Wednesday, 7 February 2007
Questions without Notice
My question is to Senator Coonan with respect to Corporations Law. Minister, are you aware that there is concern that business standards are slipping again and that last weekend the Financial Review had a headline ‘Back in the west the wild boys are back’? Is the minister aware of the article by Allen Kohler in the West Australian dated 24 January 2007 regarding conflict of interest matters arising from the mooted Alinta gas management buyout? In particular, does the minister recall Mr Kohler saying:
he means Macquarie Bank—
to look at supporting this and for the board to keep it secret.
Does the minister agree with Mr Kohler that:
It clearly cannot be left to the marketplace to work out.
I thank Senator Murray for the question and I am certainly excluding him from any allusion to being a ‘wild boy from the west’! I note that he certainly does take a very keen interest in these matters. I do not want to comment too much on the specifics of Alinta and the proposed management buyout of that company, although I do agree that some of the matters in respect of the Alinta arrangements are certainly ones that are now under scrutiny—at least under investigation—by the regulator. I am aware that Alinta’s chair, CEO, three other executives and the company’s former adviser, Macquarie Bank, were involved in a proposal for a management buyout of Alinta and that the CEO and chair resigned as directors in response to concerns about possible conflicts of interest. Those conflicts apparently look to be very real. Macquarie, of course, has publicly denied that it used any information obtained in its advisory role to further the management buyout proposal. I am also aware that questions have been raised by commentators, including Mr Kohler, as to whether the Alinta board disclosed the offer to the market soon enough to meet continuous disclosure obligations, so that is obviously another matter under scrutiny.
The regulator announced on 18 January 2007, and this has now been put on its website, that it had been making appropriate inquiries regarding developments with Alinta and Macquarie. It believes the laws in relation to directors’ duties—that is, the framework—are clear and they apply to all forms of takeovers. A very key aspect of those duties is that it is the responsibility of directors to ensure the market is properly informed and that people act appropriately, that directors have a duty to avoid creating a conflict of interest between the directors’ personal interests and those of the company and shareholders. The law also requires financial service licensees and, in this case, Macquarie to manage any conflicts of interest. When ASIC identifies any conduct it reasonably believes might step outside the boundaries of the law, it can and will act. This certainly flags that ASIC is on the case, and it is a matter for ASIC, with great respect, to determine whether contraventions of the Corporations Act have in fact occurred and to take appropriate action based on the evidence before it. It is clear, I would submit to the Senate and to Senator Murray, who has asked the question, that there are very clear provisions in the existing law that deal with directors’ duties, disclosure and conflicts of interest. It is a matter that I think is entirely and appropriately a matter for the regulator. There does not appear to be any doubt as to the legal obligations and clarity of the law surrounding directors’ duties. It is appropriate that ASIC should do its work.
Mr President, I ask a supplementary question. I appreciate the minister’s answer and I am aware that ASIC are looking into the matter but I am not satisfied that the law is as clear as the minister might hope. In view of the problems identified in Mr Kohler’s article and general disquiet over matters like these, will the minister undertake to strengthen Corporations Law if ASIC finds that its current powers to investigate and act on conflicts of interest, the actions of directors and the level of management fees involved in these types of transactions are unclear or inadequate? In that case, will the government consider asking ASIC or CAMAC or both to formally review these and similar issues?
I thank Senator Murray for his supplementary question. I think it is appropriate that ASIC should continue to do its work in the way in which it has indicated it will on this and other matters. The general proposition is that the government will continue to ensure that regulatory settings are appropriate in the light of both market developments and investigations that might indicate any lack of clarity, certainty or reach where it is appropriate. That is an affirmative that the government will continue to ensure that the settings are appropriate as matters unfold.