There are three jobs you don't want: prime minister of Australia, and director or senior executive of an Australian public company. While the job churn and media focus is tough for the titular leader of Australia, you have more chance of going to jail, seeing bad photos of yourself and your family in the paper and your children copping a hard time at school if you're a member of a board or the top team. That's not how it was meant to be.
The listed public company structure is now 416 years old. It was founded when the hot technologies were the slide ruler, the pocket watch and the reflecting telescope, and the best pieces of communication infrastructure were the horse and boat, so it's worth asking if the public company is past its use by date. Not that the Dutch East India Company wasn't the buy of the decade in the 1600s - at one stage its shares were up 3000 per cent on its IPO and it paid dividends of up to 63 per cent. Plus, the world's first multinational knew how to fix competitors: two years after listing, its employees found 10 Englishmen from a rival company trying to take business from them so they beheaded them.
The listed public company was created to raise capital.
Two hundred years later, the creation of the limited company meant shareholders didn't risk losing all their personal assets or heading into debtors' prison if a company went belly-up. This combination of access to capital and limited risk fuelled global industrial growth and the occasional stockmarket crash.
In 2018, shareholders are relatively safe from prosecution and persecution; directors and executives are not so lucky.
Elmer Funke Kupper, former CEO of Tabcorp, became chief executive of ASX in 2011, remaining on the board of Tabcorp. In 2016, the AFP began an investigation into an issue at Tabcorp.
At Tabcorp and ASX, Funke Kupper created serious value for shareholders. On news of the investigation, he did the right thing and stepped down from both positions, while denying any wrongdoing. The media stalked him at home and his face was all over the news. That was more than two years ago and it is understood that the AFP still hasn't contacted him.
In June this year, the ACCC laid criminal charges against the ANZ, Citigroup, Deutsche Bank and six senior executives. The banking royal commission has accused NAB and CBA of possible criminal offences. If it's not criminal charges, then it's being treated like a criminal at a royal commission or a senate inquiry, or directors' private lives being given the sort of attention normally reserved for deviant celebrities. The idea that directors and executives might sometimes need to be sent to the slammer is only new to those who don't know our business history.
Remember the collapses of companies such as Adelaide Steamship, Bond Corporation and Bond Brewing; all three major commercial television networks; Budget; Fairfax; Pyramid; Tricontinental; Partnership Pacific; Elders Finance; State Bank of Victoria and the State Bank of South Australia? Justice John Mansfield led the royal commission into the State Bank collapse.
As Dr Greg McCarthy says, "in his report Mansfield focused on the legal basis for mounting prosecutions against members of the board and some of the managers, whose decisions could provide the basis for either civil or criminal prosecutions so as to get some of the money back". Trevor Sykes summed it up in his 1994 book The Bold Riders: "Never before in Australian history had so much money been channelled by so many people incompetent to lend it into the hands of so many people incompetent to manage it."
In 2018, you don't need to be listed to raise capital; there's a flood of it looking for a home, and that home is increasingly not publicly listed companies. The smart money is going into private equity, along with some of the smartest people. And a lot of the smartest people like focusing on performance rather than ever-expanding governance requirements. At the end of last year, 3600 companies were listed on US stock exchanges - just over half the number there were in 1997. Of the top 50 ASX companies in 1980, only 10 are listed today. Thirty-four were taken over and six have underperformed.
As Justice Michael Kirby said 20 years ago: "Where is the modern equivalent of the legal imagination that gave birth to the highly successful idea of the limited liability company?
On the brink of a new millennium, we should be thinking creatively about the ways in which the law can facilitate economic development, and not simply coerce, regulate and control its occasional errors and ugly manifestations.