Democratising the corporate world

We need to reform corporate laws so that when a civil prosecution is successful on particular grounds such as price fixing, misleading conduct, or trading while insolvent, that the corporate veil is lifted automatically for board members of corporations.

The current penalties are simply insufficient to deter unethical or illegal behaviour; exposing individual board members to the possibility of complete financial ruin is more likely to ensure ethical behaviour. It is more likely to ensure greater vigilance by board members to ensure the corporations they are responsible for act not only within the technical aspects of the law but the spirit of the law.

We will hear the Melbourne Club and the Business Council of Australia claim that such reforms would deter talented people from accepting positions on boards. This argument is a furphy. If the individuals act with ethics and diligence they will have nothing to fear.

Structurally we need to ensure that the systems of governance promote the long term interests of the corporation. Allowing executive remuneration to be influenced by short term economic outcomes is not healthy. If it is good enough for workers to be subjected to secret ballots before they can withdraw their labour, it is good enough that executive remuneration greater than 15 times the average wage for the corporation be subject to a binding secret ballot of shareholders. A proper secret ballot that does not allow the Tammany Hall ballot stuffing if the result is not going the way of the board is necessary.

All public corporations should have at least two board members elected by the non-executive workforce. Worker participation within corporate Australia is generations behind European and Japanese corporations. We urgently need to bring industrial democracy to corporate Australia.