Merry Christmas to Peter Wilson. When it was suggested that Peter Wilson should be independent of the old board so that we can have a fresh start Peter responded with "That's your issue". Summary of the meeting here: viewtopic.php?f=23&t=594
A good summary of where we are up to by Joe Aston of the AFR, linked to from here: viewtopic.php?f=5&p=4137#p4137
If you are new to this website read the story so far: viewtopic.php?t=321#p1793
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RESPONSE TO CPA AUSTRALIA Letter of 2nd March 2017

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RESPONSE TO CPA AUSTRALIA Letter of 2nd March 2017

Post by nakedadmin » Thu Mar 30, 2017 9:27 am

Hi Members, and the CPA Board and Management,

Many of you will have seen the Letter from CPA Australia to my emails.
I have added it on below in case you haven’t.
Here is my response

Let me answer in point form.

One is short, verbose, and legal management speak ; the other is long, verbose and blunt.
1. It is with pleasure that I provide this reply to the letter that was emailed to me on 2nd March (5.59pm), and was then delivered by affidavit on 3rd March (5.15pm).
And I was only too happy to sign.
It was signed by Jeff Hughes (COO Member Services) but I suggest was co-authored by a number of people (you make your own assumptions as to whom they might be) and going by the language (which I would best describe as legal management speak) it had a fair deal of legal oversight.
Being delivered by affidavit I thought was a bit of overkill, but hey they wanted to make sure they extended ‘the hand of courtesy to (me) as a valued member” and that I would “accept the genuineness of (his) invitation…”.
To me they don't go together - extending the hand of courtesy, and issuing an affidavit. But each to their own.
If I were you Jeff I would have come out blazing, which is pretty much how you must be feeling. I have been frank, honest, up-front and very outright and critical of some major matters and issues at CPA Australia.

2. You should not have had the legal experts look over it and revise the language of your first draft Jeff because it really has made it tough going.
But I persevered, and had my dictionary handy at all times so I managed to put it all together.
Humphrey Appleby of Yes Minister fame would have been proud of you. Lets be honest here Jeff, are you sure you didn’t whip out the Rogets Thesaurus at the end and gild the phrases a little?- I mean that "the efficacy of elements of the organisations governance” and “there cannot be a scintilla of confusion” were just beautiful.
Well I shall try not to do the same.

3. I was worried about how to respond to your letter because of that little confidentiality disclaimer at the end of the email but clearly your intention was to have this broadcast to all the members, as Alex Malley and Graeme Wade have done since you sent it to me with the instruction to distribute it to other members.
So that certainly enabled me to write this for all the members also.

4. I shall go through paragraph by paragraph so there is no misunderstanding. Possibly best for members to have Jeffs letter open at the same time to see what I am talking about.
I do apologise for the length of this but bear in mind this was sent to me by affidavit and they write in very legal jargon.

My emails to members
A. The first four one sentence paragraphs - nothing much to add other than that I have sent another two group emails to the one’s you mentioned

Email 1: 21st Feb Six issues for the Board to consider - pretty critical and also pretty right I would suggest (even after your letter)

Email 2: 26th Feb Two more Issues added - Governance Issues and Excessive Remuneration of Board and Three Senior Managers (one of them being you Jeff I should add)

Email 3: 28th Feb A detailed analysis of Excess Remuneration of Board and Senior Management since Alex Malley has been President then CEO. I even included a detailed spreadsheet and offered it to anyone in unprotected excel format (nothing to hide sort of approach). I notice you did not ask for that.

Email 4: 2nd March A summary of topics I plan to write about over the coming weeks and months including

governance at CPA,
more on remuneration excess,
a more critical look of the Alex Malley story insofar as CPA Australia is concerned
a look at CPA’s strategic misdirection over the last decade,
a quick review of what really happened in Oct 2017 and since,
a review of CPA Australia Advice, and
possible actions by members to correct the ship.

Email 5: 3rd March Two quick member quizzes and two ‘hot off the press’ AFR newspaper articles about CPA (1st and 2nd March)

Here is some of the feedback I have received Jeff, as you will be interested being the COO Member Services.
I have received 115 supportive emails from members (thank-you, I am glad someone is going this, I’ve always thought as much, I agree sort of thing), 8 have asked to be unsubscribed, and all this from a mailing list of about 600 members.
I’m no marketing genius (actually one of your directors even suggested that some of my concerns of marketing at CPA were the 'pontifications of someone who had not done Marketing 101’) but I would have thought that was a pretty good response rate in terms of quantity and agreement.
I know many of your directors, Graeme Wade in particular, have been out canvassing (and more I should add) the members in response to my emails so it would be good to know what sort of a strike rate they have had?
How do I know that? Well, because the members have been emailing and calling me and telling me because what I have written in my emails resonates with them. Rings a lot of bells in their ears (so to speak).

In summary I have had an overwhelmingly supportive response from the members (based on a mailing list of just 600).

But I digress.

CPA Summary of my emails
B. The fifth paragraph (3 sentences)

You many be right to summarise my emails as two strands of issues, but I’m a simple sort of guy Jeff.
No MBA or Law degree in my toolbox, and I must admit "the efficacy of elements of the organisations governance” was just too good for mel to try to dismantle. Let it stand in all its incomprehensible glory I thought.
So I would say to you, and the members, that my emails as written is what I said and meant to say, not your reduction to two strands.
The obvious conclusion from that is that you have neglected to mention a heck of a lot of the things I mentioned in my emails.
A heck of a lot.
Perhaps you might like to respond to mine paragraph by paragraph as well. Might at least discuss all the issues not just the cherry-picked ones.

Lets move on shall we. The meatier stuff awaits.

Strategic Direction esp. Branding
C. The sixth paragraph (starts with As and ends with them)
In the midst of all those words (and gee Jeff you have used a lot to say very little in this paragraph) you have said
1. We have a diverse membership
2. We have three core strategies or goals - enhance the brand, drive advocacy, and create/disseminate knowledge).
3. Have a high membership retention rate compared to other accounting organisations.
Is that a fair summary?
On points 1 and 3 I am sure thats true, though I shall check the 3rd one when I do one of my later emails. Good points and well said.

However it is on that 2nd point that I would like to make a few comments and these possibly indicate why many members have trouble with the marketing campaign and approach under/using Alex Malley, and also the strategic direction of CPA Australia.
The latter first
Strategic gaols of CPA (sorry, core strategies) - only one and a bit of those three that roughly fits in with the Objects of our organisation (have a look at s.5 of the constitution, they are very clearly laid out and described) is to drive advocacy, and partially fits create/disseminate knowledge.
That's fine to an extent but the concerns lie with what is left out (improving our professional status and standing as members and as an organisation is my quick summary) and what is included (brand enhancement).
My personal beef, and I am not Robinson Crusoe in this regard among the members, is that the brand enhancement strategy (read my first email and I pretty much hit you with both barrels on this) is making us the butt of jokes and a laughing stock in the public arena. That is exactly the opposite of what a core part of the objects say, which is to (my summary) improve our professional standing as individuals and as an organisation.
If you want a quick and off the cuff solution - reduce the $30 million spend on marketing (which is mainly on Alex Malley not CPA) to say $5 million, and spend the difference $25 million) on lifting our professional standing (you might reduce some of the costs of CPD events, and make them a break-even rather than profit activity etc). In other words lift our game as accountants and not as some Hollywoodised organisation that has to keep apologising for the inane and wasted money spent on the Alex Malley marketing strategy.
Look at the Objects in s.5 of the constitution Jeff. It is plain reading for all.
Is that a clear enough explanation of the problem.
Ask most members and they might not express it like that, but the drift and overall message is the same. I would suggest most members will have some suggestions on ways to lift the professional status of members and the organisation, and I would say 99% of them would not place the Alex Malley marketing approach as part of the mix.
We have been sold a pup.

Lets move on.

CPA Self Promotion and Circular Reasoning
D. The seventh paragraph (starts with As and ends with board)

I summarise this paragraph as your PR statement Its a form of corporate governance circular reasoning. The board sets the goals/objectives, it establishes metrics to monitor them, achieves them, and then brags about it. Jeff, we all read last years Annual Report.
You know where the critical problem lies, or how to break the circular reasoning - what are the goals and objectives the board has established? Are they goals that meet the objectives of our organisation (see above paragraph).
Let me illustrate in case you don’t get what I mean - goal - to make The Naked CEO the best selling business book in Australia (spend millions, trips overseas etc) but who is it promoting (I don’t care if we own the IP, how foolish).
Thats right, it is promoting Alex Malley.
But it gives us brand awareness I hear you say.
Well, that is the point at which the circular reasoning is broken - you see it is promoting Alex Malley and not CPA Australia. The band awareness is crap for us as a profession and as professionals. You see it might fit in with one of your goals (brand awareness) but not with our Objects.
You try it Jeff.
Try the sponsorship of The Australian Open Tennis, or the NBL (on that I am amazed you have not recognised the major conflict of interest with Graeme Wade as the Chairman of that organisation - more on that one later), or the billboards, or the television shows we pay for. C’mon Jeff, you can do it if you really try.
It's pretty obvious to most members.

On we go 7 down, 12 to go. Grab a coffee if you want a break by the way. I’ll wait for you.

Marketing - The Naked CEO and Total Marketing Spend
E. The eighth paragraph (starts with Since and ends with events)

This one is all about two things. Firstly singing the praises of the book The Naked CEO, and secondly the total marketing spend at CPA.
I also won't say anything about my conversations with Graeme Wade as half a dozen members have told me they have the same conversations and replies with him whenever they have asked questions on these matters. So its a well traversed CPA advocacy line Jeff.

Lets start with The Naked CEO
Well Jeff no praises from me on that one.
I think its a flawed strategy and is more about brand awareness for Alex Malley than for CPA Australia.
And to think that we have bankrolled it. I couldn’t give a toss about the IP.
I would suggest that if we did an Activity Based Costing exercise on it, we would be losing big time.
But irrespective its a flawed strategy as per above.
Did you read in the AFR Rear Window that perhaps Alex might not be the sole author of the book? You were pretty adamant in emphasising that Jeff - “solely authored by our Chief Executive”.
It indicated that perhaps Jillian Bowen (yes, the one caught bragging about her flights around the world presumably on our tab doing work for us?) was the one who ‘developed’ the content for the book. (AFR Rear Window 1/3/17).
But I presume the board are on top of all that if we own the IP. Phew.

How about the marketing spend at CPA?
Yes, I was wrong in saying the marketing expenditure was north of 20%.
I should have said it was just south of 20%.
I also would like you to corroborate that the staff involved in the marketing full time at CPA are not included in admin. expenses but marketing.
Not a big deal but I think most would see the implications of that and perhaps the north of 20% is nearer the mark
Marketing Spend.png
Marketing Spend.png (118.92 KiB) Viewed 724 times
I also notice that you did not use the comparison to ‘broadly comparable member organisations’ as you did on paragraph 6.
Let me, to get some perspective.
The Institute (prior to the merger and not reporting mktg separately) spent around 4.5% on marketing, thats about 25% of what we spend.
Take a look at the chart for comparable years 2008 and 2009 (CA’s 4% to 4.5%, CPA’s 16% to 16.5%)
How about the IPA. Well nowadays they only spend about 8% to 9%, whereas we are around the 19%.
Thats what we get for The Australian Open, The TV, the billboards, The Naked CEO, oh and the NBL sponsorship.

Also as I look at the chart I don’t see the overall trend as falling as a % of revenue as you suggest.
It looks pretty sticky to me up around the 18% and 19% level.
A perhaps better metric is 'of every dollar we spend how much goes on marketing’, and that pushes it a tad higher.

Oh well, lets see what 2016 brings eh? Perhaps we got the NBL sponsorship at a special rate.
Let me emphasise how the board do not see the obvious conflict of interest (both apparent and perceived) on that one defies me.
You sort of got me on the 'north of 20%’ skirmish but I would say that one is still fighting and I won the overall ‘we spend too much on marketing’ war.
Is that a fair summary?

Lets move on.

Global Strategy
F. The ninth paragraph (begins with As ends with vision)

In summary we live and work in a global world, and we as CPA Australia need to rightly fulfil our role in that to our members and the profession.
All good Jeff. No worries.
That's a reality we all face and live with.
The problem comes when CPA Australia starts to usurp rather than align itself and work with international accounting organisations such as the CPA’s in the USA.
I can say from firsthand experience my family have a business in Canada, and we do not expect our Australian CPA accountant to be the expert on Canadian accounting and tax laws etc. We work in cooperation with a Canadian accountant and he presumably looks to his Canadian professional accounting organisation.
That is a rough summary of what I would call aligning not usurping.
You know what it does Jeff, it saves a lot of money with CPA Australia staff and board travelling overseas to set up offices in New York and London.
I bet you guys are planning to appoint a Global Director (the word is out I’m afraid, I bet there will be some jostling for that one), perhaps some supporting staff.
You know how it goes?
When you say ‘we have the privilege of being both the trustees and beneficiaries of that vision’, are you talking of CPA staff and board here, or are you talking of the members?
I think the former are in your beneficiary sights.
I think its a misguided strategy ,and that our emphasis should be (as per the constitution) aligning ourselves with like minded organisations.

On we go.

Self Promotion Again
G. Paragraph 10 Tenth paragraph

Pure unadulterated patting yourself on the back.
What can I say, you have said it all.

The ‘Facts'
H. Paragraph eleven (starts with In and ends with me)

You have issued some fighting words here Jeff.
I’ve made errors that can be clearly understood from publicly available information.
Are you ready to thrust the rapier in.
This is your way of saying you are wrong Brett.
Well lets see as we proceed through the following paragraphs eh?

Corporate Governance 1 - Directors Terms and How Appointed
I. Paragraphs twelve, thirteen and fourteen (beginning with The and ending with appointments)
I think okay to group these all together as all deal with the issue of length of service of board members (para 12 & 13) and how appointed (para 14).

i. Directors Terms
Lets start with how term lengths of directors has changed since Alex Malley (Oct 2007) became President and then CEO (Oct 2009).
The context is important
The context here, which is important, is to see the way these constitutional matters in relation to directors have been very influential in locking in directors who are keen supporters and advocates of Alex Malley, and also for what I believe are excessive remuneration levels for both board and senior management (Key Management Personnel).
More on the latter later in the letter but let's focus on the directors and the changes which have specifically ‘locked in’ terms for specific directors well beyond the normal (and standard maximum times by best practice governance standards.).

That is the context that these matters need to be seen, as well as the very small number of members who voted for these constitutional changes that locked them in.
In 2012 it was just 138, 147 and 143 members who voted for the three changes, and in 2014 for the change that enabled a couple of specific directors terms to be extended it was going to be defeated at the AGM until the president swung in with 300 proxy votes.
That was described by the CEO Alex Malley at the 2014 AGM as overwhelming support for the changes.
Really. A change that was about to be defeated by the members at the meeting but was secured with 300 plus proxy votes.

In other words, these changes were secured by 462 member votes out of a membership of 150,000 members.
I understand that is the way votes go but lets not regard an approval by 462 votes and a the lack of attention and apathy by the remaining 149,500 votes, as overwhelming support eh?
I suggest that is the line constantly used to any one who asks on these matters. (Ditto re Alex Malleys approach re marketing. That is the almost standard response in my three conversations with Graeme Wade - that the members overwhelmingly endorse the marketing strategy with Alex Malley.)

So that is the context.
The vast majority of members have been too busy, too trusting, too apathetic etc, and these changes have been passed BUT thats a far cry from being overwhelming supportive, or a glowing endorsement. (This becomes more obvious with the excessive remuneration changes).
The context, to me, is that we have been foolish to allow this to happen, and its a real danger for many professional organisations.
The members are busy and just presume the board and CEO will oversee the organisation responsibly, they don't get too involved in reading annual reports and motions for changes at AGM’s. Our fault, no excuses there.
But the danger lurking beneath the surface is that when members do not remain vigilant then what appear minor changes and/or are passed by an insignificant number of members (for example, 140 out of 150,000 in the case of the 2012 changes for us) the consequences can be pretty dramatic.
What has happened since Alex Malley took over leadership at CPA Australia is now becoming readily apparent in a number of areas with directors terms and remuneration being just two taking our attention here. (marketing, branding and strategic direction discussed above would be another three).
I am endeavouring to make all the members aware of that so we can correct it.
That is the context necessary to understand the directors terms and board remuneration.

But lets continue with the directors terms.
What does the constitution have to say?

On the general rule
2007 constitution (30/4/07) - s.72 (4 & 5) two year terms with maximum service term of 6 years (in other words three terms of two years max).
2008 constitution (30/4/08) - ditto to above. s.72 (4 & 5) two year terms with maximum service term of 6 years (in other words three terms of two years max).
2009 constitution (1/7/09) - s.44 (b & e) three year terms with maximum service term of 6 years (in other words two terms of three years)
2012 constitution (1/5/12) - ditto to above. s.44 (b & e) three year terms with maximum service term of 6 years (in other words two terms of three years)
2014 constitution (28/4/14) (current) - s.44 (b & e) three year terms with maximum service term of 9 years (in other words three terms of three years)

In summary directors up until May 2014 served for a maximum term of 6 years. From May 2014 it was extended to 9 years.

The exceptions to the general rule
Now this is where it gets interesting, where you really need a lawyer to interpret the meaning of the sections, and where I have my real beef over this matter.
The exceptions were added for specific individuals to serve beyond the general rule terms. I know you use the term 'transitional arrangements’ but thats just management speak. Refer to my detailed Remuneration Analysis and you can see this more clearly.
R Petty and G Wade commenced as directors in October 2006, so their terms should have expired in Oct 2012 but for the exceptions. Ditto for M Ryan except one year later.
Based on my analysis (which is reasonably accurate given the limited data available to be precise) these three directors have been remunerated (and still are I should add) since 'going over' their initial 6 year terms as follows:
R Petty (now in his 11th year) about $400,000 (from 2013 to 2016) and for the total period about $1,100,000 (2006-2016)
G Wade (now in his 11th year) about $1,100,000 (from 2013 to 2016) and for the total period about $1,400,000 (2006-2016)
K Ryan (now in her 10th year) about $400,000 (from 2013 to 2016) and for the total period about $600,000 (2007-2016)
These three directors specifically benefitted enormously from the exceptions to the rule changes.
I leave it for members to do the sums and calculate what they would have not received had the changes not been made.

These exceptions to the general rule were passed at the AGM’s and constitutionally correct (members can refer to the Notices of AGM’s on the website, and to the constitutional changes) although note that with votes of about 140 in 2012 and 450 (of which 300 were proxies) in 2014, and with wording that to me was almost incomprehensible (when specifically naming the persons would have made it much clearer for all to understand - but then again if they had of done that then I doubt they would have passed) one could hardly call them an overwhelming endorsement by the members (as Alex Malley did at the 2014 AGM).

So Jeff, when you say in your letter, that the justification for these extensions to 11 years was due to 'transitional circumstances’ and that it was all explained in the 2014 Notice of AGM, then you are absolutely correct in the legal and technical sense but to me it does not pass the pub or sniff test. In an organisation with 150,000 members are you saying other directors could not be found who had the necessary experience or expertise to step in when their terms expired by the general rule?
I’ll leave members to make up their own minds on that one, but to me I think we were foolish not to dig deeper at the time to understand what that almost incomprehensible exception involved and what it would cost us, and benefit them.

So Jeff, let me say I got it wrong in saying these three directors are serving in breach of the constitution.
You got me there. I’m happy to apologise to all the members and the board and the senior management.
I should have looked a little closer at the incomprehensible exceptions in s.44 and not just the general rule.

But let me also say I think we members have been foolish in allowing this to happen for all the above reasons given the context, the specific individuals excluded (in legal terminology not by name) and the amounts of remuneration involved.

ii. Appointment of directors
Lets look at the second of the issues in relation to governance, being the appointment of directors (paragraph 14 of your letter).
I am going to do a very detailed email on this one but lets clear up a few things from your letter, and emphasise a few matters that you clearly have avoided in your letter.

i. Members can never vote for the directors directly.
Firstly the language in relation in relation to both Directors (12) and the Representative Councillors (24) is that they are appointed.
This appointment process may involve an election (at various levels e.g. Div Councils, or other groups etc) but it is not mandatory.
And secondly because the Representative Council appoint the directors we the members never have a direct vote for the directors.
An election in other words.
The big red flag waving here is that when people are appointed rather than elected directly all sorts of politicking/lobbying can occur behind the scenes such that the members are excluded from being the final decision-makers on who our directors are.
We are always one step removed from doing that.
That is a big red flag in a governance sense.
So Jeff all the talk of wanting to prevent an ‘ossification of the board’ and to ensure a ‘highly talented potential member is not disenfranchised’ is just claptrap when the members cannot vote directly for the directors.
I think you are just plain wrong when you say (last sentence) that “members have the ultimate say as to who is appointed to the Board’’ (yes I shall get onto the Rep. Council next and no I haven't taken your comment out of context). If that were the case we should directly elect them.
We don’t, so lets not make statements like that eh.
Perhaps an apology could be in order on that one?
Why do you say this Brett? Aren’t you being a bit unreasonable?

ii. Let's look at just how representative the Representative Council actually is, the power the Board have over the composition of this group, and the dangers that lurk beneath the surface.
In other words there are lots of red flags waving here.
Let me quickly summarise who the Representative Council are and how are they appointed to see if you can pick up some of the red flags.
There are 24 of them currently.
50% are appointed from Divisions (see below for details of them) (62a i and ii)
50% are appointed from various other groups (see below for these groups) (62a iii).
These other groups cannot exceed 50% (62b).
These other groups are selected by the Board (62a iii) plus the CPA President (62 a iv)
The President chairs the Representative Council

Well members seen any obvious red flags flying there?
Three obvious ones to start with I suggest.
1. They are appointed and not elected (see my comments above on that).
2. The Board select the other groups that comprise 50% of the Representative Council.
3. The President chairing the Rep. Council.

Lets look at the actual Divisions and Other Groups to see if we can't see a couple of other red flags flying.
Representative Council.png
Representative Council.png (43.38 KiB) Viewed 724 times
Geographic Region.png
Geographic Region.png (47.98 KiB) Viewed 724 times
What do you think? Any red flags obvious there?
Remember the words in the letter of the boards intention - to broaden the reach of the Representative Council to embrace those disadvantaged by geographic location in one way or another.
Let me ask a few questions to highlight just some of the red flags I see flying? Refer to 2015 Annual Report p. 20 to corroborate data used.
I’m from Hong Kong, and I know we with China bring in 10% of CPA revenue yet we only have one member which is the same as Europe which only brings in 0.6% of revenue?
I’m from Vietnam, and pull in the same revenue as Europe yet they have a rep, and we don’t?
I’m from Malaysia and we pull in nearly 6% of CPA revenue and only have one rep, while NZ has one for only pulling in 1.2% of revenue?
How come past presidents have the same number of reps as we do in WA?
I mean really how many past presidents are there after all?
I’m a mature academic who lives in the NT, was a past president and I do voluntary work in the NFP sector. Does that mean I can be involved in appointing 5 Reps.?
The common denominator to all of these is that it is the board that selects groups.
I know a lot of members who play bridge. Do you think the Board would start a group for us and we can have a Rep.
Oh better still how about a Basketball group, that would strategically link with our marketing effort.

I would suggest that the Board has a lot of control, and that the red flags flying (see above) do not indicate a best practice corporate governance model.
And contrary to Jeffs assertion that it is the members who ultimately say who is on the board.
I say that is bollocks, and that we are being hoodwinked.

Is them fighting words enough for you CPA Australia Board and Senior Management (you shouldn’t cop all the flak Jeff, after all we know this letter was a joint effort eh?)

Time for a toilet break, or perhaps a nice cup of tea? Go on. You have earned it to make it this far.
See you in a sec.

Corporate Governance 2 - Board Remuneration
J. Paragraphs fourteen and fifteen (begin with You and end with Australia)

On this one Jeff, you and your co-writers are on a hiding to nothing, and I think you should apologise to us.
I shan’t revisit the material from the Detailed Remuneration Analysis done.
Members have seen that. It speaks for itself.
Remember if there are any dissection errors in my analysis (between directors and senior executives) then I only have what is publicly available to work with.
Either way the total is definite, and its either directors or board who are reaping the rewards.
The split in exact terms is not important, what is important is that it is pretty close to the mark.

Let me just highlight a few matters and juxtapose (do you like that one? C’mon Jeff you have to crack a smile sometimes even when you are in the wrong. It provides cathartic release. Stops you from doing something really bad. Not so sure about the directors though, some of them look like that they are about to blow a gasket!) them against your comments in the letter.

No detail just a total figure!!!!
You said “The annual cost (of board and executive remuneration) is clearly disclosed in….(the) annual reports” and that “there are no secrets to the total quantum of cost”. Completely true but what are you saying?
Are you saying that with a straight face? You have to be kidding.
All that is disclosed in the Annual Reports (members check it out an Note 17 in any of them) is one amount for total remuneration to Key Management Personnel (which is the board and the three senior managers). In 2015 this was $4,572,000. That’s it.
Clearly disclosed… no secrets..
Gee Jeff why not publish a one line Income Statement showing the surplus/deficit and then brag about it being clearly disclosed and no secrets.

I had to read those sentences again to be sure that was what you are saying.
And let's be clear about this.
This letter is from The CEO ( Alex Malley ) and the Board (currently presided by Tyrone Carlin), and represents your combined attempt to make a virtue out of a vice, or perhaps to give the impressions of pearls when we are looking at a pigs ear.
There is no breakdown of who received how much.
That is required and standard for all publicly listed companies.
That is not being open and transparent, it is the opposite. And you dress it up as a virtue.

That is the point of this whole matter, and you come up with this sort of crap over two paragraphs.

The directors are overpaid!!!!
They went from nothing to 15% of the Auditor-Generals salary overnight in April 2010 which now equates to them receiving about $104,000 each p.a.
The President had a 50% increase the day Alex Malley commenced as President. That presidential salary is 60% of the Aud-Gen salary and works out at about $420,000 p.a.
Ditto for the Deputy President which is 25%, and a nice little $175,000 p.a.

Members can do the sums easily to see what a nine year (full term) serving director would rake in in fees if they fill all the positions at some stage (which seems to be almost the rotation policy approach) at just todays rate - it would be (104k by 7, 175k by 1, and 420k by 1). A nice tidy $1,323,000.
If members want to see how this actually pans out just look at my detailed analysis. And if you manage to squeeze it into just 7 years as G Wade had done its a nice little $1,400,000, and for R Perry $1,100,000 over ten years.
As I said in my email this is OUTRAGEOUS.

And you waffle on in your letter about ‘relevant market benchmarks’, and proportionate to the 'demands on directors’ (11 meetings a year, are you serious?)
And how about ‘extensive market testing and rigorous external advice’. You must have written this with a joke book in hand.

And all this has occurred since Alex Malley and the three long serving directors (already mentioned) have been in leadership of our organisation.

That just requires a 100 members to sign a resolution to force the hand of the Board.
Don’t worry directors it will give you a two to three month breathing space before the ‘immediately’ kicks in to meet our Corporation Law and our constitutional requirements for such a resolution to be passed.
What do you think Jeff (and your co-writers)?
Worth considering by the members?
What about the board. Can you imagine them doing this voluntarily?
Mmmm. They should.
On this one I would think the members are all in favour.

The executive (and possibly other CPA staff) are also overpaid!!

I can see Jeff why you only made one mention of this in your final sentence to paragraph 16. “The same rigour was applied” to remunerations for the management.
Well we know what that rigour was now don’t we - the rigour of just maximising the individual pays and merging it with the boards fees and then hiding it all under one total remuneration figure, and calling it 'clearly disclosed’ with ‘no secrets’ being hidden.

You and Alex and Adam appear to have somewhere in the vicinity of $3,000,000 to divide among yourselves.
My guess is 50% to Alex( $1,500,000) and you guys 25%( $750,000) each.
But thats just a guess because contrary to the openness and transparency in public listed companies, you don't disclose it.
You make us guess.

I reckon you could knock a clean $1,000,000 off that $3,000,000 total and you guys would still be very handsomely remunerated.
Its okay Jeff, calm down. That was just a suggestion.
At this stage!!

How about all those other senior managers from the Business Effectiveness Leadership Team (p.20 of 2015 Annual Report)?
Completely blind to us Jeff but my guess, if the large increase in Administration costs is any indication (a 14.2% increase in 2015), are on pretty sizeable packets as well.
But you know we don’t have any idea.
We have our suspicions given the over-generous attitude the board and senior three managers have to remuneration for themselves.

All we know is that we seem to get significant increases in our membership fees each year, we have to pay considerable sums for professional development, we see money being wasted hand over fist on promoting Alex Malley, we see money being thrown around like candy sponsoring The Australian Open, did I mention the National Basketball League (best go and check my emails I might have picked up a client from that one), the billboards around the country of Alex Malley and then his television show which we have to endure funding.

The stars aligned at certain dates for some people at CPA Australia
I shall be doing a short history overview of the important dates and events in the 10 year leadership period of Alex Malley from 2007 through to now.
Some dates, such as October 2007 and April 2010, really do stand out. But Jeff I shall keep you in suspense on that.

Nearly at the end. Phew.

Conflict of Interest - esp. re NBL sponsorship
K. Paragraphs seventeen (begins with You and ends with dealings)

Lets get one thing straight on this before so ‘there is not a scintilla of confusion’ (your beautiful expression Jeff) on what I am saying here.
I am not saying there has been necessarily any wrongdoing with this sponsorship in terms of the the clear conflict of interest regarding Graeme Wade, being director and immediate past President of CPA Australia, and also Chairman of the NBL. Although I will get side-tracked for a moment and say I do think it is a clearly foolish strategic decision and a waste of our money but I have already spoken on that earlier.
What I am saying id that there definitely is a conflict of interest, and all the ‘proper conflict declarations and mitigations in place” do not remove this conflict.
It does not look good, and I am surprised CPA Australia went ahead with it.
What do you think the NBL board will say? And of course what do you think Graeme Wade will say? And of course Graeme Wade would not have been in the board room when the decision was made.
I have always thought the director who resigned in 2010 S Chapman who works for the Auditor General Office sets a shining example in this regard to all directors. He did not take any directors fees, not did his employer. It would have been about $36,000. Possibly his employer has that rule but it is a strong recognition of the potential for a conflict of interest problem in his work.
So, sure, it is legally okay for CPA to sponsor the NBL, of which Graeme Wade is Chairman, but it is not a good look irrespective of all the mitigation and conflict declarations made.
And to be honest I would have thought some of the other directors of CPA Australia would not have allowed this to happen.
They should know better (I reckon).
We have had enough of this sort of thing with our politicians, surely we don't have to be keeping another eye on the board and employees of our own organisation.
Have you declared what staff and board members were given free tickets to both the Australian Open and the NBL?

On it goes.

Personal responsibility I say
L. Paragraph eighteen (begins with Whether and ends with member)

This is a very legal paragraph.
You say (in effect) that my statements were too focussed on individuals and they were unfair, and unprofessional.
I leave it to members to decide the legitimacy, veracity and professionalism of what I have written about.

I’m not too sure how, for example, people could say the CEO of Australia Post was overpaid without mentioning the name of Ahmed Fahour.
Not too sure how you could talk about the strategic mistakes at Bellamy's in Tasmania without mentioning the names of Woolley, McBain, Cameron etc.

One of the failures I believe of much of the reporting of corporate and organisational issues/misdemeanours/failures etc is that we talk in terms of the group or title without ascribing personal responsibility. So, for example the board comprise individual people who need to be held not only accountable as a group (the board) but also as individual directors (their names).
When we take away the personal identification and use these group or other labels and titles instead ( the board, the CEO, the senior management, the media, the marketing group etc) there also goes a lot of the personal responsibility for whatever it is that is being discussed.

If Alex Malley is prepared to stand up so prominently as CEO of CPA Australia then he should be able to cop the criticism as well. Ditto with any others (including yourself Jeff) when I mention names. If any board members such as the President Tyrone Carlin or any of the other directors take offence at my specifically saying their names rather than their title then that is not my problem.

If you feel I have been too pointed in specifically identifying what remuneration has been paid to individual directors over the years.
Then that to me is your problem. That is one of the issues here.
Those things should have been accurately and clearly disclosed so that I did not have to do an analysis which by its very nature is bound to contain inaccuracies. But its close enough to get the picture (which is the whole intention).
If that offends or hurts someone feelings then so be it.
When we are provided with a one figure total for the remuneration of the 15 Key Management Personnel at CPA Australia, is it unreasonable for members to ask well, just who has earned what here.

In relation to the directors terms and the extended years for three, and the context, I think that needs to be specifically stated.
Especially given the nature of an organisation such as CPA Australia which has a large membership (150,000) yet a very small number who vote on significant changes (150 or so). That’s our fault as members, I agree, but when the consequences of those decisions are clearly seen I think it appropriate that they are clearly exposed.

When I, as have many members raised these issues in the past, and are told by directors that the membership wholeheartedly support the Alex Malley marketing approach, or that the members overwhelmingly supported the change to extend directors terms (when that was clearly not the case at the meeting) I think it reasonable that this can be raised with the members.
When I see that the corporate governance of the Board including their excessive remuneration has plenty of red flags waving I think the members need to be made aware of this.

Just stop and think about your letter Jeff, which really is from the Board and the senior management of CPA Australia (Key Management Personnel).
It conveys the idea that everything is going so well at CPA Australia, that the members are very happy with the current leadership and direction, and that this guy writing these emails is 'off with the fairies’.
What do you think members will be thinking?
Oh well its all okay, my lingering questions and doubts on these matters are wrong, when I (Brett Stevenson) suggest it clearly is not, and I think on most of the issues I have shown that with pretty solid evidence.
What can a member do when directors call to them if they have a query and they are told the membership overwhelmingly supports what Alex Malley is doing, that the directors are paid fairly, that the sponsorships and billboards and book, and tv shows are a resounding success, that we are the retaining members and growing such that we are just booming along?
It all sounds so good except that my gut, and clearly any investigation, shows that is not quite the case.
Why do you think out of a mailing list of just 600 members, over 115 have replied and said they agreed with me?

I’ll leave it with you Jeff, after all you are the COO of Member Services.

M. Paragraph nineteen the last one (hooray)
Let me keep it short and sweet.
I do not regard a letter 'extended with the hand of courtesy’ and 'offering a genuine invitation’ issued as an affidavit as that. To me they are mutually exclusive.
So Jeff, I shall not issue this as an affidavit, I shall send it as an email to you, the board, and to the members on my mailing list.
How you regard that is up to you.

My intention in these emails
To expose what has been hidden from the members.

I would subscribe to that great saying by Louis D Brandeis “Sunlight is said to be the best of disinfectants; electric light the most efficient policeman”
Openness and transparency are the best way is my shorthand summary.

What I suggest should happen from here
I suggest all directors fees should be reduced by 50% immediately.
If need be perhaps by a members resolution.
But I’ll let others pursue whatever they want to.
I am just trying to expose these matters to make the members aware, and to hopefully sharpen the board up a bit.
It's a very simple agenda from a pretty lowly accountant who just got sick and tired of the crap basically.
This is my response.
But I am just one of 150,000 with a mailing list of just 600. So, there you go.

Just one other matter, not sure where it fits in.
Can I suggest Discussion Group Leaders remember a discussion is at the heart of the meeting.

It is not a court of law where documentary evidence is needed before you can say anything.
I have been shocked at some of the warnings given to Discussion Group Leaders lately.
If I were told that I would tell the person to nick off.

I’m after a copy of the 2006, and 2007 CPA Annual Reports.
I tried the CPA Library but none in Sydney and can only view the had copy in the Melbourne Library.
Do you beleive that?
Anyway the upshot is that if anyone has a copy I would love to borrow for a week or so.



Brett Stevenson CPA BComm MDiv

Email From CPA Australia 2nd March 2017

Dear Mr Stevenson

I write in relation to your recent emails setting out a range of concerns with respect to the strategy and governance of CPA Australia.

A core responsibility of my role is to maintain contact with our members throughout the world and to provide responses to their feedback and questions, positive and otherwise.

I therefore hope that to the extent that you wish to raise questions or concerns about CPA Australia, you will feel welcome to contact me directly.

The content of your recent emails (dated February 21, 26 and 28 2017) in relation to CPA Australia touched on an array of issues.

Having considered these as a whole, it seems to me that they can be reduced to two main strands. First, concerns that goes to the strategy of CPA Australia and the execution of that strategy. Second, concerns going to the efficacy of elements of the organisation’s governance.

As regards the first of these elements, it seems reasonable to conclude that with a membership as large and diverse as ours, opinions may vary. The challenge and paradox of setting and implementing strategy in an organisation whose membership is highly diverse on essentially every measurable dimension is that in advancing the whole, the particular preferences of an individual member may not be wholly fulfilled. Nonetheless, it has been my almost universal experience that once reminded that the board’s core strategic tenets are to enhance the brand, drive advocacy and create and disseminate knowledge, members acknowledge the coherence of the organisation’s activities with those stated strategic priorities. A practical manifestation of this understanding is our membership retention rate, which stands at record levels and, from what we are able to glean by reference to disclosures made by other broadly comparable member organisations, compares very favourably to them.

As you will wholly understand, it is for the board to determine the organisation’s strategy, to frame the particular objectives to be achieved in the pursuit of that strategy and to provide oversight to assure the accomplishment of all actions necessary to support its realisation. More than that, the board has been clear in its commitment through integrated reporting available to all members and to the community at large to communicate not only the elements of strategy but detailed metrics relating to its accomplishment. As a swathe of that material makes clear, the organisation has consistently accomplished and frequently surpassed the objectives set by the board.

Since it is my understanding that you have discussed a number of issues relating to the execution of the Board’s strategy with our immediate past president, there seems little virtue in further traversing that territory in this correspondence. However, for the sake of completeness, it does seem appropriate to reiterate that all intellectual property in The Naked CEO, though solely authored by our Chief Executive Officer in his private capacity, vests exclusively in CPA Australia Ltd. The book has been Australia’s best-selling business title for three consecutive years and has generated remarkable interest and engagement across a wide spectrum of society, most particularly the next generation of potential members. Further, as is clear from the financial disclosures available in our annual reports, the proportion of revenue expended on “marketing” is not in excess of 20%, is falling as a proportion of revenue notwithstanding greater than ever impact and effectiveness, and encompasses a very wide range of activities including the preparation, printing and distribution of a range of our member publications and the promotion of member events.

As you know, we are an international organisation – something which behoves us to contemplate our strategy and approach in light of impact and effectiveness within and outside Australia. This predisposition is not the reflection of a recent strategic revelation as to the relevance of the world beyond Australia’s borders, the genuinely international nature of our profession and the deep rooted propensity towards international career mobility amongst a very significant proportion of professionally trained accountants. Rather, it pre-dates the period of membership of almost all our living members and is hard coded into our organisational DNA as the rich legacy of those within our professional body who more than six decades ago saw both the necessity and virtue of casting our gaze to Asia and beyond and who acted emphatically to that end. We have the privilege of being both the trustees and beneficiaries of that vision.

None of the accomplishments to which I refer above would have been possible in the absence of robust governance, the second core strand of the concerns you have expressed.

In expressing your desire for good governance, I wish to assure you that your values are in common with our board and senior leadership. It is both remarkable and regrettable, therefore, that in seeking to advance that shared cause, you appear to have fallen into error about matters which are capable of being clearly understood on the basis of information freely available in the public domain and indeed upon request from me.

The first of these relates to your assertion that a number of current directors are serving beyond their maximum permissible constitutional term. This is demonstrably false.

As Article 44 of the Constitution makes clear, there exist limited, one off transitional circumstances where directors may be appointed for a span of up to eleven years. The basis for the particular formulation of Article 44 is set out in detail in the 2014 Notice of Annual General Meeting which you would have received in your capacity as a member and which is available, along with the organisation’s constitution on the public website of CPA Australia.

Importantly, as is clear from publicly available details in relation to the composition and qualifications of the Board of Directors from time to time, there is and has been no ossification of the board since the governance changes approved by the membership at an Extraordinary General Meeting of members convened in 2006. Rather, because since that time it is possible for any member to be appointed to the Board of Directors, as opposed to drawing the board only from divisional councils, the capacity to bring together a diverse board able to contribute to the resolution of the particular challenges faced by the organisation from time to time has expanded considerably. It is no longer the case that a member who does not live within the geographic boundaries of one of our divisions is excluded from serving as a member director. Nor is a highly talented potential member disenfranchised simply by reason that only one position is available from a particular geographic region, as was historically the case. In any event, members have the ultimate say as to who is appointed to the Board because it is the Representative Council, not the board of directors that has the constitutional authority to determine board appointments.

You also dwell at length on issues pertaining to board and executive remuneration, the annual cost of which is clearly disclosed in each year’s annual report in accordance with applicable standards and subject to scrutiny at each Annual General Meeting. There simply are no secrets in relation to the total quantum of cost associated with the organisation’s board and executive management and CPA Australia’s disclosures follow the same form as other comparable member organisations. Indeed, it was precisely because of a concern that director compensation be proportionate to the demands on directors and relevant market benchmarks that the Board recommended changes to article 45 of the constitution in 2012. As previously worded, article 45 obligated the organisation to remunerate directors and office bearers defined and fixed proportions of the salary of the Commonwealth Auditor General. The continued application of that clause unaltered would have had the effect of substantially escalating board costs over time. The practical cure was to reframe Article 45 to set out clear limits to director and office bearer remuneration and to provide the Board with flexibility not to adjust director and office bearer remuneration upwards in circumstances where there was no clear imperative to do so. All of this, again, is clearly spelt out in the explanatory material relating to the 2012 AGM available on the CPA Australia website.

Far from a circumstance where directors have sought a remuneration framework essentially guaranteed to deliver escalation over time, they sought and gained the support of the membership to alter the constitution to allow the exercise of prudence and restraint. And they have lived to that. No office bearer’s remuneration was the subject of a request for the approval of an increase in either 2014, 2015 or 2016 and there is no evident mood to alter this approach in the foreseeable future. By contrast, modest increases have been approved for non-office bearing directors over the same period, after the application of extensive market testing and rigorous external advice. The same considered rigour is applied to remuneration framework for the Chief Executive and by extension other staff of CPA Australia.

Your assertions in relation to actual or perceived conflicts and their management by the Board and executive management are also concerning and deeply surprising. It should not need reinforcement, given the very clear admonitions of the fiduciary obligations owed by directors, but the avoidance and management of perceived and actual conflicts of interest is a matter of deep concern and forensic attention on the part of all directors and executive management. So that there cannot be a scintilla of confusion in relation to the specific matter of CPA Australia’s sponsorship of the NBL – the arrangement was negotiated at arm’s length and with all proper conflict declarations and mitigations in place. This, of course, is the case with all the organisation’s commercial dealings.

Whether or not it has been your intention to cast aspersions in relation to the character or professionalism of a range of people to whom you have referred in the correspondence to which I am responding in this letter, or indeed in relation to the strength, vitality and integrity of CPA Australia itself, that has been the unfortunate consequence of your actions. Holding to one side a contemplation of whether you have been reckless as to the facts as you have published your views in relation to the organisation and individuals associated with it, it appears to be unarguable that you have not displayed the caution and due diligence one might expect from a senior and experienced member.

Thus, whilst I have no apology to offer you for any of the matters in relation to which you have voiced concern, I do again extend the hand of courtesy to you as a valued member and hope that you will accept the genuineness of my invitation to you to address questions you may have to me so that I can assist you, to the best of my abilities, to be fully informed in any future comment to or interaction with members.


Jeff Hughes | Chief Operating Officer | Member Services
CPA Australia

Level 20, 28 Freshwater Place | Melbourne | Victoria 3006 | Australia
T +613 9606 9842 | M +61 (0) 418 115 139 |

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