Well how to comment on the 114 pages of the Preliminary Independent Report released this week.
Let me just highlight a few matters and observations.
1. We were right.
The IRP Report confirms that what has been exposed by the members about CPA Australia over the last 6 months was substantially correct. All the opposition, and reasonably forthright denials by the CPA leadership have been shown to be just as hollow as they have been in their leadership.
2. The silence from those who knew better was deafening.
People (members) who should have known better, and were certainly in better positions than most to expose these matters over the last decade were noticeably silent. And who might these people be?
i. Well certainly all the directors at CPA Australia over the last decade can take a bow for being such silent and complying individuals. Special mention needs to go to those of them who were Presidents/Chairpersons (Tyrone Carlin, Jim Dickson, Graeme Wade, Richard Petty, Penny Egan, John Cahill ). To think these are the people who oversee the management and the strategic direction of CPA - asleep at the wheel is the best description I can think of. In my more sane moments I would suggest other less respectable motivators were at play.
ii. I hardly need to mention the scandalously well remunerated CEO (Alex Malley) and his two offsiders (Adam Away and Jeff Hughes) as his COO’s. Disgraceful is perhaps the best descriptor of their leadership.
iii. How about all the extremely well paid middle management at CPA (‘Business Effectiveness Leadership Team’ per the 2016 annual report - lets’ give them a mention for being such obliging and compliant managers in the face of such obvious wrongs - Bowen, Diss, Malady, Laughton, Wood, Dignam, Thomason, Bibby, Chenery, Leung. One can always pass the buck upwards eh, but sometimes a little bit of quiet reflection and consideration of one’s own responsibilities in the midst of this would to go astray. Probably did not see the bullying that went on at Head Office, maybe that occurred on their days off.
iv. I think the problems with CPA go much deeper into the culture of the place, and certainly the leadership at board and senior management level need to take most of the blame for that but really others of the CPA staff and associated persons (such as the Ethics column writer in the CPA magazine In The Black Eve Tsahuridu) probably need to ask themselves why did I not speak up about these matters? or is there anything I could have done in my position to not participate in these wrongs?
v. Clearly many of the Divisional Councillors, especially the Presidents and those who had served for quite a few years, need to take a good hard look at why they were so silent (at best) and compliant by default. I think we all need to take a long look at the schedule I prepared of these people and their deep connectivity with the Malley decade to appreciate that many of these people who should have known better just went along for the ride. This is why Tim Youngberry receives no plaudits from me as he was President of the ACT Division, and now comes out and portray himself as some knight in shining white armour trying to ‘save the day’. Please thats just crap. Total silence from you for years on these matters. And for Simon Chhoeu as NSW Divisional President to now start portraying himself on the CPA Linked In site as being one the people who spoke out against the wrongs and was especially influential in fostering change just makes me cringe. Up until the last few months you were virtually silent Simon, so lets not kid ourselves eh?
vi. How about all the members of the Advisory Committees, the Representative Council and especially the International Committees (which even includes Ian McPhee). Apart from a few notable exceptions there was total silence. I can use hear it now - ‘we didn’t know’.
What was very very obvious in the Independent Review Panel Report was the almost extreme lengths the Panel went to to avoid naming anyone. Just read page 31 and they clearly deal with provisions relating only to Graeme Wade, Richard Petty and Kerry Ryan (extended directors terms) but the names are not mentioned but rather a nice distant ‘a number of directors’.
I think it just fits perfectly into the approach of the IRP which is to avoid any sort of blame game of holding people responsible, but rather to just focus on future changes.
Therein lies my biggest issue with the IRP and their report. They assured us no ‘stone would be left unturned’ but failed to mention that no-one would be held accountable for what they uncovered. Thats a just a facade. It’s what I call a sanitised professional whitewash.
The other noticeable item in this regard is that the IRP went to great lengths to thank the Divisional Presidents (refer v. above). “The Review Panel would like to acknowledge the consultation, engagement and insights offered by the Divisional Presidents, which provided a rich source of input to the Review” (p.11).
Yes, I bet. Hopefully a bit more than the silence that came from them over the last decade. Hopefully insightful gems like ‘there are no remuneration or governance issues at CPA” from the Victorian Div President at the Singapore AGM was not included. Nor the NSW Div Presidents late recasting of himself as one of the outspoken critics when he was completely silent. Or perhaps of the ACT Div Presidents self promotion to the board and the Nominations and Remunerations Committee and position as the great listener when really he has also been silent for years.
But perhaps your glowing endorsement of the Divisional Presidents is reflected in the soft recommendations made and the lack of recommendations to hold anyone accountable. So, perhaps no surprises there.
But what we also noted in this regard was the special mention saved for members such as myself and others who were prepared to speak out on these issues for being ‘disrespectful’ and damaging’. Nothing of the misinformation, and misreporting and lies told by CPA staff and leadership. Of course that is not damaging or disrespectful in the same way is it. Nothing about the lies about the membership growth, or the lack of transparency on things like scandalous remuneration, or the irresponsible and selfish marketing expenditure in the millions being disrespectful or damaging. And of course nothing about the oppression of members by the leadership in doing all they could to prevent these issues being communicated with the wider membership. No, none of that was disrespectful or damaging.
No, what needed to be emphasised was the disrespectful way the ‘rogue’ members spoke about the greed and irresponsible and misguided leadership of CPA Australia, and of the silence of the members and staff who should have spoken up much earlier.
Yes, you really nailed us (me) on that one Ian.
For me, I think you have completely lost the plot with such a statement, and have not understood anything about the way these matters were exposed. We did not receive a million dollar pay packet to conduct a post event independent review., calling for submissions from on high. Or forming an insightful Divisional Presidents Groups to ‘richly garner’ your report.
No, we were in the trenches trying to expose what your report has just confirmed has been happening.
There is no mud up there in the Independent Review Panels air. No, that is where the air is so fresh and perfect and the view is so magnificent. Mud, that’s not for us up here in IRP land, that’s for those journeymen down in the trenches which we don’t want to know about. Those journeymen don’t have a case. We are the ones who have the rich insights (from the Divisional presidents of course) and we dine on million dollar consulting fees while they slave away in the mud and the trenches. I bet they don't even use deodorant.
Did you hear that from the trenches? I’m sure I heard someone say ‘$4.9 million’ and then there was some swearing. Disgraceful, those journeyman have no idea, they don't have the manners we eminent people have up here in IRP land.
Lets go over there into Divisional Presidents Land and see what they are saying. Total silence. Oh well, thats pretty typical eh?
3. Lets now look at the recommendations
This is where the IRP has failed us badly. They know as well as anyone that their recommendations would form the basis of the changes needed at CPA Australia and would effectively be the action plan for the new board.
Some of them are fine, as with many of the findings of the IRP Report, but the elephant in the room with them all is that they do not cover any actions against the people who were responsible for this disastrous chapter in the history of CPA Australia. That is the fundamental weakness of the report and I suggest lays a weak foundation for the CPA’s future.
I mentioned to Ian that there needs to some sense of accountability and responsibility. If not then forget using words like integrity and transparency high ethical standards, and accounting standards. They just become slogans without meaning, and that is what they had become during the last decade at CPA Australia. We can pontificate all we like about our logo having the word integrity emblazoned across it, but it became a term of ridicule in view of the things which have been exposed. We are not an organisation of integrity.
Just take simple little examples like not being able to see the contract for Alex Malley upon which his termination payment of $4.9 million was made. What do you think that says of people like Jim Dickson, or Graeme wade, or Richard Petty or Tim Youngberry, or Sharon Portelli, or Michelle Dolin, as the board who refused access to it, as displaying integrity.
How about spending millions on misguided marketing to self promote Alex Malley and the board with no obvious connection to CPA Australia (and use the money contributed to the South Sydney Rugby League Club or the National Basketball League as prime examples) as displaying integrity?
What about their lack of transparency in relation to remuneration of the board and senior management, and saying that it was ‘complete disclosure and held no secrets’, when the exact opposite was the case when we forced them to fully disclose it. Do you think that reflects great integrity?
What about the lies about the membership growth from the CPA staff? Where is the integrity in that?
So Ian and the rest of the IRP if the people who made these awful decisions and were responsible for some of these matters are not held to account and are called to take responsibility for their actions and decisions, then all we are left with is an empty shell of an organisation with cheap slogans that mean little.
Post WW2 Europe needed the Nuremberg Trials as well as the Marshall Plan. The Essendon AFL Club needed disciplinary action after the drugs scandal before it could restore itself. The Enron era in the USA required not just Sarbanes Oxley but also the CFO/CEO’s responsible to be held accountable, as with the professional advisers such as Arthur Anderson. I think it is fair to say that the post GFC financial world is still showing the same signs of weakness because none of the bankers responsible were held to account.
So, with CPA Australia, these recommendations are intentionally made by the IRP to avoid the very thing they should include i.e. action against those responsible for that has happened.
Lets look at them all together to get a feel for what the IRP has taken the easy path where the air is fresh, the view is magnificent and the mud is never seen. In other words they live in fairyland.
I encourage members to just quickly read through the preliminary recommendations which I have copied below. Lots of good recommendations but ask yourself where in all of these is anyone held accountable or any specific action suggested against those who were responsible?
I’m sure the IRP will see that as respectful, fairyland friendly, a sanitised and positive professional approach which aims to move forward without trying to hold anyone responsible or accountable. I think that is what they have provided.
But is that the right approach given what has been exposed and confirmed in this report. The ‘salesmanlike’ almost arrogant approach of the CPA leadership displayed over the last decade but in particular over the last year suggests that they are ‘laughing all the way to the bank’ and will walk away scot-free.
That is not right.
I’m sure that can be padded out more but those four words pretty much summarise why this IRP Report is a failure on the most fundamental of levels - it is not right.
The Representative Council’s composition should be reviewed to ensure it is meeting the requirements of independence from the Board and reflecting diversity of CPA Australia’s membership.
CPA Australia maintains Directors’ three year term but reconsider the appropriate number of further terms.
Preliminary recommendation: Change practices to allow the Representative Council to have timely and meaningful consideration of applicants
The Board skills matrix and continuing professional development requirements should be kept under review for continuous improvement
There should be a Review Implementation Committee
CPA Australia should review its approach to issues management
There should be allotted time at meetings of Directors with no management present
The Review Panel recommends a number of changes in Board remuneration to align with member expectations and peer organisations
Set the CEO remuneration to be competitive but comparable to similar organisations
Balance attractiveness and comparability to set KMP remuneration
Disclose individual remuneration to improve transparency to members
Marketing Strategy and Expenditure
Ensure marketing investments align to an appropriately set corporate strategy and are executed accordingly
Maintain marketing activities that differentiate CPA Australia with proper oversight and caution
Ensure CPA Australia’s future brand building activities are centred on CPA Australia and its members
Utilise member engagement mechanisms to actively engage membership in the development of marketing strategies
Consider a review of the organisation structure of marketing related business units to fit within an overall organisational structure
Member Services and Engagement
Empower Divisions and Divisional Councils to better engage with members
Improve member ability to meaningfully engage with CPA Australia’s directions
Periodically review costs of member services and how membership value is reported
Make Annual General Meetings accessible to all members
CPA Australia institute a code for appropriate professional behaviour by members
Strategy and Performance of CPA Advice
Carry out a comprehensive post-implementation evaluation of CPA Advice
4. The elephants in the room that the IRP conveniently ignored
a. Any apologies to the media especially he AFR for the legal threats of the CPA leadership about matters that were shown to be correctly reported.
Clearly the IRP do not see the threats and misrepresentations and misreporting and false denials from the CPA leadership as being on par with the disrespectful communication of the rogue members to the CPA staff and CPA leadership. Somehow I think the IRP have been listening too much to the great CPA salesmen in the CPA leadership, the silent divisional presidents and the CPA staff a wee bit too sympathetically and have lost sight of the real issues and concerns. And who really was in the wrong.
I think there is a saying that has words like ‘shooting the messenger’ which have some relevance here.
b. No apologies from the current board on these matters.
And please do not say Dicksons apology at the Senate Hearing was an apology. It was not. He apologised for the difficult period and if anything he and Wade and Youngberry were almost dogmatic in their assertion that the marketing strategy of CPA Australia so comprehensively detailed and quite excellently critiqued in this IRP Report was spot on.
Ditto regarding governance, remuneration, member engagement and CPA Australia Advice. The IRP Report makes a song and dance about the way Jim Dickson and the current board have made changes but nothing about the fact that they were forced to do so. They have done so reluctantly and screaming all the way. The weight of the evidence of their wrongs was pretty compelling but it wasn’t until they had to fully disclose remuneration, and 7 directors resigned, and then the truth of CPA Australia Advice became known (even though conveniently hidden in the Annual Report using consolidated accepting techniques - very tricky, a real badge of honour for a professional accounting body purporting to set the highest of standards- give me a break), and the gerrymandering of the corporate governance process became evident, that they started to recognise they could not defy gravity any longer.
The IRP see this as the board taking ‘positive steps under the Chairmanship of Jim Dickson’. I think that is compete crap and distorts the reality.
They have opposed, obfuscated, misreported, threatened, prevented members knowing of these things and even lied to fight these matters being exposed.
To suggest that this current board, and past boards also I would suggest, are a beacon of positive change is just gilding the lily.
But of course the IRP just couldn’t help itself from emphasising the need for more respectful member engagement. Forget the CPA leadership and staff communications. That by default was always respectful. It is those naughty rogue members, they were the problem. Get rid of them and CPA can move forward.
You think I exaggerate. Well have a quick read of the first half of page 3. I feel sure the IRP asked Jeff Hughes to write this using his management speak expertise.
But of course I cannot say that. That will get a tut tut from the IRP as being just too disrespectful.
Please save us from the respectful approach of the IRP which ignores the elephant in the room of the CPA leadership behaviour and communication and prefers to have a go at the merely CPA journeymen further down the eminence ranks.
c. What about Alex Malley $4.9 million termination pay.
The IRP Report correctly observed that (p.52) “member responses were, without exception, vocal in condemning the scale of this payment”. So you would think one of the first things they would do would be to have a look at the contract given that Jim Dickson reluctantly admitted at the Senate Hearing that it was a contractual obligation, and then told Ian McPhee that it was contractual employment benefit (see footnote 67 on page 42).
But no, they didn’t. Have a look at page 52. The IRP say that it ‘complied with the letter of the law” (p.52) but that there was ‘minimal documentation of the decision-making process or rationale”, and that the terms of this ‘contractual agreement were not disclosed to the members”, and presumably also not to the IRP.
Why doesn’t the IRP actually say that rather than make it obscure.
Does a contract actually exist to is this just based on the word of the Chairman and ‘minimal documentation’? The questions just keep coming. When was this contract signed? Who signed it? What did the current board members agree to? and on what basis?
This is why we need to take legal acton on this matter both to recoup the money and also to hold these irresponsible directors accountable for their decision to pay it.
The elephant in the room is staring at everyone but the IRP just refuses to even to comment on it. This was the single most obvious breach of trust, as I see it, by the IRP with we as members.
Just look at the beautiful sounding Terms of Reference on page 107 - the IRP “will receive the full co-operation of the Board and the executive”. Well it would seem that is crap. They will receive full access to info and fill co-operation so long as the llght does not shine into any holes that the board or executive do not want investigated. Clearly Alex Malley termination pays one such hole.
Who do you think was on the Nominations and Remuneration Committee in 2013 when Alex Malley and all the other scandalous remunerations were reset?(p.53).
Well let me look up the 2013 Annual Report and I shall tell you
Richard Petty Chairman (4th of his 6 year long reign as Chair of this committee)
Jim Dickson (surprise surprise)
Graeme Wade another surprise surprise
Penny Egan, wow the surprises must keep coming
Kerry Ryan, her 6th year of an 8 year service to this committee.
But of course the IRP did not think it worth highlighting the fact that three of the current board were on this very important committee that reset the scandalous remuneration levels including for Mr Malley.
Little wonder they were not too keen to show any contracts.
This is the one area where the IRP should have recommended legal action. But no. Not to be. Verbal assurances for the Chairman was enough to convince them that this was all legal and bona fide.
I say it stinks and needs to be legally actioned, and we will do all we can with what remains of the fighting fund to pursue this so the new board takes action.
d. What about CPA Australia Advice?
i. I’m still shaking my head in disbelief after reading it again (p.101-106), and also p.47 dealing with the directors remuneration.
Wow, what an exercise in professional obfuscation and avoiding the issues.CPAA Advice board and senior executives and their remuneration were recommended by Alex Malley (p.47) and approved by the CPA Australia board (excluding those who were to sit on the CPAA Advice board” (p.47).
Well let’s name these CPA Board members who believed paying some of their fellow board members an extra $70,000 p.a. (Petty, Carlin, Dolin) and $100,000 p.a. (Wade), along with an extra $250,000 p.a. for Alex Malley and an extra $185,000 p.a. each for A Awty and J Hughes. Remember this is for people who are already on outrageously high remuneration levels, and from a subsidiary which is going to lose lots of money in the early years per the business plan.
Well these are the directors who approved these outrageous payments - David Spong, Jim Dickson (name keeps going up), Richard Alston, Sharon Portelli (still there on the board), Kerry Ryan (lots of experience on the N & R Committee at CPA, 8 years of it), Tim Ebbeck, Deborah Ong and Peter Dowling.
Just ask yourselves why would anyone pass such crazy levels of remuneration to people who were already well remunerated in a subsidiary that will lose lots of money in the early years? I just call this folly on the part of the directors who approved this, and greed on the part of the directors/senior managers who assumed the roles with CPAA Advice.
Did they even consider the question of it putting some of the directors over the constitutional limits of directors fees?And what does the IRP say on this aspect of CPAA Advice - well nothing really other than stating the facts.
No recommendations for follow up action. Just this is what happened and it is not unusual for directors to be paid in subsidiaries etc. And that is the oblique and ‘washing their hands of making any sort of judgement’ on the fact that the payments to the subsidiary effectively enabled them to go over the CPA Australia constitutional limits.
I would have thought even Maryjane Crabtree as a litigation lawyer might have at least suggested some action. But no.
This IRP is all into the future restoration of CPAA, they are not concerned with trifles such as past failings and potential breaches of the constitution.
ii. Well what about the business plan and the massive losses at CPA Australia Advice? Surely the IRP would have looked closely at the $47,000 revenue and $7.2 million loss in just 19 months and asked some hard questions. NO.
It was all according to the Business Plan, it was a long term strategy, income is a little down on projections but basically their motives were pure, their overdraft from CPAA of $20 million was guaranteed so what does it matter that almost $1.5 million of that $7.2 million loss was due to payments to the board and three senior executives (Malley, Awty and Hughes).
You read that whole section from p.101-106, and if you were a member of the IRP and had a bit of spare cash it almost reads as if this CAA Advice is a goer, and you should put some money into it.
It’s a dog and they even go on to partially blame the public exposing of this being a dog as the reason for it not meeting its targets.
I find this just mind blowing.
And the IRP want us to take their report seriously.
Even the academics and the senior management at Sydney University recognised that Tyrone Carlin was stretching it a bit at CPA with the Chairmans remuneration plus being a director of CPAA Advice plus holding down his full time job as Deputy Vice Chancellor at the university. But the good old IRP just saw through all that negativity and did not recommend any sort of action against those responsible and just said it needs to be reviewed.
Can you believe the wording of their finding “the business case for establishing CPA Advice articulates a strong rationale” (p.102). Just ask yourself what does that mean? It looks good in theory even though it actually is crap in reality. It’s almost as if they are trying to ‘out-sell’ the CPA leadership on it. Must be catching.
iii. I leave it for others to comment on the way they mishandled the Professional Standards Scheme. Knew the risk but went ahead anyway it seems.
e. What about members directly voting for directors?
No, thats not an option. This was a very detailed section on governance (p. 21-41) with some good recommendations but more just a tinkering with the current system than a major overhaul. There is too much motherhood type language in governance work (it all sounds so beautiful and high-minded) but ultimately you have to look at what is happening.
And what has been happening at CPA Australia is that the system was gerrymandered with an influential small group holding significant power and sway over the whole organisation however nice the theory reads.
To my mind to not deal with the reality and let too much ‘motherhood type language and theory’ hold sway is a recipe for failure. Too much of the 40 pages in this section was chock a block full of this governance verbiage.
Our current governance system is a failure. Here is my two bob’s worth based on what I have seen at CPA and the evident failures
i. Members need somehow to directly vote for directors. This can be done but needs changes to ensure member engagement. Clearly this was not own the IRP’s agenda.
ii. There need to be more checks and balances to prevent any group, whoever they are and however high-minded they might sound, from wielding too much control. That is what happened at CPA Australia. I think the failure of we members in whatever capacity we are was a key reason for that. Hence why with whatever system that is developed member engagement is critical.
iii. I did go through the entire Governance Review Report done in 2006 and my conclusion as I recall now is that it was gamed by a few to foist a corporate style model on a nfp professional membership organisation. I’m not so sure the motives of those who gamed the system were as pure as driven snow (as a matter of fact I would put them almost on the opposite spectrum) but they ‘won the day’. And we now see what has resulted. So whatever is done lets not get too caught up with the governance verbiage and look at the reality. We all read the CPA leaderships defence of the governance at CPAa Australia in their memo’s of 16th March and 31st May, and that was verbiage which tried to legitimise what we all knew was a gerrymandered system. So I would suggest to the IRP, just keep their realistic feet on the ground and not listen too much to the CPA Australia leaderships sales talk on governance.
iv. I thought the most telling part of the failure of governance at CPA Australia was the chart on pages 37 and 38 with the IRP making some suggestions to the current board for immediate changes. The current CPA Boards response just show how pathetic they are. Still protecting their territory and making sure no real change occurs while they are there. I regard the whole six of them with the same level of disrespect as they possibly regard me. Fancy Jim Dickson still wanting to be Chairman of the Representative Council, and to attained meetings even if not to vote. Really how pathetic is that. And how about management preparing the communications strategy for the Representative Council with members. I mean really this makes a mockery of all them.
v. I just loved that last sentence of added extra advice from the IRP in 5.2.6 (p.40) in relation to the Corporations Act change. They obviously are keen to leave any communication with the members centrally controlled by Head Office. It wasn’t a necessary addition but they did add it which in itself was very telling given that CPA really did use the compliance with the law as a tool to prevent member communication.
vi. I still believe we need to pursue possible legal action against some of the directors and senior managers at CPA Australia for they decisions and failures. Oppression of shareholders, breach of duties to name just two.
f. ASIC’s involvement and possible investigations
I would think that the IRP have very conveniently ‘knocked on the head’ any possible ASIC involvement with this report. They have, as I said above, conveniently refrained from suggesting any sorts of legal or other actions against the persons involved in allowing all this to occur. That send s pretty clear message to ASIC doesn’t it.
For that you get no plaudits from me IRP.
g. Sponsorship of the South Sydney Rugby League Team - who was responsible for this?
Well if you look at footnote 117 on page 67 we can say it was the CPA Board of 2016. So let’s list them here to see who was responsible such a stupid decision to waste our money and provide ‘entertainment benefits’ to CPA leadership and staff.
Here they are
Tyrone Carlin - Chairman
Jim Dickson - Deputy Chairman
Deborah Ong- Deputy Chairman
h. How about the National Basketball League (NBL) sponsorship?
Same people as above except Greame Wade would obviously have had no part of the consideration of this deal given that he was also Chairman of the NBL. It was a case of a conflict of interest that was carefully managed. Nudge nudge wink wink sort of stuff. Yes, of course it was a conflict, but I did not get involved and certainly was not there when the board made the decision. No that was done by my wonderful colleagues listed above. Nothing like a cohesive leadership team at CPA Australia eh?
i. Nothing in the report about bullying at CPA
Yes, the IRP were happy to major on the disrespectful rogue members but not a word on the awful cases of bullying at CPA. Well, they are hard to prove, and very difficult for people to speak about but what we heard was enough to say I would never apply for a job there. But of course the main focus of the IRP was on the disrespectful members. I suggest they need to perhaps look a little closer to home.
j. Nothing in the report on the enormous waste on international travel by CPA staff and board members, and no recommendation to have a good forensic accountant go in and give the place a good going over.
What can I say. The IRP have access to so much more information than we yet manage to come up with zilch.
Even Joe Aston and the AFR journalists were able to expose more on this that at least gave the IRP something to work on. But no, nothing to even mention.
No recommendation to have a detailed analysis done of the international travel done by the Key Management Personnel, and the Business Effectiveness Team?
No forensic look at the supplier contracts such as with the outsourced education and professional development?
k. Nothing about the appointment of Alex Malley as CEO and the Macquarie University connections/termination.
Again not even worth a mention.
l. No mention of why seven board members including the Chairman resigned over a six week period recently.
I guess that is for us to just assume. One would have thought some interviews with them and some sort of statement by the IRP to see what sorts of lessons can be learned. Or was this down to criticism by the rogue members. Just an obvious elephant that is ignored.
m. No recommendations to perhaps disclose more fully the expenditure of CPA Australia beyond the current four line items?
I thought that was an obvious lesson from the marketing analysis done (which by the way was perhaps the best part of the report). Why should a membership organisation such as CPA Australia not err on the side of giving much more information than is minimally required by the law. To not do so automatically defaults to a what are they covering up mentality. And in the case of the last decade of CPA Australia we were correct to have that mentality because much was covered up.
n. What about the auditor in all of this?
Two members in particular (Andrew North and Greg Angelo) have raised some really serious questions over the standard of the auditors work especially in relation to CPAA Advice and the s202B statement. The auditor (Deloittes) can be as cocky and confident as they like but quite frankly I tend to think Andrew and Greg are right. It would be good for the IRP to at least look at these concerns.
5. Lessons Learned
Let me make a few observations
i. Most public companies that are unlisted (whether limited by guarantee as with CPA Australia or other) need to be closely watched because they do not have the fourth estate watching them normally, nor the share market providing a trading eye. And usually the members (or shareholders) do not trade their membership or shares but are rather too caught up in their own affairs to monitor the company.
Membership organisations and retail groups are two very clear examples of these sorts of public companies.
The danger is when the board and management get just a wee bit too closely aligned, which is a real risk because the directors are usually not ‘professional’ directors and can be easily intimidated by the management or a dominant chairman or leader.
I have come across it twice in my professional career just by accident really with CPA Australia ($180m t/over, and who knows how many millions were squandered), and with a retail buying group called Associated Retailers Limited ($250 million t/over, and close to a $20 million loss to members).
Some of the common denominators to these two, and I’m sure with others, is that the board and management feel aggrieved and offended when their failings/faults are pointed out. And the members are often too busy to really be too concerned.
ASIC is just ASIC and doesn’t really care. It is a big weakness and possibly a vacuum in our corporate sector. No easy answers as there are no rewards or class actions for exposing the problems.
Thankfully we have the fourth estate, and hopefully there are still some individuals in organisations who are prepared to make a stand on principle even if it does cost. Nothing beats the contentment that comes from doing the right thing I reckon, no matter how lowly you are in the pecking order.
ii. Where are the academics in all of this? Some of the main supporters I had in this (usually private for obvious reasons) were academics. And there were a few who were quite outspoken. Somehow one would like to think that they have more freedom to expose and write about these matters. I can think of dozens of excellent PhD studies that would come out of this whole CPA charade. Maybe some of the Business Schools might see this as a catalyst to add a little more ethical grunt into their schools and disciplines because the peddling influence of CPA Australia with its grants and awards leaves a lot to be desired. Thats another area that the IRP did not touch but maybe that it is legitimately outside their purview.
iii. What is the role and function of a professional membership organisation like CPA Australia? Is it to grow larger and build a large capital base (financially and membership wise) or is to develop and strengthen the profession? You may think that a rhetorical question but that seems to me to be the most pertinent one that comes out of all of this. Going on the example of CPA Australia I tend to think they are mutually exclusive and the latter should be the focus. But that is not the answer that most accounting membership organisations around the globe seem to be pursuing at the moment.
iv. How do we prevent our professional and accounting standards from being ‘gamed’ and from losing their integrity. This possibly is tied to the above purpose of the professional organisation and developing the profession itself. But really you would have to say at CPA Australia the leadership have ‘gamed’ the rules of compliance, and minimum disclosure, and consolidation, and even auditing standards, and integrated reporting, and even governance to hide and misreport and obfuscate and basically not show a true and fair view of the condition of CPA Australia. That is a professional problem we have I reckon, and we need a gutsy and strong membership organisation to lead the way. Certainly we need more oomph in our professional development and at affordable prices and locations. The cream puffery and sugar coated crap we have been fed over the last decade needs to stop.
v. How do add a strong ethical framework to our profession to prevent what has happened at CPA Australia without all the normal motherhood statements that sound so good but are practically meaningless usually. I’m sure no silver bullet on that one but I did hear the President of Harvard University say that they need to add more cross disciplinary studies into all their programs to prevent the more silo type treatment of subjects such as in Business Schools then current which enabled these smarty pants accountants and financiers to come up with the sort of shenanigans that allowed the Enron period and the GFC failures. In other words we need a bit of interdisciplinary studies in say the humanities and sciences to balance out often purely financial focus. Makes a lot of sense to me. But whatever the answer is we sure could do with a bit more ethical grunt at CPA Australia.
vi. How do you foster member engagement in an organisation like CPA Australia?
To be honest I have never been involved at a ‘political ‘ level in CPAA, nor have any desire to, but I certainly am concerned as an individual about the standard of my profession and my organisation. I did my professional training through the Institute but went with CPA because I had a boss who had enormous integrity, was a good accountant and was a big CPA fan. I’ve been in and out of the profession in terms of career path so I am perhaps untypical but I think I would be typical in wanting to take pride in the CPA designation because it represented something of value professionally. There is no doubt that the CPA designation has been denigrated enormously over this last decade but the question remains how does our organisation foster member engagement to prevent this sort of crap from happening again?
I’m afraid I shall have to leave this long response there with that question hanging in the wind.
6. Where to from here?
Well there is still about $23,000 in the fighting fund so I am suggesting we consider a number of strategies at this stage. The IRP Report will be the action plan for the new board I daresay. We still are unsure about the new board so its a matter of waiting.
These are the actions I am considering and am discussing with other members so let me know your thoughts
a. Getting legal advice to at least see how strong a case we could have regarding pursuing the $4.9 million termination payment to Alex Malley (both in terms of A Malley and the board that approved it), and also the over the constitutional directors fees payments in relation to CPAA Advice. Clearly we cannot afford to actually take the legal action but we can certainly get enough of an opinion to make sure the new board do so. CPA have plenty of money to pursue legal action and we should do it if there is a strong case. It would seem the IRP are not going to move this way so we need to continue to push for the action.
b. Force an EGM on basis of a resolution to strip Alex Malley of his life membership (and too my way of thinking also Richard Petty, Graeme Wade, Penny Egan and John Cahill). That is possibly more for the Spill Motion group as they have over 4,000 members in their list.
c. Develop a brochure to be handed out at the coming Congresses to members highlighting the above two issues to try to alert and engage with the members on these important matters. To me we really do need to take some affirmative action against some of the people who are responsible for what has happened at CPA, and which the IRP Report has detailed pretty well. Their failing is that they are just weak on the recommendations.
From a personal perspective this has been a long haul, and I was happy to commit to end of September, and depending upon events may go a wee bit over. But really now is the time for the corrective action. I was pretty optimistic that the IRP Report might be the catalyst but as you can see from what I have written above it was pretty disappointing. So the next catalyst will be the new board but I am not quite as optimistic with it either given the involvement of the current board (especially Tim Youngberry and Jim Dickson on the Nominations and Remuneration Committee) and the lack of a call for a full governance review by the IRP so that members can directly vote for directors in the future. That sounds to me like a recipe for a pretty weak organisation.
But you never know so any suggestions for possible strategic actions let me know. Remember in all of this we have really only had the ability to huff, puff and shame them with the truth, and that we were closer to the angels than they were (in other words we were more right than they), plus we have had some pretty darn good media journalists who saw the issues more clearly than we as members often did. So we have achieved quite a deal.
Thank you to everyone who has contributed in whatever way you could, be it with your own analyses and emails, your financial contributions to the fighting fund, your website comments. or just your words of support to those of us who were able to be a bit more outspoken.
The Naked Webmaster needs a special note of thanks because he (or is he a she?) really pulled it all together with the website.
Well if you are one of the few who made it to this far and are reading this sentence. Well done. You deserve a medal.
Brett Stevenson CPA BComm MDiv