Tony Featherstone Columnist

Tony is a former managing editor of BRW, Shares, Personal Investor, Asset and CFO magazines. He writes a weekly column for BRW and The Australian Financial Review, specialising in small listed companies,IPOs, entrepreneurship and innovation.

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Money versus the masses

Published 24 May 2012 00:01, Updated 24 May 2012 10:30

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Money versus the masses

In the eyes of some, the 2012 BRW Rich 200 moguls look like a billion-dollar sideshow. Gina Rinehart, Clive Palmer, Gerry Harvey ... one tycoon after another has copped a media shellacking in the past year. At times, it has felt like the Rich 200 versus the world.

Gag writers could only dream of some Rich 200 material: extreme views on business and the nation, family inheritance squabbles, political tilts and manifestos, sporting code disputes, buying media assets and, in Palmer’s case, a plan to build a Titanic replica. For good measure, some Rich 200 kingpins have had a vicious feud with the federal government over mining and carbon taxes.

Their actions are no joke to the east coast literati who believe the mining magnates, such as Rinehart and Palmer, are a threat to democracy, fearing they will use their billions to buy more media assets and wield too much power through a narrow prism of self-interest.

Others see the moguls as the face of a mining boom that has created extraordinary wealth for the few, while the rest of the nation suffers.

Certainly, the government, led by Treasurer Wayne Swan, has eagerly taken on the resource billionaires and seemingly used them as a scapegoat for the ills in struggling industries and the patchy economy. Yet to their supporters, mining entrepreneurs are business heroes who do not get nearly get enough credit. Love or hate them, the likes of Rinehart, Palmer, Nathan Tinkler and Fortescue Metal Group’s Andrew Forrest have built billion-dollar assets and seized a once-in-generation mining boom.

They have helped create a new class of well-paid mine worker and reinvigorated some regional centres. And in Forrest’s case, done tremendous work promoting indigenous employment.

Whatever your perspective, there is little doubt the polarisation of community attitudes towards the Rich 200 has rarely been this great. It may be an inevitable consequence of the global financial crisis, which has widened the gap between rich and poor and arguably led to more extreme views, both right and left, featuring in the public debate.

This is hardly the first time Rich 200 members have lost favour. Australia’s support of entrepreneurs waxes and wanes. When business conditions are strong, people gravitate to entrepreneurial success and lap up the heroes. When conditions turn and companies go bust, entrepreneurs lose favour. Yet this time around, Rinehart, Forrest, Palmer and company are prospering during an unpopular period for the super rich. Something has changed.

That is not to suggest the Rich 200 moguls are misunderstood and under appreciated. Some of the new billionaires have misjudged their entry into public debate, done too much at once, occasionally appeared erratic and been unable to persuade the public that their views about mining and carbon taxes, for example, serve the greater good and not just their own.

“A lot of the statements from the Rich 200, in the eye of the public, appear extremely self-serving and some of them appear to lead dysfunctional lives,” Westfield-Wright co-founder and veteran business commentator Mark Westfield says.

“They have had either no corporate relations advice or bad advice. Sometimes they seem to say the first thing that enters their head and appear naive in some respects. There’s also a perception that they are trying to buy influence and push their own interests on everybody else. Gina Rinehart and Clive Palmer look like a slow-moving train wrecks at times, when it comes to their public statements.

“And there’s a public perception that their wealth has been easily won by exploiting resources considered by large sections of the public to belong to everyone. Media coverage of these people reflects those public perceptions.”

Palmer is the best example. He seems to have one public misadventure after another: from talk about running for Wayne Swan’s seat in the next federal election, forming a breakaway soccer organisation, potentially buying into the media, staging his own press conferences and wanting to replicate the Titanic. How can the public trust the mining magnates’ views when their behaviour appears erratic to casual observers and when billionaires such as Palmer are a mystery to most ordinary Australians?

The intensely private Rinehart has similar problems. She, too, has been front-page news because of a nasty public squabble with her children over inheritance; her decision to buy more of Fairfax Media (publisher of BRW) in February and her opposition to the mining tax.

Fortescue’s Forrest argues forcefully against the mining tax on one hand and on the other his company is fighting charges of continuous disclosure breaches over its iron ore projects in Western Australia in 2004 and 2005 – a High Court decision on Fortescue’s appeal is due soon.

Such inconsistencies reduce public trust in business leaders, as the community looks for patterns in behaviour and zeroes in on even slight inconsistencies when deciding if they are trustworthy.

It is not just Rich 200 mining moguls who are losing favour. Harvey Norman chairman Gerry Harvey has been a constant critic of the government’s refusal to put GST on goods bought through overseas online retailers. Harvey’s crusade even attracted letters to business newspapers urging him to “stop whinging”. Other critics have lambasted Harvey Norman for an outdated business model and not responding fast enough to the online retail threat. The public could wonder how GST on more online purchases would help them and whether Harvey’s comments are too self-serving.

Yet for all their communication mishaps, there are delicious ironies in the Rich 200’s bigger role in public debate. It was not so long ago that chairmen of large listed companies spoke out against governments, not only with their corporate hat on, but also from the perspective of a concerned citizen and pushed for change in the community’s best interests, even if came at personal cost. In contrast, private entrepreneurs often relished staying private. Now the roles seem to be reversing.

Today, many elder statesmen in listed companies are publicly silent: continuous disclosure obligations and fear of government reprisal have meant too few chairmen engage in policy debate. When they do comment, it always seems to be from a corporate perspective and often their messages are bland and too measured.

Big listed companies must be secretly grateful that private and public entrepreneurs are leading more of the business debate these days, saying what many in business think about government and copping all the flak.

Another irony is the singling out of mining entrepreneurs for criticism. Had it not been for the mining boom, Australia’s two-speed economy would have had one gear: reverse. And the superannuation of millions of Australians would surely have been even lower. Arguments that the mining boom benefits the few are dangerously simplistic.

Other ironies are just as obvious. Australia bemoans a lack of women in senior executive and board roles, yet its richest person by far is Rinehart, an extraordinary achievement that would have received much more recognition in another time. One wonders if an Australian male who was one of the world’s richest people, would have had more adulation.

We talk about backing the little guy, yet respect for Forrest in some quarters still seems grudging, even though he took on the resource giants and built a billion-dollar empire. We talk about Australia needing younger entrepreneurs, yet have a 36-year-old billionaire in Tinkler – who seems to get more recognition for his ownership of sporting clubs than his ability to build coal companies.

The mining moguls could argue, with some justification, that the public sees their entrepreneurship as somehow less worthy compared with those who build more visible inventions. Or that mining entrepreneurs simply pay geologists to find natural resources, arrange the finance to exploit them and are in the right place at the right time. And that mining booms inevitably go bust, leaving too many mining towns with big holes and scarred environments.

Or that Rinehart is not a true entrepreneur because she inherited wealth from her father, Lang Hancock, although children of rich entrepreneurial families more often than not destroy family fortunes rather than add several billions to them, as Rinehart has done. Perhaps the real issue is that critics of mining entrepreneurs do not understand how mining works or the skill involved.

Mining moguls might also argue that too many media outlets make it impossible for them to have a fair hearing, a reason why some presumably want to invest in media. And that their shellacking is unfair, or overstated and that there is no evidence the public dislikes them.

East coast critics might also underestimate how much support they have in the main resource states and mining regions.

Even so, the Rich 200 mining billionaires have clearly misjudged or overlooked some critical issues in the past year.

The first is growing anti-business sentiment worldwide. The Occupy international protest movement has spread from Wall Street in September 2011 to at least 750 cities in 92 countries, Britain’s Guardian newspaper reports. The movement is much smaller in Australia but its support worldwide reflects growing distrust of big business after the GFC.

Some of the super-rich seem to have misread the public mood by arguing positions that appear even greedier in this global climate of austerity. They may have gained much more by saying nothing.

The second issue is corporate social responsibility. The 2011 Edelman Trust Barometer found 79 per cent of survey respondents in Australia believed corporations should create shareholder value in a way that aligns with society’s interests, even if it means sacrificing shareholder value.

The public may see the mining billionaires as unable to argue positions that achieve both corporate and social wealth.

It is also unclear how much the Rich 200 give to charity. Research commissioned by the Petre Foundation found wealthy Americans give 10-15 per cent of their net worth to philanthropy, compared with less than 3 per cent from wealthy Australians.

Care is needed with straight comparisons: tax differences between the US and Australia affect philanthropic giving and no one knows for sure how much the Rich 200 give; some prefer to give privately and without recognition.

Anecdotally, the Rich 200, collectively, are no exemplar in philanthropy. “It’s a shame that we can’t name 40 or 50 of the Rich 200 who have significant charitable foundations,” the Myer Family Company’s head of philanthropic services, Peter Winneke, says.

“You really struggle to come up with a decent list of Rich 200 entrepreneurs who engage heavily in philanthropy.

“There is a screaming opportunity for one Rich 200 billionaire to set up a foundation and seed it with $500 million or $1 billion and create an example for other Australian billionaires.”

It is also unclear whether the level of philanthropy in Western Australia remains below the national average.

Extraordinary resource riches should suggest fast-growing philanthropic giving in the mining states. But as one veteran observer of philanthropy told BRW, “Australia would hardly have a philanthropic sector today if not for Melbourne’s wealthy community.”

Adolph Hanich, an adjunct professor of entrepreneurship at Swinburne University, and a practising psychologist, believes the controversy around the mining magnates is partly about the “essential meanness of Australia’s new rich”.

“This country has still not embraced the idea that those who make it big should ‘give back to society’,” he says. “Philanthropy is still a marginal interest of the few and not an embedded part of our culture.”

Hanich says the mining tax debate has opened up “old divides between rich and poor, between laissez-faire free marketers and those who want some distribution of wealth and power”.

“The [mining tax] debate is also about political power and who should have the right to wield it; it’s about the two-speed economy, which benefits a few and hurts the many; the underlying fear and doubt surrounding the global-warming issue and what if anything we can or should do; it’s about farmers versus miners; it’s about overburdened young mortgage payers who want lower interest rates, versus retired people struggling with limited means who want higher returns on their savings; and it is about current consumption versus the welfare of future generations.”

St James Ethics Centre executive director Simon Longstaff insists that the key issue is trust. “The community looks at the claims business leaders make on policy issues and tries to understand the motive behind the position,” he says. “To judge if the position is fair, they look for consistent behaviour, without exception, where leaders do the right thing by all their stakeholders and are willing to stand up for something, even if it involves a significant personal financial cost.

“True leaders apply an ethical framework consistently to all their decisions … not only what is required by law.”

Longstaff adds: “It’s a good thing if more business leaders speak up and enter the public debate as citizens and we should keep an open mind about whether all the criticism [of the mining entrepreneurs] is fair.

“But the public will discount their views if they cannot see consistent ethical behaviour and actions beyond self-interest.”

Some Rich 200 may think they already do more than enough by creating wealth and jobs, and paying tax.

They may care little for philosophical debates about whether their view is worthy in the eyes of a cynical media.

But without genuine community trust, the Rich 200 will only lose more battles in the court of public opinion and inevitably the war. Resultant new or higher taxes and more regulation may become the most cruel joke of all.

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