Well we have had a few days to digest the CPA Australia AGM and its aftermath. The clear message to me is that we have learned absolutely nothing, and the new board continue in the same vein as the old.
Have you ever asked what has been the core problem at CPA Australia that resulted in the entire leadership being either sacked or replaced, a supposedly Independent Review of the organisation, and an almost ‘new’ leadership in place? If someone asked you what was the central issue how would you respond?
That has been the question foremost in my mind ever since the AGM. Because, unfortunately, I believe the same core problem remains. My answer is in the latter half of this email.
After spending a good year and a half to research and expose the shenanigans at CPA Australia over the last decade I’m sure I share the disappointment and disillusionment of many with the events and decisions of the AGM. Perhaps these little pictures or vignettes captured from the evening convey something of that.
Picture This - the perfect cameo of the problem
Scene 1. There was none other than Jeff Hughes (yes, the one who categorised members as friendlies or not, and dogmatically asserted no secrets in the remuneration at CPA, the $900k COO membership man who managed to squeeze into that a tidy $185k p.a. from CPAA Advice etc etc) sitting in front of me at the AGM enjoying the refreshments and bonhomie of the occasion I am sure.
Scene 2. Our new Chair Peter Wilson threatening to take legal action against any members who asked/made some passionate and emotional questions/comments at the meeting. (I told him by the way that if he threatened me then my response would be summed up in that quintessential Australian expression ‘to get stuffed’.)
There you have in one little cameo a neat summary of the cpa saga - past leaders who led the organisation avoiding any sort of accountability, many walking away with a ‘fistful of dollars’ and escaping any form of censure.
While there you have the new Chair threatening the members who did most of the hard yards in exposing the shenanigans and asking some passionate and tough questions of the leadership, being threatened with defamation. And our new leader refusing to assure them that he will not take action against them.
Now there is a loss of perspective and appreciation of the real issues at stake and what has really happened. This is why I ask myself the question what has been the core problem at CPA Australia.
There you have a leader (and a seemingly equally compliant board) just basking in the glory of their new found power.
The contrast was inescapable to me.
I hardly need add that I voted for resolution 14 to remove Peter Wilson as a director.
Another Glimpse - our new leadership in full voice
There we have a new Chair and a new board who, as I perhaps too impolitely stated at the AGM, had not raised one word of public criticism about what had gone on at CPA Australia prior to their appointment as directors on 1st October 2017. Some of them we know from the annual reports had a long association with CPA Australia at a representational level but not a word of public protestation about the goings on at CPA. Yet there they were at the AGM presiding over the ‘rabble’ who dared to ask some tough questions of them. The silence of all of them at the AGM, apart from the dominating voice of Peter Wilson as Chair and a very small supporting voice from Merran Kelsall, was deafening.
The synergies between their silence before being elected, and their acquiescent silence at the AGM was just too much to miss. And here I was thinking groupthink and speaking up courageously as directors was a lesson to be learned from the Malley era. Now there is a sign of the future if ever there was one.
Where are the members?
Only 6700 members voted in this election (out of a possible 120,000). After all that has happened and all the coverage both internally and externally! Amazing really. Three quick observations from that:
a. That’s about the number required for members to call a members meeting - 5% of the membership of 120,000 voting members.
You can see the danger of the board unanimously opposing resolution 13 and ensuring it never got up. The board have locked their power in good and solid. If ever another Malley type event occurs there is nothing in the constitution to ‘simplify’ the process to deal with the problem. How the new board could not see the importance of this check being implemented makes me very cynical of their willingness to be held to account.
They want an ‘unchecked’ power, and all their rhetoric and talk shows they are just as bad as what went before in terms of having an unquestioned power not answerable to the membership. They might well have the support of the Ian McPhee led Independent Review Panel, and persons such as Ruth Medd from Women on Boards (see later for her ‘contribution’), and the past leadership but I can assure you this was the most obvious opportunity to fix our constitution and they blew it big time because they dogmatically (even resolutely) opposed it.
b. If this is the best we can do as a membership organisation to have the members engaged after such a debacle then we really do have a problem. I’m not sure anyone has the definitive answer to that, but I think it fair to say (as I see it anyway) that
- the soft recommendations of the Ian McPhee led IRP Panel with superficial governance recommendations,
no accountability of past leaders,
the almost subservient adherence to those recommendations by the new board,
the bloodyminded stubbornness of the new board to oppose the members who proposed resolutions which could have achieved consensus and healed ‘wounds’, and
the exhibition of controlling ‘from on high’ traits at the AGM by the new chair
could be a
I would also think the obvious contradiction between the much touted vision of CPA Australia (loudly affirmed by our new Chair and even new CEO) to be the ‘the worlds best member service organisation’ (p.9 annual report) with the words ‘accounting’ and ‘Australia’ and ‘integrity’, which are all clearly emblazoned in our name and logo, being conveniently overridden. The paradox seems to be obvious to all except the CPA Australia leadership.
c. Where were the divisions in all of this? They are being portrayed as the representative voice of the members. The one thing this AGM process has shown very firmly is that to believe that you might as well believe in fairies down in the back garden. That is the myth that the Ian McPhee led Independent Review Panel postulated and that the new board perpetuates.
Forget all the rhetoric, the divisions are a tool to prop up a very powerful board. They do not serve the membership, and they certainly do not offer any checks and balances on the boards power.
Such was the control of our new el Presidente at the AGM that even when questions were asked of the auditor he did not let the auditor speak, and even Caroline Spencer was not called upon to answer a specific question about her remuneration to the WA government. Yes, we have a leader in full control. That is such a relief after the last ten years eh?
We want a dominant leader of that ilk like we need a hole in the head, but there you go.
Everyone appreciated that it would be a difficult AGM, and that there was a lot of business to be done but I think a lot of the pain on the night was self-inflicted by the Chair because of his responses and answers and the way he conducted the meeting.
Words like openness and transparency take on a whole new meaning in the context of a CPA AGM. The boards of the Malley era perfected the technique and I’m not so sure our new board is greatly different. So, for example, providing the membership numbers by division and branch (even though a critical factor in the new Appointments Council) were not (and seemingly will not be) provided to us as we made this vote. And of course the breakdown of the for/against votes by division on each resolution will not be provided either.
It’s just empty rhetoric.
The question is why won’t they? That’s a rhetorical question by the way.
The refusal of the board (presumably with the new chair being their unanimous spokesperson) to provide a breakdown of the proxy voting by division and branch with the obvious sensitivity being the hint that the board may have been involved in proxy harvesting. The mere hint of that earned one member a sharp rebuke from the Chair. Their refusal and that rebuke says it all really.
Just think about that a bit.
Ruth Medd and Women on Boards
One couldn’t help but note the ‘timely’ comment by Ruth Medd from Women on Boards to say she saw no problem with the remuneration proposed by the new board (echoes of Jeff Hughes and Penny Egans comments there), and that her submissions to the Independent Review Panel were ‘embraced’ by the Panel so no complaints from her on that score. My mind thinks of the soft nature of the Independent Panels recommendations on both governance and accountability and I just wonder at the linkage between the two. Mmmm.
My suggestion to all the directors on the CPA Australia board is forget about gender and just be a great director along the lines of the criteria used by BHP that I had included in my resolution 9. They are gender neutral. Organisations such as Women on Boards I know are very ‘in vogue’ currently but it is worth considering that they be default focus on a director selection criteria (gender) which is irrelevant in relation to director performance when the fundamental criteria are not present. CPA Australia demonstrates that perfectly. Our organisation has focussed on skills based and gender selection criteria but has ignored the fundamental director criteria which (to repeat for Ruth Medd’s benefit in particular) are gender neutral.
Here are some of the fundamentals I would suggest need emphasising:
1. unquestioned honesty and integrity;
2. a proven track record in the accounting profession;
3. time available to undertake the responsibilities;
4. an ability to apply strategic thought to matters and issues;
5. a preparedness to question, challenge and critique;
6. and a willingness to understand and commit to the highest standards of governance
of CPA Australia
Don’t worry they are not in our constitution as the resolution failed to get up, but can I encourage the new directors to ‘lock them in’ anyway.
Conflict of interest just never goes away at CPA
I think we see the myth of conflict of interest when the new board cast their proxy votes in favour of their remuneration proposal which saw the President for example (i.e. Peter Wilson) have a $225k remuneration rather than the $130k alternative proposal. No conflict there of course, that’s just the way things are done at CPA Australia. That’s a neat $95k extra with hardly a blink. An increase equal to the total amount any of the scandalously remunerated directors received in 2016. The echoes from the past are inescapable. CPA Australia is a cash cow just ready and waiting to be milked. I just thought the directors might not be the ones leading the charge.
Great member involvement at AGM
It was great to see many members asking questions and making comments. It may not have been pretty but it was real and fair dinkum, and for most of them they have not received any dollars from CPA for their efforts. I could not say the same for everyone there.
How about some openness and transparency
I await the board’s notifying us of the amount given to the South Sydney Rugby League Club. Why their reticence (along with the Ian McPhee led Independent Review Panels failure to do so) is worth noting especially given their mood of greater openness and transparency.
Gerrymander heaven at CPA Australia continues
No breakdown of the member numbers by states in Australia. They refuse to provide this. In effect we have a gerrymander heaven at CPA Australia - NSW with 42,000 members has the same one vote as say Europe with 1,500 members. Victoria with 37,000 members has the same one vote as NZ with 2,200 members. No wonder the most sensitive area for the new board is to ensure they never provide details of the various divisions as their focus will be on the global approach. Echoes of the past here eh - it should be called CPA Global not CPA Australia. That is straight out of the Malley decade playbook.
And the new directors just sat there in acquiescent silence and agreed.
I’d encourage all members to have a look at the demographic analysis summary provided of CPA Australia on the website.
There is no breakdown of the Australian membership of 116,909 (71% of total 163,750) while for the other 29% they break it down into 37 groups. It’s a very dodgy, deceptive and misleading breakdown. The new board are happy to tell us there are 28 members in Kuwait but not that there are 42,000 in NSW. We only know the Australian state breakdown because I analysed the Members Register which the members purchased from CPA Australia to determine it.
I have repeatedly asked for the Australian breakdown and the new board have just as stubbornly refused to provide it (just the Ian McPhee led Independent Review Panel did not disclose it. Makes you wonder why eh?).
The new Chair and board have demonstrated the same cavalier approach to using the words openness and transparency as the old board.
I met a few of the new board, and just on initial meeting they seem pretty good, so hopefully if some of the obvious faults observed from the AGM can be challenged by them (my tip for you Caroline, and the others, is just answer the questions directly, speak up and not let Peter control the show as he did at the AGM - the one lesson from the past boards’ is we do not want groupthink and we do not want leaders who dominate good common sense directors duties) then things may be on the improve.
To be perfectly honest I was not impressed with our new President.
The reality is that this is the new board we have.
What has been the core problem at CPA Australia?
Back to the question that I started with.
I would summarise it in three words - abuse of power. In so doing I am just echoing the insight of a CPA member from the ‘old-school’ professional class which did not see CPA Australia as a cash cow to be milked but rather as a professional accounting membership organisation to advance the profession.
Abuse of power
The real heart of the issue at CPA Australia has been one of abuse of power. Those in power (the leadership in particular) have abused their power and you just need to read the Independent Review Panels Report (as soft as it was) to see how this worked our practically.
The critical question we need to ask is have we established checks and balances in our constitution to prevent such an abuse of power occurring again?
No, we haven’t.
The two resolutions which would have provided some checks on this (6 to communicate with members by email, and 13 to call a members meeting) were steadfastly opposed by the new board.
Why do you think that was?
Well best I leave it to you to answer that one. We now have a new board with no checks and balances on their ability to abuse power just as with the previous leadership.
It seems to me that in many ways we have come full circle and are back in close to the same spot from which we began.
i. We dropped our past leaders off with no accountability and a fistful of dollars on the way out the door.
ii. We appointed new leaders under the old system
iii. We have a new Chairman who shows amazingly similar control traits as what went before.
iv. We have a very gerrymanderable governance system and the members still cannot vote for directors.
v. Members still cannot practically communicate and/or call a members meeting on major issues.
vi. We have a board which espouses openness, transparency, engagement but displays the opposite and rules with an ‘iron fist’ on dissenting members.
vii. It all has so many echoes of the Malley decade that it is scary.
What is that saying about history repeating itself because no-one listened the first time?
What the new board have failed to appreciate is that checks and balances exist in constitutions because people (read members and directors and management) are not perfect so we need them to make sure controls are in place to ‘prevent the bad things’ from overtaking ‘the good things’. I’m sure the current board will assure us they are dependable and reliable and good people which may be correct but we don’t have to be great scholars of human nature to know that where money and power and no checks and balances are in place then trouble can brew.
That is the major failing of the board in opposing resolutions 6 and 13 in particular. If they misbehave then we are back to square one as members have to go through this same ordeal to expose it. And what are the chances of that occurring?
All the CV’s and reputations (be it from the Ian McPhee Independent Review Panel, to Ruth Medd’s clearly influential advice with them, to all those highly credentialed members and consultants who have been used etc) cannot overcome this basic human tendency to abuse privileges, which we have seen at CPA Australia too often.
CPA Australia is a munificent cash cow just waiting to be milked with a guaranteed revenue stream and a balance sheet to dream of. Marry that to a CPA global strategy focussed on growth and membership numbers (and I would bet my last dollar if I were a betting person that they will continue with this - don’t be fooled by their rhetoric) rather than a CPA Australia strategy focussed on the profession and members, then you have a recipe for more of the same.
Here is a little litmus test. Ask yourself if they will provide a diary showing costs and itinerary for international travel by person and purpose, and when they rebuff that you will have your answer in one. Many organisations and semi-government departments do such a thing but no, not CPA Australia. They will just give a one line total in the P&L showing international travel.
Where to from here?
Well I’m not sure. The indications and signals from the AGM are not very encouraging.
This is how I see it.
We have tried the membership route and the vast majority are just not interested so that seems to be a wasted effort. But others may continue to pursue this.
So to my mind that only leaves the legal and regulator/legislative routes. I shall keep pursuing these.
Lawyers do not use terms like ‘gob-smacked’ but can I say that the failure of the new board to pursue the board which approved Alex Malleys three year termination contract was the response from my legal advice. If I achieve any success in pursuing this (which will require some wealthy and highly principled benefactors to front up the funds necessary, which is unlikely as you can all imagine although the risk is very very low for a legal action) then it will not be just the past board but also the current board which will feel the sting of that. A reasonably narrow and focussed legal action has a very high probability of success. The new board members should think about that very carefully and seek their own legal advice on that one. I would just remind them that their primary duty is to the company CPA Australia and, as much as Peter Wilson would like to emphasise just looking forward and not back, they do have duties in relation to past matters.
Remember ASIC has a new leader so let’s not give up too readily on their being some accountability for those responsible from the past decade. I haven’t anyway. I may not be quite as active and vocal as in the past year but I am still here and will do my bit as I see appropriate.
Bi-partisan legislative change to improve disclosure for non-listed public companies such as CPA Australia (being a public company limited by guarantee) is a possibility, with clearly CPA Australia’s abuse of their corporate status being a catalyst. The possible need for greater regulation of professional membership organisations and their activities (in standards and financial reporting especially) where self-regulation has failed is another area, and clearly the CPA Australia example and the scandals hitting the Big Four accounting firms have provided the fuel for this fire.
As you can well imagine their are powerful groups and people who will be opposing such changes but that does not discourage me. I have this optimistic confidence and belief that doing the right thing is reward in itself.
I have completed my book outline and will take the next three months to complete it. The lessons from CPA are enormous on governance, the profession, membership organisations, accounting standards and the practical relevance (perhaps irrelevance is more apropos) of the law. I have been tempted to call it CPA Australia: A Case Study in Legal Theft, or maybe CPA Australia: Corporate Governance Gone Mad or maybe CPA Australia: An Abuse of Power but there are so many options that I am not sure. One chapter is called Naked No Longer.
Maybe I should have a page of title options. I will be ‘painting with a broad brush’. I’m afraid the academics are best equipped to do the more detailed research and analysis.
Well it has been a sorry saga, and the AGM (and the new board) was a real disappointment and pretty disheartening. I shall not be as actively engaged as with the last year and a half, but am still here. My last ‘official’ email will be when I finalise the Fighting Fund and give an update on the legal and legislative actions mentioned above. If I have the time I will also report on the recent Accounting Awards Night from the Vladivostok Social Club (just as much herring and ‘water’ consumed and raucous behaviour as at last years event).
I am still surprised at the lack of interest shown by the vast majority of members, and I don’t think I’m talking ‘out of turn’ to say that this has surprised many in the media. I have spoken with a couple of large groups of organisations recently about the CPA saga, and the people are amazed at the lack of accountability of the leaders and the disinterest of the bulk of the CPA members. It’s not a good look to the outside world.
I think it is also telling that many of the people who were in leadership and representative positions at CPA Australia over the last decade, and/or were silently acquiescent ’sitters on the sidelines’ when they should have been actively engaged in exposing the saga, financially benefitted (think past and current leaders at board and management, think Independent Review Panel, think PwC, think auditor etc) in ways that many of those who actively exposed these matters did not. There is a cost for doing the right thing, and there are benefits from remaining silent.
Thanks and no thanks
Thanks again to all the members who have contributed and been active on this matter. Also to the media, and the AFR journalists especially. And no thanks to the likes of the Ian McPhee led Independent Review panel, or the likes of Ruth Medd from Women on Boards, who managed to avoid the obvious and fundamental problems to deflect to peripheral issues.