC has just one senior executive based here, out of 49 nationwide.

Above that, there is no representation, which makes you wonder how such an important organisation keeps tabs on the massive amount of business this state does, particularly where public investment is sought.

Collapses such as Westpoint, Great Southern and Firepower show that entrepreneurial Western Australians have a bigger appetite for risk and non-traditional investment – a combination that attracts the best and the worst business promoters.

Science questions

I’M not one to spend much time in the so-called blogosphere, but there is one subject for which the web is a rich source of information.

In the climate change debate there are vast amounts of material to absorb regarding every nuance of this issue.

The breadth of the debate and the huge numbers of people on both sides of the argument makes, in my view, a real lie to the statement that the science is settled.

This past week or two things got even more interesting when a decade’s worth of emails and documents from the influential Climate Research Unit at Britain’s East Anglia University were suddenly released to the public by an anonymous source.

For anyone with the time and energy, this material provides a rich insight into some of the biggest questions surrounding the climate change debate.

The release, dubbed Climategate, has already been compared to the Pentagon Papers, which contributed heavily to the public swing against the Vietnam War in the early 1970s. The timing, just before Copenhagen, could make them influential, but it is early days.

The best place to read about them is on the sceptics’ site: ClimateAudit. The best place to see them defended is RealClimate. Both of these websites, or their founders, feature in the emails, either as subjects or correspondents.

The email correspondence all appear to relate directly to climate change issues, including publication of papers in scientific journals and freedom of information demands the researchers were fighting.

The emails are important for two reasons.

Alarmists have long argued that the discovery of man-made climate change is about good science, backed up by peer-reviewed publication of the results – the latter being a cleansing process that ensures only genuine science gets heard.

But the emails cast doubt on this. Firstly, the scientists involved appear to be going to great lengths to avoid releasing their data so it may be tested. Here the alarmist argument about good science goes out the window. Good scientists put their hypotheses up to be challenged by others.

Secondly, the emails also appear to show that the peer review system has become a biased one where the like-minded review each other’s work and those who don’t agree are bullied. That’s hardly good science either.

While the researchers in these emails may have had the best of intentions with regard to the planet, the correspondence appears to show that certain climate scientists have been doing many of the things the sceptics have been claiming, in what seems to be a bid to deny the questioning of their theories and forecasts.



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