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From the Desk of the Executive Director

Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

Big firms aren’t budging on business behaviour

Thursday, March 10, 2016

This week Robert Gottliebsen praised the CEO of the Commonwealth Bank for quickly apologising over revelations of how some customers had been treated badly by the CBAs insurance arm (CBA’s mea culpa a sign of the times, March 7).

Robert’s point is that the apology is an indication of the cultural shift starting to occur in large Australian firms. Once the CBA, on legal advice, would have denied liability and sought to stare down the accusers.

In the same article, Robert reiterated that the unfair contract laws covering small businesses are going to push greater cultural change than most large firms understand.

But don’t think any such change is universal. In fact, there’s much working against corporate behavioural reform.

For example, last week an alliance of more than 20 peak small business bodies met with the Treasurer and Assistant Treasurer to discuss proposed amendments to competition laws to bring in the ‘effects test’. The group wants the effects test introduced.

Last October, I explained that to understand the effects test, compare the burden of proof required of murder, to manslaughter. Murder is where death occurs with intent. Manslaughter is death without intent but as a result of reckless behaviour.

The current competition laws impose liabilities on businesses with dominant market power (say Coles) if they ‘murder’ competition. It’s a very high burden of proof on a prosecutor. The effects test would impose liabilities on (say) Coles if they ‘manslaughtered’ competition, a lower but still major burden of proof.

Wesfarmers (Coles, Bunnings, Kmart etc) chief executive Richard Goyder is strongly against this. On March 1, he declared that if the effects test came in it would threaten $2 billion dollars of annual Wesfarmers investments. Goyder is also on the board of the Business Council of Australia who also strongly oppose the effects test saying it would curb innovation.

While the pro-effects test small business alliance is at pains to point out that they don’t want this as a big versus small business issue, it’s inevitably playing that way. Stepping back from the specifics, this is an economic and cultural battle about the nature of economic freedom in a democracy.

To ‘big picture’ the scene, since the Magna Carta societies have struggled to constrain ‘big’ from oppressing against ‘little.’ It’s an ongoing societal endeavour.

It’s in the nature of behaviour of decision makers in big organisations (private or government) to view the maintenance of the organisation as paramount over the interests of the individual.

Robert Gottliebsen points out that protecting the institution over the individual has been the folly of the Catholic Church in the sex abuse scandals demonstrated in Cardinal Pells gaffs.

Likewise, but much less dramatically, this was the thrust by the BCA and other big business interests who tried to stop the unfair contract laws for small business people last year. It’s happening again with the effects test.

And the institutional forces protecting ‘big’ are formidable. Grace Collier revealed in The Australian that the ‘shoppies union’ (SDA) collaborated with Coles to create an enterprise agreement that paid Coles workers less than the award. The agreement, now being challenged as illegal in the Fair Work Commission, gives Coles a competitive operational advantage against its retail opposition. Further, Coles ‘encourages’ employees to join the SDA. The SDA has more than 230,000 members, making it powerful within the Labor Party. The Labor Party opposes the effects test as currently proposed.

This SDA-Coles deal that reduces workers’ wages is similar to other examples exposed in the Hayden Royal Commission into union corruption. It’s not union corruption alone that is the problem, but rather the big business/union collusion producing corrupt outcomes, particularly in the competition space that’s the bigger issue.

There are many twists and turns to this. For example the SDA is opposing an industrial agreement for Aldi, the rising competitive threat to Coles. The agreement, if passed, would make Aldi competitive in warehousing.

The primary point is that the internal triggers in large organisations operate to secure the primacy of the organisation. Big organisations have no concern or interest in the needs of the individual. But it is individuals that drive democracy and open, competitive market economies.

I would like to think that Robert Gottliebsen’s analysis of change in corporate Australia is accurate. But the BCA and Wesfarmers’ leveraging against the effects test and the deal making between Coles and the SDA to disadvantage workers are examples of corporate Australia being true to form in working to secure their institutional dominance.

Note: I must declare that Independent Contractors Australia is part of the small business alliance supporting the effects test.

[First published in Business Spectator, March 2016]

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