Butt-covering, hubris and a lack of remorse sum up former politician and current Crown Resorts chair Helen Coonan’s performance at the NSW Casino inquiry on Friday.
It was an attitude displayed to varying degrees by Crown’s other directors over the course of the inquiry.
When Coonan was reminded of a speech she had given in April 2019 admonishing the banks following a royal commission into misconduct, she couldn’t see the irony or parallels with Crown.
“Poor culture in financial institutions has been identified as the main culprit that permitted a slew of bad practices, appalling treatment of consumers and small businesses, and in many cases arrogant indifference to regulatory and compliance risk,” she told the Committee for Economic Development of Australia in her role as chairman of the Australian Financial Complaints Authority.
Crown didn’t display arrogant indifference to regulatory and compliance risk, Coonan told the inquiry, arguing it was more a case of “shortcomings”.
At this late stage in the inquiry’s hearings it is gobsmacking that she would continue to adopt a legalistic approach to questions.
What has become clear from the various directors’ testimony is Crown’s so-called independent directors lacked sufficient relevant experience in casino operations. Each had a public profile that gave the board the appearance of strength.
Coonan joined the board in 2011 days after leaving parliament in a move described by anti-pokie advocate Tim Costello as “indecent haste”. During her time in parliament she held senior positions in former prime minister John Howard’s cabinet as media and telecommunications minister and announced massive cross-media and foreign ownership reforms that resulted in James Packer selling down his stake in Nine Network to private equity.
Other directors to give testimony include a former senior public servant who came to public notice in the Children Overboard affair as deputy secretary of the Department of Prime Minister and Cabinet and headed John Howards’s people-smuggling taskforce; an ex-AFL officer who was caught bringing in secret notes to the inquiry and reciting the definition of an independent director; a long-serving media buyer who was rescued from potential financial distress by Kerry Packer and spoke mainly about how to lose weight with James Packer; and a former personal physician of Kerry Packer who oversaw his famous kidney transplant.
Add to these the non-independent directors who worked directly for Packer and the now disclosed formal and informal arrangements with Packer to provide information not available to other shareholders and it is understandable why a growing number of minority shareholders have had a gutful.
Crown’s annual general meeting next week will be the start of the battle. Any institutional investors who manage money on behalf of smaller investors and vote to re-elect the three directors up for renewal will need to justify their decision. The directors standing for re-election included key Packer lieutenant Guy Jalland, Jane Halton and John Horvath.
Bill Watson, who runs First Super, has submitted his fund’s Crown proxy vote against the re-election of the three directors using the 700,000 shares it holds.
Watson said First Super lobbed a protest vote on the back of the significant governance failures exposed during the inquiry. He said these failures created “an increasingly imminent risk of destruction of shareholder value” if Crown Resorts loses it licence to operate in NSW, Victoria and Western Australia.
“What we have seen and heard is independent directors failing to do their job, being inquisitive, holding management to account, dealing with CPH conflicts. It is rare for shareholders to see members of Australia’s directors’ club being eviscerated through meticulous forensic examination,” he said.
Earlier in the week the Australian Council of Superannuation Investors, which advises funds with more than $1.5 trillion of investments, urged its members to vote against the directors.
Even if the three directors survive, assuming Packer votes his 36 per cent stake and a few other big shareholders vote with him, the clock is ticking for renewal.
Coonan said the board had completed a survey and she was having conversations with a few directors. Given the tenure and performance of a number of them in the past few days, she needs to start showing some leadership.
First State said it will await the findings of the casino inquiry to determine its next steps. Others will too.
How that looks will depend on Crown and the findings. If change isn’t radical enough the board could face the ignominy of an extraordinary general meeting to clean out the board.
The findings could also give the Australian Securities and Investments Commission (ASIC) a prod to do its job and start investigating whether any director duties have been breached.
It is rare for shareholders to see members of Australia’s directors’ club being eviscerated through meticulous forensic examination.Bill Watson, First Super
The role of the board is clearly in the inquiry’s sight. When Coonan took the stand, counsel assisting Adam Bell began with listing the role of the board and directors’ duties.
He said they include challenging and holding management to account, setting the company’s risk management appetite and setting the tone of the organisation by ensuring the right governance framework and controls are in place and that they are being properly executed.
Bell said boards also had an obligation to report truthful and accurate statements to the ASX.
Based on Bell’s list, the Crown board has serious questions to answer.
Even now it is falling short. Commissioner Patricia Bergin was perplexed why Crown has failed to launch its own inquiry into what has gone wrong to shed light on how the failures occurred and how to stop them being repeated.
These failures within the business include money laundering, junket operators linked to organised crime, secret bank accounts run through two of Crown’s entities to avoid regulatory requirements such as anti-money laundering laws, and a corporate structure riddled with conflicts as well as executives and directors passing confidential and possibly market-sensitive information to Packer when he wasn’t on the board and at a time when he was negotiating to sell down his Crown shareholding.
Coonan’s response was equally unconvincing. She blamed the decision not to review the governance failures that led to staff being arrested in China on legal advice that it might weaken its defence in a shareholders’ class action.
She said a decision was made to “piggy back” on the inquiries.
What is clear is the board not only didn’t have the processes in place to prevent the problems that have emerged, but has failed to actively inquire and seek accountability and remedies. Its default position has been to rely on management and lawyers and plead ignorance. Coonan needs to revisit her speech about the banks then take a good look in the mirror.
Source: Thanks smh.com