Turnbull’s cabinet must not yield to rogue lobbyists

Robert Gottliebsen
SEPTEMBER 23, 2015
BUSINESS SPECTATOR
Suddenly in two separate incidents over the last two days global sharemarkets have been hit by the controversial strategies of bad managers and dangerous lobbyists.
And in Australia, the Bruce Billson affair — where the new Prime Minister sacked him partly because he, or his superiors, succumbed to disgraceful corporate lobbying — is a local version of the lessons coming from overseas.
As time goes on we will discover whether or when the board and chief executive of Volkswagen knew the company was cheating in emissions. Without prejudging the issue, what normally happens is that middle or upper-middle managers discover a way to gain credit from an illegal technique. Once the deception is made continual concealment becomes important and as the problem gets larger that concealment often embraces people at the top.
In Australia we have seen a similar situation in a range of defence equipment errors that are covered up, but those mistakes do not endanger the sharemarket.
In the case of Volkswagen, investors have savaged the shares and the fallout has spread to shares of other carmakers.
In the US, presidential hopeful Hillary Clinton needed a boost to her campaign and so chose to highlight “price gouging” by drug companies. The shares in drug companies naturally fell in price last night as a result of her comments.
So we are going to have a US and global debate about the role and profitability of drug companies. Global drug companies have been among the biggest and most successful lobby groups in the world and while they have been successful among politicians they have not taken the community with them. Hillary Clinton can see a chance to exploit that weakness.
In Australia, a government (Tony Abbott’s Coalition) came to power on a solemn promise to extend consumer fair trading laws to small enterprises because large organisations (government and private) were not negotiating contracts but handing out standard ‘sign or else’ forms to small enterprises.
In opposition the future small business minister, Bruce Billson, sold the reforms up and down the land and they played an important role in the Abbott government’s victory. But after the election a group of franchisors, led by 7-Eleven, were scared that their franchise contracts would be deemed unfair. In the case of 7-Eleven the clear evidence from former ACCC chief Allan Fels was that 7-Eleven contracts certainly were unfair and very likely that unfairness was duplicated in many parts of the industry.
Some large companies have very lazy senior managers whose skill is designing unfair contracts rather than gaining for their company the productivity improvements that arise when a large corporate looks at the best way of gaining services or goods. These lazy but powerful managers led the large corporate lobbying. Retail shopping centres also lobbied but they had a legitimate point. Whereas the franchisors and the large corporates would benefit from better and fair contracts, retail shopping centres were already regulated. But all three aimed to force an elected government to go back on a key promise. They directed part their pressure to the prime minister’s department and part to the small business minister.
Instead of standing up to the lobbyists and championing his cause, Bruce Billson succumbed and inserted a clause in the legislation limiting the application of the laws to contracts involving $100,000. The legislation became useless. The small business community had been betrayed.
All new cabinet ministers will face this sort lobbying and their task will not be made easier because many departments do not have the skills to prepare proper briefs. (In her first remarks after Abbott’s removal the former prime minister’s chief of Staff Peta Credlin spoke of ministers with badly prepared briefs. She obviously minced those ministers, particularly if she had been lobbied directly.)
In the case of fair contracts the rogue lobbyists found that when they talked to the crossbench senators there was much closer examination of their claims than occurred in the government. Again this will be a problem for inexperienced ministers in the Turnbull government because the crossbench senators now have skills that are missing in some areas of government. The crossbench senators set the limit at $300,000, which will encompass a lot of small enterprises although it does not match the all-encompassing original promise.
Billson, having betrayed the small business community, had to be sacked. The first test of his replacement will be whether she honours the original Abbott-Billson promise as defined by the crossbench senators. New ministers will face more Billson-style situations because they are inexperienced in handling rogue lobbyists.