Friday, March 27, 2009

Australian interest in environment issues wanes as Facebook group urges Earth Hour power ON

An anti-Earth Hour group urging Australians to keep their lights blazing this weekend is a sign of waning interest in environmentalism, experts say. The global Earth Hour movement – founded in Australia in 2007 – is asking people to switch off their lights for one hour on Saturday night. But a Facebook group is urging people to "keep every light you own running during Earth Hour".

The group urges people to protest by switching lights on "if you think turning the lights out for an hour is completely ridiculous and will change nothing". "Or if you just think people who really believe global warming is a giant threat are dumb, join this group to keep every light you own running during Earth Hour."

Group member Alexander Woodhouse says: "The Earth Hour makes people feel like they've done their share and makes them sleep better... that's nice for them but it doesn't really help the earth." Another member wrote: "I don't believe the vast majority of those participating have given it enough thought to get to that point. ‘It's helping! I don't know how, but it's helping! I'm helping! I don't have to do anything else because I'm doing this now! Go me!'"

Australians have been losing interest in environmentalism for years, says social analyst David Chalke, who leads the annual AustraliaSCAN survey, a cultural change monitor established in 1992. "Absolutely the GFC (global financial crisis) has accelerated a decline in interest in environmentalism that was already going on,” Mr Chalke said. "Environmentalism has been in decline among the Australian public for the last five or six years. "The notion that we’re all becoming more environmentally concerned is not true. We get concerned occasionally when (global warming activist) Tim Flannery tells us we’re all going to die – but it’s not a genuine fundamental shift in values. "The impending recession has focussed people’s minds and priorities and clearly they are much more focussed of my job, my family, my house, rather than the more distant and esoteric idea of climate change. The attitude is: if the climate changes we’ll live with it."

Earth Hour will see lights go out in 82 countries and more than 2400 towns between 8.30pm and 9.30pm (local time) tomorrow night. Organisers hope one billion people will switch off. But practical measures – like demand for candles - suggest interest in the initiative has dipped this year. Last year, nearly 10,000 candles were ordered by a Caulfield candle business in Melbourne to cope with the demand during Earth Hour, but shop owner Roy Merrington said demand had dropped markedly, The Age reported. "I would like to think we would do the same (trade), but we will probably do half that," Mr Merrington said. "People's attention is elsewhere … the conversation about the health of the planet is on the back burner, because people are paranoid about money — and quite rightly."


"Great men are almost always bad men" (Acton)

We like the story of the disgraced former judge Marcus Einfeld, jailed last week for lying about a minor traffic fine, because it is a reassuring morality tale. It restores our belief that character is destiny, that karma eventually catches up with everyone, and that lying, even in an era when trust is in short supply and truthfulness downgraded, is a serious transgression that can land a big wig in jail.

Einfeld didn't just start telling lies in 2006, when he falsely named a dead friend as the driver of his car when it was caught travelling at 10kmh over the limit by a speed camera in Mosman.

The pattern of deception apparent in even a superficial examination of his life shows that he gained a lot of kudos and reward from his fabrications, whether it was padding his Who's Who CV with dodgy degrees from American "diploma mills", or alleged plagiarism, or allegedly claiming a lost overcoat on expenses when he was head of the Human Rights Commission, having already lodged an insurance claim, or using the names of people living overseas in statutory declarations to evade traffic fines. A habit of dishonesty went unpunished.

Instead, Einfeld was richly rewarded, becoming a darling of the legal and media establishment, with an Order of Australia and named a "National Living Treasure". Sad as it is for a 70-year-old man suffering from prostate cancer and depression to be thrown in jail for what essentially began as a trivial matter, his punishment represents a larger righting of wrongs.


Being an incorrigible academic, I thought I might give a fuller version of the famous quotation from Lord Acton. It formed part of Acton's opposition to the declaration of Papal infallibility of 1870
"I cannot accept your canon that we are to judge Pope and King unlike other men with a favourable presumption that they did no wrong. If there is any presumption, it is the other way, against the holders of power, increasing as the power increases. Historic responsibility has to make up for the want of legal responsibility. Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or certainty of corruption by authority. There is no worse heresy than that the office sanctifies the holder of it. "

Crooked top cop in Tasmania?

ONE of Tasmania's highest-profile criminal cases - the trial of suspended police commissioner Jack Johnston - continues today. Mr Johnston faces a preliminary hearing before magistrate Sam Mollard at 10am on two charges of disclosing official secrets. Mr Johnston is accused of telling two politicians, including former premier Paul Lennon, about a top-secret police investigation into potential government corruption. The police probe was investigating whether the Lennon government promised a senior legal appointment to barrister and Queen's Counsel Stephen Estcourt in return for favours.

Another matter under investigation was the Shreddergate allegations, after former attorney-general Steve Kons shredded a Cabinet document recommending lawyer Simon Cooper be made a magistrate following a phone call from former Premier's Department chief Linda Hornsey.

Mr Johnston, who has pleaded not guilty, was suspended as commissioner by Premier David Bartlett in October after being charged with disclosing official secrets. He is on leave with full pay.

The 26 witnesses to be called before this week's open preliminary hearing -- expected to run for eight days -- include some of the state's top politicians and powerbrokers. Facing questions from the Crown and the defence are ex-premiers Paul Lennon and Michael Field, Acting Police Commissioner Darren Hine and ministers Jim Cox and David Llewellyn. Whistleblower Nigel Burch, Ms Hornsey and Director of Public Prosecutions Tim Ellis are also key witnesses.

This week's preliminary hearing will be followed by a Supreme Court hearing before a judge and jury. The lawyer representing Mr Johnston, Roland Browne, was last week given court approval to expand his questioning of witnesses.

The charges allege that on or about April 9 or April 11 this year, Mr Johnston improperly told Mr Cox in a briefing note, and Mr Lennon in a conversation, confidential details about the secret police investigation. Mr Johnston was charged with disclosing official secrets under Section 110 of the Criminal Code. The charges allege Mr Johnston knew details of the Estcourt matter by virtue of his senior public office and that, as commissioner, he had a duty to keep the allegations and investigation secret.

No charges were laid in either of the matters investigated by police after the DPP found there was insufficient evidence to proceed.


War on bosses won't fix economy

Michael Costa

WAYNE Swan's legislation requiring shareholders to approve executive termination payments worth more than a year's base salary is another political stunt from a government that has run out of economic policy steam. Its use of the Productivity Commission to conduct a nine-month inquiry into executive pay shows a lack of understanding of markets and is a waste of public resources.

Executive remuneration should be transparent to shareholders. Directors should be accountable for the decisions they make on behalf of shareholders, including executive remuneration. If the Government thinks there is lack of transparency to shareholders in executive remuneration arrangements, this is a failure of its corporate regulatory framework, which it should amend.

The problem with the Government's announcement is that it is not motivated by concerns about transparency. It is another childish attempt to blame our economic problems on executive greed. It also is an attempt by a desperate government to extricate itself from its failure to get Pacific Brands to change its decision to move part of its operation offshore.

By linking executive remuneration to class war and broader economic problems, Swan is following in Kevin Rudd's ideological footsteps. Swan asserts that "the largesse of the last decade has been a slap in the face of many working people" and that many recent payments to executives have been viewed as obscene.

It may be true that many people are angry about executive salaries but that doesn't provide grounds for the Government to engage in a general attack on chief executives and the corporate sector. This is particularly unhelpful at a time when the Government should be strengthening business confidence.

Justified public outrage in the US over bonuses for American International Group executives and in Britain over the pound stg. 700,000 a year pension for Royal Bank of Scotland chief executive Fred Goodwin is an entirely different situation. These outrageous payments involved taxpayer funds as part of government-orchestrated bailouts. But, government bailouts aside, whether an executive's remuneration is considered obscene by the community is largely irrelevant to the directors and shareholders of the company. The responsibility of company directors is to act in their shareholders' interest.

Swan seems to think the interests of the broader community and the individual shareholder are one and the same. They are not. Shareholders want their companies to do well. Often this is at the expense of other companies and their shareholders. The community, on the other hand, wants the best and cheapest products. Workers want their firm to survive and provide job security. Their job security and wages, despite union attempts to take wages out of competition, often come at the expense of rival firms. Workers want the equity investments in their super funds to perform well even if they happen to be in rival firms. These are the fundamental tensions in our economic system. It is the creative destruction that provides our enviable standard of living. The sooner the Government wakes up to this, the better off we all will be.

Company directors must secure the best executive team to guarantee the prosperity of the firm. The challenge for directors is to ensure that remuneration packages align the interests of management with that of the shareholders. This is not easy. A whole body of economics has developed around resolving this agency problem. The core concern is that management can capture company directors and operate the company in their interest rather than shareholders' interest. When this happens, management is in a position to extract an economic rent from the company, reflected in excessive executive compensation. Maximising executive compensation, not shareholder value, becomes the focus of the company.

The most common solution to the agency problem has been share-based incentive payments. This can create its own problems. Executives have an incentive to focus on increasing short-term share price at the possible expense of long-term shareholder value.

There are many examples. The unsustainable expansion of companies such as ABC Learning and Babcock & Brown could fall into this category. These were dominated by strong chief executives who were instrumental in their foundation and initial success. The failure of these companies demonstrates the direct link between corporate results and rewards.

This is of little comfort to shareholders. The directors failed to provide executive incentives that balanced the short-term remuneration objectives of executives with a longer-term interest of shareholders. Better-quality directors, not government regulation, is the solution to this problem. Recent research suggests that directors would achieve better performance from executives by altering remuneration packages to place greater emphasis on a combination of share price and earnings performance.

But even with the best endeavours of the most diligent directors there is no guarantee that companies won't fail, which is what generates the higher rewards of those that succeed.

The same solution applies to more established companies where large remuneration packages are poorly aligned with corporate performance. Directors, not executives, have the responsibility to ensure proper alignment. Better alignment will assuage shareholder concern about executive performance and pay. But it will not deal with the price companies have to pay for a skilled executive, which is set by a highly competitive global market. Highly skilled executives command large salaries. Just because governments and sections of the community believe these salaries to be excessive or obscene doesn't mean they are wrong. Morality has nothing to do with it.

Many in the community regard the salaries of Hollywood actors and sports stars as obscene. That doesn't mean the government should hold an inquiry or attempt to regulate them.

One of the most misleading ways of assessing executive salaries is by comparing them with the pay of workers. The Economist claims that in 1980 the average pay for chief executives in the biggest companies in the US was about 40 times that of an average production worker. In 1999, it had increased to about 85 times and was estimated to be more than 400 times during the recent asset price bubble. This may be true, but it is irrelevant. The market for chief executives is not the same as the market for production workers.

Many factors explain the growth of executive salaries and the relative decline of production workers' salaries, including their relative supply and demand. Executive remuneration cannot be effectively regulated by governments. It would be foolish to try. The resources of the Productivity Commission would be better spent examining the economic consequences of the Government's Fair Work Australia legislation, which will have greater consequences to the economy than any chief executive's salary package.


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