Year in Review CBD: Looking back on a year disrupted

Just think how this year started.

Catherine Livingstone started as the fresh face in the chair at the Commonwealth Bank with a mandate to calm the waters and repair relationships with Canberra. Just like she did at Telstra.

Livingstone ended up with a bank tax in the May Budget from Malcolm Turnbull’s troubled conservative government. The bank then faced legal action from Austrac over the money laundering compliance scandal in July. The bank’s boss, Ian Narev was thrown under the bus within weeks.

And the year was capped off with our desperate banking cabal actually calling a Royal Commission on itself to end the misery and uncertainty.

That’s what you call business disruption, and it extended to the top of our most successful corporate empires.

James Packer’s abrupt changes early in the year were eclipsed by the astounding deals brokered by Rupert Murdoch and Frank Lowy that sent a very clear message on their succession plans.

In blunt terms, Frank doesn’t really want one, while Rupert has all but handed the remaining family business – post Disney deal – to Network Ten’s most astute investor, Lachlan Murdoch.

It seems rather ironic that Lowy and his sons, who are so highly regarded as shopping mall moguls, are voluntarily giving up control of Westfield, while Rupert grapples with the issue of family dynasty.

As a very frank Mr Lowy told the media soon after the multi billion dollar deal was announced: “I was sick and tired of all the useless formalities that public company life enforced upon me.”

Not that he ever hid his disdain for these formalities.

Who can remember Cranky Frankie’s performance at last year’s AGM where he told a dissident shareholder to “grow up and do something useful instead of criticising people”.

He also dealt with the usual questions on political donations, both here and in the US. The only donations, if any, would have come from his son Peter who “lives in the US and if he has made any donations, it his private business … and none of yours”.

“I’m told I’m being too aggressive,” Lowy snr added after a word from his fellow board members.

And for those who see the threat of Amazon looming over the Lowy’s decision, keep this in mind.

The deal involves the Lowy’s overseas interests which have been facing Amazon’s disruption for years.

And after the deal is done, the family will have a stake in the n business – Scentre – that will be twice as large as its stake in Unibail-Rodamco.

Which business do you think faces more of a threat from Amazon in the years to come?

And Packer’s sharp retreat made a bit more sense when he updated the market on his preferred platform for ASX announcements: Rupert Murdoch’s local publication, The n.

He handed out tidbits like the fact that $2.4 billion Crown Sydney gamble might not pay off in terms of getting the return it needs to justify the massive investment. Not a huge stretch given this is exactly what has happened with Crown’s big investments in Perth and Melbourne.

Packer also blames the financial settlement with his sister Gretel for plunging the family’s privately owned Consolidated Press Holdings into debt to the tune of $2.3 billion in 2015. So he had plenty of personal reasons to rationalise Crown and his investments at Consolidate Press Holdings, like RatPac.

Packer shed his Hollywood dreams, and former best mate, Brett Ratner, who has now joined the Jodee Rich club of former pals.

So did former Crown boss Rowen Craigie and former Crown chairman Rob Rankin, with Packer’s long time consigliore, John Alexander, taking over as executive chairman.

But the biggest revelation could yet guarantee Packer more headlines in 2018: His relationship with Israeli Prime Minister Benjamin Netanyahu and what the investigators make of all that lavish gift giving by Packer and his pals.

Last month he was voluntarily chatting with the n Federal Police who were questioning him on behalf of Israeli investigators trying to get to the bottom of the alleged graft.

“Mr Packer is not suspected of criminal conduct in either Israel or with respect to this investigation,” was the crucial statement from the AFP.

Giving back

Payback was also a big theme for 2017.

In previous years we had the ratcheting back of rock star pay packets, especially among the Big Four banks.

But as the spirit of Trumpian anarchy hit the corporate sector, it became necessary – even in – for perceived corporate transgressors to literally pay for their sins.

It began with the release of the Commonwealth Bank’s annual results, which were unfortunately timed to be released just one week after Ian Narev’s bank was rocked by the Austrac allegations of breaching money laundering rules.

While some market pundits, including Narev’s big brother – Addisons Lawyers partner Rick Narev – said the “money-laundering drama is overblown”, it did not take long for this little storm to hit Category Five.

Chairwoman Livingstone announced that Narev and his team would not receive any short-term bonuses. The board has also cut its pay by 20 per cent for the year, all in the name of corporate atonement.

And when that did not prove sufficient, she announced Narev would be consigned to history by July 2018.

A Royal Commission was announced in November.

You know an issue has reached the point of no return when banker-turned-pawn broker like EZCorp boss, Stuart Grimshaw, is ripping into our biggest (non payday) lenders.

Grimshaw, who is also the chairman of the Perth-based pawn shop operator, took great delight in slamming the big banks in the company’s annual report.

The main point of contention for Grimshaw is that the banks refuse to deal with Cash Converters due to “reputational risk”.

That would really stick in the craw of Grimshaw who resigned as Bank of Queensland’s chief executive in 2014 to join Texan pawn shop operator, EZCorp.

“Ironically, when reviewing the performance of the banks over the past few years, what is evident is a focus on driving profitability at the expense of sound reputational risk management,” said Grimshaw, citing CommBank’s scandals across life insurance, financial advice and money laundering, as well as ASIC’s impending bank bill swap rate (BBSW) Federal Court case against the other members of the big four.

“The breadth of these issues is breathtaking and continues to drive consumer apathy towards these large institutions. If we were to use the same underlying reasoning as the banks in refusing to provide services to Cash Converters, then surely all capital markets should be closed to these banks, given the significant reputational risks they now represent.”

That’s what you call payback. But let’s get back to the spirit of pay restraint, which gained momentum during profit reporting season.

Seven West boss Tim Worner sacrificed what little bonus he would have received for the media group’s woeful year – which included the very public legal battle between Seven and Worner’s former lover, Amber Harrison.

Domino’s Pizza also had plenty to be sorry about following Fairfax Media allegations about the corners being cut at its franchise network.

Domino’s boss Don Meij and three of his senior executives handing back their short-term incentive (STI) payments for last year, with an oblique reference to the pizza chain’s wages scandal.

“They each elected to forgo their incentive entitlement to acknowledge the negative effect of publicity in relation to the franchise network,” the annual report said.

But investors who have done their dough – following the “publicity” – will be pleased to know that, despite the disappointing financial result, Meij was still expected to take home more pay than the previous year with his remuneration totalling $4.66 million thanks to long-term bonuses. Oh well, the thought was there.

At least we can report that the pay penance did not stop there.

Kerry Stokes’ board at Seven West Media gave itself a permanent 20 per cent cut to its fees.

Stokes said the board was going to “lead by example” as it announced $25 million worth of job cuts amid an operational environment that was still “soft”.

It matches a similar cut handed out to Peter Costello’s board at Nine Entertainment as the high-paying world of TV adjusts to a harsh financial reality of declining revenue.

But amid all the pay restraint, where would we be without the man who dominated the headlines with his efforts to avoid lording his stupendous pay packet before his 24 million paymasters: Ahmed Fahour.

The good news is, Fahour severed his final ties with Post just in time for Christmas with his resignation from the Dubai-based logistics provider, Aramex.

Post spent more than $200 million acquiring a 10 per cent stake in Aramex last year, which earned Fahour a board seat. And he clearly stated his desire to keep the seat after leaving his well-paid post in July.

It was decided he would keep the role until some time in 2018 while Holgate found her feet.

That changed November 28 when Holgate replaced Fahour. It came one week after Aramex announced that Bashar Obeid would replace Hussein Hachem, as its chief executive.

This came one month after Obeid announced his plans to exercise his early retirement option and leave Aramex.

There is no suggestion this had anything to do with Holgate deciding she would replace Fahour on the board sooner rather than later.

His resignation from Aramex also removes Fahour’s final source of income derived from Post. While he was a Post employee, the Aramex board fees were paid to the government-owned enterprise.

But Fahour pocketed the board fees himself after stepping down from Post in July.

This comes on top of the $10.8 million he took home last year – which consisted of $8.7 million worth of bonus payments, and Fahour’s $2 million salary – which ranked him among the highest paid chief executives in the country.

With Holgate now on the Aramex board, the director’s fees are being paid to Post once more.

And Holgate will have to make do with her salary of $1.375 million a year, with the potential to earn 100 per cent of that as a bonus, meaning her total remuneration will be no more than $2.75 million.

Holgate also sacrificed $2.63 million in forfeited share rights when she resigned this year from vitamin maker, Blackmores.

Blackmores’ annual report said 12,127 share rights for the 2016 financial year and another 15,051 granted last year “were forfeited due to Christine Holgate’s resignation prior to completion of this service period”.

Retail therapy

And how could we end the year without mention of the retail carnage that preceded Amazon’s n debut.

The list of retailers who did not survive the year is too long to mention: TopShop, Herringbone, Oroton, Marcs, David Lawrence, Payless Shoes, Rhodes & Beckett.

And all before Amazon had hired its first non-employee, worker bee, at its Dandenong warehouse.

And then there is the living dead. Think of the slow motion trainwreck that is Richard Umber’s Myer, with billionaire Solomon Lew providing the talkback radio commentary on its performance.

It is safe to say that the only people who appeared to be making money in our department store sector were the short sellers.

Lew would have been on the retail winners list for the year if it was not for the towelling he took on the $101 million Myer stake he acquired before it got swamped by bad news.

No wonder he’s howling at Myer and its choice of chairs – the underwhelming former chairman Paul McClintock, and his replacement Gary Hounsell.

The latter did such a forgettable job of chairing Spotless when Grant Fenn’s Down EDI came knocking with its bid, and we wonder how long he will last against the battering of a real pro like Sol.

Tune in next year to find out.

Follow CBD on Twitter. Got a tip? [email protected]老域名购买.au