Behind the Coles Myer saga

Comment by Chow Wei-Cheng In a corporate melodrama that has dominated newspaper headlines, we heard cries of "thuggery" from Rupert Murdoch, accusations of defamation from Bill Kelty, and a vitriolic attack by Prime Minister Paul Keating on pension and superannuation fund managers, as the Australia's rich and powerful took sides in the Coles Myer boardroom struggle. As the new Coles Myer board starts its term, most of us are left wondering what was all the fuss about? It began when newly recruited Coles Myer finance director, Philip Bowman, was sacked in July. Bowman claimed that he was sacked because he tried to find out about a transaction dubbed the "Yannon affair". Yannon Pty Ltd, a shelf company, had bought preference shares in Solomon Lew's publicly listed Premier Investments under an indemnity from Coles Myer. In summary: Yannon paid too much for the shares; Premier Investments gained; and Coles Myer ended up with an $18 million loss. Since Lew was the executive chairman of the board of directors of Coles Myer, questions arose as to how accountable the board was to shareholders and to what extent board members could use their position to benefit themselves. Coles Myer's indemnity and the subsequent loss had not been disclosed in the Coles Myer accounts or in any public statements. Lew claimed the transaction had been engineered without his knowledge by Coles' former chief executive, Brian Quinn and finance director, John Barner. When the news emerged that Coles Myer shareholders were allegedly footing the bill for Lew, several large fund managers, who had bought Coles Myer shares for their clients (pension and superannuation funds and other pooled savings vehicles), demanded changes in the Coles Myer board of directors. What was a fairly typical example of the endemic corruption in capitalist society, turned into a massive mud-slinging brawl as Keating and ACTU secretary Kelty sided with the incumbent board. Kelty supported his old mate, the notorious anti-union trucking magnate, Lindsay Fox, who was also on the Coles Myer board. Kelty is also suing his former ALP colleague Graham Richardson, for defamation, because Richardson accused him of threatening AMP Society over its support for a change in the Coles Myer board. As a trustee of significant trade union superannuation funds, Kelty was unconvincing in his subsequent protest that he wanted to stay out of "corporate politics". If the Yannon affair shows that not even the squeaky clean household names such as Coles are free from corruption, Kelty's role indicts the ACTU's corporatist unionism, under which senior union officials have become increasingly close to corporate barons. One day after joining Kelty and Lew as dinner guests in Fox's Toorak mansion, Keating waded into the fight on Lew's side, denouncing the fund managers for having a short-term investment focus and calling them "donkeys". The institutions claim they were put under intensive pressure from the federal Labor government to reach a compromise which favoured Lew. The message Keating sent to the directors of public companies was: if you are suffering a shareholder revolt, you need not worry if you are aligned with the right political party. The Coles Myer saga demonstrates that, in the era of increasing concentration of capital and power in the hands of a few large firms, the neo-liberal principles ostensibly so dear to capitalists and their loyal politicians — free competition, equal access to information, and fair play — are little more than pious rhetoric.