Christopher Niesche: Australia’s corporate scandals have exposed leadership failures

Qantas was hit by a class action lawsuit over its pandemic flight credits.

OPINION

The scandals surrounding Optus, Qantas and PwC have this year revealed major failures of leadership at Australia’s top companies.

Each uncovers senior executives and directors totally out of touch with what their customers want and how they think. Directors have been shown to be complacent in their stewardship and supervision roles, allowing these scandals to develop under their noses.

And most troubling, they reveal a corporate culture of obfuscation and secrecy - at best. At worst, they highlight a culture of deception and dishonesty.

In short, 2023 has not been a good year for Australian business. While there are, of course, many companies that have diligently and honestly gone about their business, it is the corporate failures that will be remembered and which set the tone for the increasingly distrustful relationship between business and government, regulators, shareholders and the public.

Even now, several months after we learned about the various scandals, the facts remain breathtaking.

To recap, Qantas suffered a litany of failures in 2023.

There was the refund problem. Qantas has been hoarding A$570 million in Covid-related refunds and made the refund process so time-consuming and complicated that it was almost impossible to get money back. They initially had a December 31 deadline on credits, raising the possibility the airline could permanently keep the money, but dropped the deadline after a public outcry.

Then there were the ghost flights. A consumer watchdog investigation revealed Qantas last year allegedly sold tickets for 8000 flights it had already cancelled. The airline continued selling tickets on flights for an average of two weeks and up to 47 days after the flights had been cancelled.

To make matters worse, Qantas was deliberately canceling the flights to boost profits, leaving customers scrambling to find more expensive replacement flights and pay for extra accommodation because of their disrupted plans.

At PwC, it was revealed that the “Big Four” accounting firm had been advising the federal government on how to design tax laws that would more effectively tax multi-national tech giants which are famously adept at shifting profits offshore to low-tax jurisdictions.

It was then approaching those same tech giants to market its tax minimisaton services based on the inside knowledge it had about the legislative changes.

Finally, phone and internet company Optus suffered a major network outage that left more than 10 million Australians without mobile phone, landline and internet services for the best part of a day. It left hundreds of thousands of small businesses unable to take card and phone payments from customers; emergency services uncontactable by Optus customers; and shut down Melbourne’s entire train network during peak hour.

Yet the company barely bothered to keep customers informed about what was going on. It put a note on its website - which customers couldn’t read because they didn’t have internet access - and delayed responding to media queries for several hours.

The outage came only 13 months after Optus suffered a massive data breach that revealed the names, birthdates, home addresses, phone numbers, email contacts, and passport and driving licence details of a third of the Australian population. The recent service outage revealed the firm had learned nothing about preparing for and managing a crisis.

What’s striking about each of these failures is that they happened at some of Australia’s largest companies and firms.

Each has teams of in-house lawyers, marketing and brand reputation experts and ever-expanding ranks of environment, social and governance executives whose job it is to ensure stakeholders’ needs are considered. And each has a board with seasoned and respected directors whose stewardship is about ensuring their organisation behaves competently and ethically.

Yet the average member of the public didn’t need this army of experts to tell them the corporates’ actions were dishonest and incompetent. It’s just common sense.

We’d like to hope the leaders of Australia’s top businesses witnessed the scandals engulfing these three companies and checked to ensure that their own houses were in order.

But judging by the performance of Woolworths at its annual general meeting last week, it doesn’t look like it.

Over the past year, two workers have been killed on the job at Woolworths, despite the increasing focus on health and safety by companies and their directors. In fact, Woolworths executives’ bonuses were in part based on the company’s health and safety record.

Two workers have been killed on the job at Woolworths in Australia. Photo / Jesse Wood

Yet the Woolworths board cut executive short-term bonuses by just 10 per cent as a first-stage response to the deaths.

Chairman Scott Perkins told shareholders at last week’s AGM the safety metric used to calculate executive bonuses only relates to injuries and near misses. The board does not consider it appropriate to apply a formulaic weighting to the loss of human life.

Maybe so, but the board and executives appear to have lost sight of the fact there are two families who will face Christmas without a loved one this year. It shows a breathtaking lack of compassion that executives will be pocketing safety bonuses worth several thousands of dollars at the same time.

Business in Australia has a long way to go to win back the trust and confidence of the Australian public, but it will take more than crisis communications consultants and brand experts. It will require genuine change, and there is little sign of that so far.

Christopher Niesche is an Australia-based financial journalist with 25 years’ experience on Australia’s major newspapers, most recently as deputy editor of the Australian Financial Review.