Australian investors unhappy by the million

By GILES PARKINSON

Sydney view

If Australia has the highest level of share ownership in the world then it should follow that it also has the highest concentration of unhappy investors.

According to Australian Stock Exchange data released last week, 7.6 million adult Australians own shares. About 2.9 million of these have entered the market in the past two years and probably have only one or two stocks.

There is every reason to believe they are not impressed - not just with the share price, but also with the behaviour or some of their corporate leaders.

In the past month, Australian investors have read that the local sharemarket hit a record high, that Wall St is still enjoying its longest ever bull run and a creature called the Nasdaq has added $600 billion of wealth to a lot of people that drive convertibles and dress badly.

Many Australian investors, however, have little to show for all of this, because they have put all or most of their money into Telstra 2 and AMP.

They probably wish they had spent the money on the holiday. Their returns, if not their sense of fun, would have been better if they had left the money in a bank.

Telstra 2 has been the biggest surprise and disappointment for its 1.6 million investors. After shooting off to a peak of $6, the instalment receipts have slumped back to below their issue price. Last week, they could have been bought at a 10 per cent discount before chief executive Ziggy Switkowski played the "we will float our dot.com businesses" card.

The AMP share price has disappointed everybody since about 30 seconds after its listing, but it is not the only popular stock whose share price has been vertically challenged of late. Qantas Airways, Coles Myer, Woolworths and National Mutual are all some 20 per cent off their highs of the past two years.

But there have been grave causes for concern in the manner in which Australia's leading businessmen have gone about running the affairs of their shareholders.

Last week, the Australian Financial Review published a leaked memo that had been written by AMP chairman Ian Burgess to the other directors of the company.

It had been written after the appearance of an article in the AFR in which George Trumbull had sounded off against Australian corporate culture and had his photo taken while wearing an Indian headdress.

Burgess, who was already locked in a battle with Trumbull over how much money the American could take with him when he left the company, said he was appalled.

"I have told George to remain at home until further notice," Burgess wrote.

"This was done because he must be kept off the public stage."

He went on to say that Trumbull, whom he had accused of acting in an impulsive, undisciplined and emotional manner, wanted to know how much money he would get in his payout, and whether he would get his six million options.

"I told him that in my view there was no way the AMP board could approve that last tranche of options given the GIO debacle and given his behaviour."

He then concluded: "It seems to me that it is in the company's best interests to quietly get George Trumbull out of AMP without further damage being done to the organisation. We should stop short of anything that would cause a major upset."

Burgess succeeded in getting Trumbull out of the company quietly, but it cost AMP a total of $13.2 million, and it has caused a stir.

How, politicians, shareholders and critics have asked, could AMP justify such a payout to a man who had apparently failed at his job. The issue is not over yet, as Burgess himself is now coming under scrutiny for his role in the affair.

While the Trumbull payout sparked outrage across the country, one man to be conspicuously silent was the Prime Minister, John Howard, who nevertheless has a history of reproaching displays of excess in the corporate community.

Howard was silent because he has his own problems - he is up to his armpits in controversy over his Government's decision to bail out a company run by his brother, Stanley.

The company, National Textiles, put itself in voluntary administration last month and told its 346 workers they were out of a job and wouldn't get money that was owing to them.

Howard responded by meeting the workers and organising a $6 million rescue package to pay out the employees. He probably thought it was good politics, but employees of other textile firms that have failed have been told there will be nothing for them.

To complicate matters, the circumstances of National Textiles' fall from grace are being examined by the Australian Securities and Investment Commission.

There are a string of inconsistencies, of omissions, of unexplained deals and peculiar statements (such as the company's announcement that it was cash flow positive and making profits the day it went into administration) that are being looked at carefully.

Not least of which is why the company's directors dealt themselves a pay rise while imploring their employees to show restraint.

* Giles Parkinson is deputy editor of the Australian Financial Review.