08/04/2009 - 22:00

Short-term approach often ends in tears

08/04/2009 - 22:00

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SHORT-TERM thinking copped a big serve from the entrepreneurs, several of whom felt it was the true villain in what has taken place in the global economy during the past six months, including the issue of executive remuneration.

Short-term approach often ends in tears

SHORT-TERM thinking copped a big serve from the entrepreneurs, several of whom felt it was the true villain in what has taken place in the global economy during the past six months, including the issue of executive remuneration.

The lack of focus on long-term wealth creation, especially in many public companies, was seen to have fostered a culture that threw many of the basics of investment out of the window.

Coogee Chemicals executive chairman Gordon Martin was one who felt management had not been properly aligned with the longer-term interests of investors.

"Part of the problem in this market is short termism," Mr Martin said.

"I don't know anything that is worthwhile that takes less than three to five years (to succeed).

"Therefore you should be rewarded on results."

He agreed it was a challenge to reward executives for performance after they had left the company, but it was achievable if the right measurements were devised for the appropriate goals.

"There is a way of doing it but it has to be a longer-term, win-win solution," Mr Martin said.

In the end, Mr Martin admitted the actual amount of money made little difference; rather, it was the quality of management that investors were after.

"The guy who is right is worth twice what you pay them," he said.

Gull Petroleum director Fred Rae believed there ought to be changes in the rules to give investors more say in executive remuneration.

"Public companies need some sort of regulation in shareholders' interest," Mr Rae said.

He was clear, however, that this was a distinction between the public sector and private companies such as Gull, where shareholders clearly had a strong say in how much executives earned and on what terms.

While the master entrepreneurs saw merit in both private and listed company models, there was clearly concern about short-term performance requirements in public companies, which did not arise so often in the private sector.

"You have not got the pressure of shareholders looking for dividends," said Stan Perron of his car and property empire.

Engineering entrepreneur Harold Clough said circumstances dictated whether a private or public company might work best.

He said the decision to list his family company was partly based on the tax advantages dividend imputation created, which made the issuing of staff shares attractive on both sides of the employment ledger.

"That allowed us to raise quite a lot on money," Mr Clough said.

Timber products player Denis Cullity highlighted the different view that private sector players took, reflecting the same time period as Mr Martin had.

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