As an unlisted company limited by guarantee, CPA Australia is not required to report against the Corporate Governance Principles and Recommendations (CGPR). Accordingly, CPA Australia is not required to present a detailed remuneration report or to disclose the remuneration of individual directors or executives.
CPA Board Resigns
Recently, CPA Australia was subject to considerable criticism about the remuneration of its prior CEO and management team. CPA Australia was pressured by its members to disclose individual remuneration of its Executive and Board. Concerned members of the nation’s biggest accounting association forced the sacking of CEO Alex Malley and criticised the board’s decision to pay him a $4.9 million golden parachute. The rest of the CPA Board – after much resistance and denial of any failure – has agreed to resign at the end of the year.
Complaints about CPA
Some members specific grievances were not addressed which lead to the resignations:
- Shutting down a Find a CPA function on its website. This was meant to stop a supposed only small group of rebel accountants from making adverse comment.
- Malley’s $1.79 million pay package and the level of pay of other senior executives and board members.
- The marketing budget – $30.5 million – including sums spent marketing Malley’s book The Naked CEO and his television show In Conversation with Alex Malley.
- CPA’s financial advice arm was losing millions of dollars and had also led to a conflict of interest that meant public practice accountants would soon lose their legal shield against multi-million dollar lawsuits.
- Unproven allegations of staff bullying.
- Apparent conflict of interest in CPA’s $756,000 sponsorship of the National Basketball League while a CPA director was its Chair.
- Malley’s termination payment of $4.9 million – the equivalent of three years’ worth of base pay, given that if CPA Australia was a public company, the golden handshake would breach Corporations Act changes which limit payouts to CEOs to one year’s base pay.
An angry Senate Committee will call the remaining board members of CPA Australia to appear before them to explain their actions leading to the resignations from the Board. The old Board faces the prospects of justifying:
- Failure to pass on a message from 16 past CPA leaders that the Board should go.
- Holding the AGM in Singapore in April – denying CPA members access to such a vital forum.
It is evident to Egan Associates that the Board members of the CPA did not have appropriate knowledge of corporate governance protocols which would have significantly influenced the manner in which a significant majority of their senior members were required to operate in corporate Australia in accordance with legislation and regulation.
By any standard their stewardship of remuneration was poor. The contract which they entered into with the CEO was not compliant with good governance and many would believe that the CEO should have been terminated for cause or poor performance and have been denied any separation payment.
The resignation of the Chairman at the time these events became public was also not reflective of sound governance albeit that he may have been compromised. There has been no disclosure in relation to the processes which led to the decisions in relation to the determination of the CEO’s remuneration or those of senior management or those of the Board. There has been no disclosure of the advice sought and received by the Board in determining those remuneration arrangements.
This represents a significant indictment on a profession universally represented in the leadership of all public, private and government organisations. In the context of corporate governance, consideration should be given to clawing back excessive payments to all parties.
A lesson in how not to govern a corporation:
- Don’t communicate with your constituency
- Locate an AGM so that it is practically ‘unattendable’
- Block essential information to stifle communication
- Use corporate funds for personal gain of executives
- Use corporate funds in potential conflict of interest situations
- Fail to pass on matters of relevance to its members
- Fail to listen to or act on serious concerns
- When confronted – obfuscate