Just five things. First one is long, the others are very short.
1. Approach of the Independent Review Panel is concerning - no accountability.
I have just commenced a detailed response to the Independent Review Panels Final Report into CPA Australia. It will be in three parts (Remuneration, CPAA Advice, and Governance), and I have started on the Remuneration part.
Quite frankly I am shocked as I dig a little bit. So this is just to give you a very brief taster as to why I think this Final Report’s failure is that it has lost sight of the whole issue of accountability. Predominantly the board and senior management but really it goes much deeper than that.
I have written in more detail about this below.
The three part detailed response will be emailed out as I complete over December and January.
2. Concern re AHRI and two of the new directors esp. the Chairman.
I’ll also just alert you another concerning matter in relation to the major conflict of interest for the new Chairman (Peter Wilson) and new director (Jon Scrivens) re AHRI, and by default it shines a troubling light on the whole selection process for the new board from the Representative Council to the Nominations and Remuneration Committee through to the board. I
t looks like we are being taken for a ride.
But I shall let the Spillers Group provide you with the details.
3. Special resolutions update.
I have the drafts of the special resolutions to obtain the 100 signatures so they can be raised at the AGM on 22nd May 2018 in Melbourne. I have yet to complete the explanatory memorandum to accompany them but shall do over the next few weeks.
I anticipate that they will be sent out, perhaps along with the detailed responses to the IRP Final Report, over the months of January and February.
We will need to have them signed and delivered to CPA by middle of March at the latest. If members have any suggestions on other resolutions that we could raise please let me know asap.
4. A great letter from Andrew North is attached at the end.
On the core issues (and written on 19th November, before the IRP Final Report) provides a great summary of some of the key issues that still are of concern.
It illustrates that we really need to remain vigilant. We all would like to give the new board a chance to turn things around but lets not be naive.
The interim CEO Adam Awty, the COO Jeff Hughes and many of the management at CPA Australia who have been there for most of the last decade are still there. Surely we cannot attribute silence and tolerating some of the things that have been exposed to just Alex Malley. Crikey we have a very strong ethical code which obligates us as CPA’s in a way than any other profession.
The no accountability approach of the IRP is concerning.
Let me just highlight one issue in relation to remuneration and the IRP Final Report as a motivator for you to read it a little more closely, and to see why I believe the approach of the Independent Review Panel is troubling.
You will all recall that we forced the CPA leadership to provide full disclosure of directors remuneration for the 2016 year by issuing them with a s.202B request.
You will also recall that prior to this we had shared concerns about the level of remuneration to all the leadership at CPA Australia, and they resisted quite aggressively (their memo’s of 2nd March and 16th March 2017 especially) any further disclosure as there was nothing to hide (‘no secrets’) and that they were compliant with the law.
Well, we now know that they did have plenty to hide by not fully disclosing. I shan’t repeat the sorry tale of that disclosure which we all are aware of now.
The IRP’s approach
But I did want to draw your attention to the way they disclosed this, the ‘mistakes’ of the leadership at CPA Australia, the ‘mistakes’ of the auditor (Mark Stretton from Deloittes), and surprisingly the almost cavalier way the IRP has shifted the blame for these ‘mistakes’ from the persons responsible to CPA Australia in general.
It says something about the approach of the IRP’s reluctance to hold anyone accountable for what has gone on at CPA Australia. And possibly most concerning is the way they have shifted the blame to ‘CPA Australia’ in general rather than the auditor and specific CPA staff (e.g the CFO Adam Awty and deputy CFO Nicholas Diss) and the board for poor oversight.
You have a look and see what you think.
Imagine you were writing this section of the report and ask how you would express it given you have been asked to provide an independent review.
CPA Australia provided full disclosure of the directors remuneration on 31st May 2017 in response to our s.202B. It was fully audited.
Trouble is that it was wrong.
Finally CPA Australia admitted they had ‘got it wrong’ and issued an addendum or addition to the initial wrong one to correct it on 30th June 2017. It is certainly not easy to get a clear picture of the full remuneration of directors because of the way they worded the corrected one’. It was also audited by Mark Stretton and given the tick of approval.
Putting aside whether even the second one is still correct (and Andrew North contends that it isn’t and I believe him rather than CPA going on recent history) it is worth considering two matters. I have attached a summary schedule which hopefully makes it easier to understand.
a. the size of the mistake
$1,282,588 (23% of the total kmp remuneration, or 34% of the directors remuneration requiring to be disclosed). That is a pretty significant mistake wouldn’t you say. Remember this is a hot issue and subject to considerable heated discussions at the time (as it is now), and they are being forced to fully disclose. So you would think they (both CPA Australia and the auditor) would give it close attention to get it right.
But no, they got it wrong by 34%.
Crikey, that takes some believing. Can you imagine BHP providing in response to a query from ASIC or the ASX to make sure their executive remuneration was correct, dishing up an audited schedule which was incorrect by 34%, and saying whoops, we got it wrong?
I think that would redefine gullibility.
Well that is what CPA Australia and the auditor have said.
b. the response and approach of the IRP to this matter.
i. p.57 Final Report.
No mention is made of anyone specifically responsible be it the CFO and deputy CFO, or the CEO’s oversight or the boards oversight.“While the two disclosures, read together, satisfy the requirements of section 202B, the failure to include overseas subsidiaries in the initial disclosure does not reflect well on CPA Australia given its leadership role in the accounting profession.”
No, they are all specifically excluded and the general blame and responsibility is laid on the doorstep of the broad CPA Australia organisation.
Note also that no blame is apportioned to the Auditor who apparently was ‘looked to’ by CPA Australia (again no-one specifically) for external advice.(see p. 57 of final report).
It is just very strange wording and an odd approach, and unfortunately I believe it typifies the IRP’s approach all the way through this report, that there is no-one specifically (be it a person, or group of persons such as the board or the management, or the CFO’s or the accounting staff) mentioned as accountable.
It is a general CPA Australia that is at fault if ‘anyone’ at all.
I shan’t go on.
You have read of page 57 of the final report to see if I am being misleading.
How is it possible that we have a COO/CFO (Adam Awty) on a remuneration of $950,000 in 2016, and a debut CFO (Nicholas Diss) on $320,000, and board members on a minimum of $95,000 each (some much more), a general counsel on who knows how much, and other managers on between $250,000 and $600,000, yet they still were not sure how to complete the s.202B statement. In other words was full disclosure of remuneration such a rarity to them that they needed to ask the auditor from Deloitte who seemingly could not get it right himself.
Gee, I think a very bright light needs to be shone on CPA Head Office. Crikey we journeymen/women (not too are what the gender neutral term is) members provided them with the advice free of charge on that one and they still messed it up.
And I think it is fair too say all we did was look at the Corporations Act, and then applied a little bit of brain power.
After reading the CPA efforts and the IRP Final Report on the s.202B statement, one would think we were talking about rocket science.
In reality all we wanted was just a full disclosure of remuneration.
ii. Have a look at the chart of directors remuneration done by the IRP on pages 45 and 46 of the Preliminary Report, and again in the final report on pages 48 and 49.
Apart from some glaring mistakes by the IRP such that have rounded down the CEO’s salary from $1,786,331 to $1.77m rather than the normal approach adopted with the others to $1.79m, just look at the way their are no obvious ways to see the totals (as in the chart provided so you can quickly see the relationship to the annual report and the mistakes).
In the final report they made it even softer by reducing the remuneration amounts to parts of a million rather than the actual dollar value.
So, for example the directors fees paid from CPA Australia Advice board were shown as $0.38m not $380,000. It may seem unusually pedantic but we are not a listed company, and you just have a look at the way they express their very high remunerations. Usually always in specific dollars.
Not a big deal but its these little subtle touches that concern me.
For example it does not specify the missed amount of $1,182,588, which is 34% of the incorrect amount. Have a look at 188.8.131.52 in the Final Report which deals specifically with this issue raised by members.
Why would they not do a schedule to explain what the difference was such as I have attached to quickly summarise what the issue was. I suggest members should read the second s.202B statement by CPA Australia issued on 30th June, and it is not that easy to get the big picture.
I don’t want to make a mountain out of a molehill here but I believe this is a cameo of the approach of the IRP on many of the issues where specific accountability and responsibility could be laid but they seem to defer and present in such a way that it is avoided.
Remember remuneration is THE issue upon which all the members submissions to the IRP were unanimous in regarding as scandalous.
iii. In the end the IRP recommends changes but seemingly no-one at fault because responsibility and accountability are just avoided beyond a general CPA Australia.
iv. I would just encourage members to read the Final Report with this question in their minds:
- why did the IRP express this item this way?, or
why didn’t they do this? or
why haven’t they specified the persons responsible? or
why have they seemed so accepting of CPA Head Office representations and excuses while not so of any of the critics who raised these matters?
why have the IRP taken this approach?
And the answer that keeps coming into my head is troubling, hence why I use the terminology of a ‘professional whitewash’.
Surely accountability and taking responsibility are so fundamental to corporate governance that it seems silly to even state it.
Yet somehow in this whole final report I believe they have been avoided.
A great letter from Andrew North
It is attached in pdf format
Schedule of Remuneration for 2016 (KMP and other directors)
It is attached in pdf format.
If anyone would like the excel format let me know and I will shoot it through.
Well I trust you find this helpful