BCA investigation: power of the business lobby in Australia

by Michael West | Sep 28, 2017 | Business, Government

This is the first in a series of investigations into Australia’s most powerful business lobby groups. To begin, we have selected the Business Council of Australia, the most elite and influential peak body of them all. Among the findings, the nation’s premier corporate lobby group has broken the law at least 11 times in 20 years.

The Business Council of Australia (BCA) notched up revenues of $11.4 million last year. The first duty of the lobby group is promote the interests of its members, and that sort of money buys a lot of influence.

That, however, is the tip of the iceberg. The BCA is nowhere near the most richly endowed of Australia’s business advocacy groups. Over the past three years, the BCA has chalked up income of $28.6 million – all of it splashed on influencing government decisions. Yet the Minerals Council of Australia, which represents big mining companies, has recorded income of $41.4 million and the peak body for the world’s biggest oil companies, APPEA (the Australian Petroleum Production & Exploration Association) racked up revenues of $58.6 million.

Just three lobby groups then, with overlapping memberships of some of the world’s largest corporations, have been funded to the tune of $129 million over the past three years. Bear in mind that we are yet to investigate the powerful bank and superannuation lobbies, the property lobby or the Big Pharma lobby.

Couple these with the public relations and government relations budgets of their individual member companies and we are likely looking at a figure of $1 billion a year spent by corporate Australia on influencing governments.

These organisations share not one single vote between them but, when it comes to shaping government decisions, they often carry more power in this democracy than millions of ordinary Australian voters.

But we digress. BHP is a member of BCA, APPEA and the Minerals Council. Besides its in-house government relations and PR operatives, the Big Australian also spends on external PR and government relations consultants.

This one company has a bigger budget for advocacy than any newsroom in the country has for its journalists. And this is why we don’t hear BHP chief executive Andrew Mackenzie complaining publicly about government decisions. Toting a club like that, he can afford to tread softly.

Unlike APPEA, which operates more furtively, and the Minerals Council which pushes its weight about and routinely lashes out at its ideological adversaries – mostly environmentalists – the BCA spruiks its case constantly in the media but doesn’t descend into unseemly public brawls or attacks on journalists.

The Minerals Council, via an aggressive media advertising campaign, managed to oust an elected prime minister in Kevin Rudd, who was trying to push through a resources tax. It later emerged that the corporate cost of deposing a prime minister was $22 million.

The BCA hosts dinners, makes entreaties to politicians, markets its research and its chief executive Jennifer Westacott is tirelessly in the media.

Its stated “objectives and strategy” are to “work on behalf of the chief executives of Australia’s largest companies to influence the economic policies, institutions and governance arrangements that create enduring prosperity for all Australians”.

The cornerstones of its advocacy are “workforce flexibility” – read lower wages for workers – and a “more efficient tax system” – read lower taxes for companies.

A taxing tale of two peak bodies

Unlike other peak bodies whose members are corporations, the BCA’s members are the cheif executives of Australia’s largest companies. You could say this is the only union in the country where the members don’t pay their dues, the company does.

Like other not-for-profits (NFPs), the BCA pays no tax. Its statutory materials, which are not published on its website but can be found by paying a fee to the corporate regulator the Australian Securities & Investments Commission (ASIC), describe it as an “association” and a “company limited by guarantee”.

Despite its flush financial status: $6 million in cash, $4 million spent on “projects” last year, $5.4 million on employees and $6 million in retained earnings, things are not well with the nation’s pre-eminent business lobby.

As Bernard Keane put it in Crikey this week, “the two biggest rentseeker lobby groups in Australia, the Business Council and the Minerals Council, are looking like stricken dinosaurs in a world that’s changed too rapidly for them to cope.

“The Business Council is in disarray: one of its directors, Ian Narev, is mired in the Commonwealth Bank’s money laundering scandal; the Council’s previous chair, Catherine Livingstone, faces serious questions about transparency at that bank; its current chair, Grant King, had to depart the BHP board in the face of investor hostility; its CEO, Jennifer Westacott, was blasted last year by Liberal powerbroker Michael Kroger and told she should leave.”

And it is still doing better than the Minerals Council whose chief executive Brendan Pearson has just been ousted amid rising public pressure from BHP to jetisson its membership due to the Council’s spruiking for “clean coal” and climate denialism.

These are different times. Where once, the powerful peak bodies could have their voices heard, now they are drowned out by social media. Where once they could complain about annoying journalists to editors at fine CBD dining establishments, now the mainstream media is in disarray.

And they are failing to come to grips with new media. The Business Council’s Twitter account has just 5,183 followers, and the Minerals Council 6,090, Crikey’s Bernard Keane has 76,600.

The BCA still gets its opinion pieces regularly placed in the Australian Financial Review and The Australian but the message is being lost.

What is not being lost though is the influence behind the scenes, the influence of the corporate lobby over politicians and bureaucrats.

The BCA’s latest financial statements show last years major project expenditures were made on “tax reform advocacy”, the China Australia Free Trade Agreement and media and digital advertising for the federal election campaign.

The government has delivered on the tax front, having lowered corporate tax rates. It is trying to deliver on the free trade front, despite clauses which allow companies to sue governments for policies which are detrimental to their corporate interests.

And on labour flexibility and red tape, it is quietly sanctioning the deregulation of the labour market via the influx of cheap foreign labour.

Despite pontificating to government about how it should govern the governance of the BCA itself is not perfect.

An investigation of their statutory documents with ASIC shows the BCA filed its annual financial statements late 11 of the past 20 years, from 1999 to 2016, sometimes more than four months late.

It managed to get them in on time last year but, on this very basic legal obligation to lodge a company’s most important statutory document, the BCA has a track record of complying with the laws of the Commonwealth less than 50 per cent of the time.

Section 319 of the Corporations Act requires companies which are limited by guarantee to file their accounts within four months of the close of the financial year. Failure to comply with this law constitutes an “offence of strict liability”.

The penalty for breaking this, Subsection 319 (1) of the Corporations Act (according to Schedule 3 Penalties, Item 112), is, “60 penalty units or imprisonment for 1 year, or both”.

Questions were put to the BCA for this story. There was no response. Has ASIC penalised the BCA for its systematic breaches of the Act? ASIC has not responded either. Did PwC, in its role as auditor of the BCA, inform the regulator that its client has been in breach? No response from PwC either.

It is very unlikely therefore that BCA has been fined the statutory $91,800 for these breaches. And it is London to a brick that no BCA director will ever be tossed in the clink but it is also certain that the likelihood of being fined by ASIC for failing to pay on time, if you run a small business, is high.

It is this kind of “one rule for the rich, another for the poor” regime which has led to increasing public disaffection with government in Australia.

It doesn’t help the BCA’s cause either that it is calling for lower wages for workers when one of its directors, Qantas boss Alan Joyce, has just snared $25 million in pay and bonuses in a year.

Just as there is no compelling evidence that lower wages will deliver a better economy and society, trickle-down economics is more an article of faith, a theory, than proven fact; as evinced by rising inequality. And there is little evidence either for the other major plank of BCA policy, that lower corporate taxes deliver a better economy and society.

Another problem the BCA faces is that half of its members pay very little tax anyway. So a lower corporate tax rate would benefit them about as much as the recalcitrant multinational taxpayers benefit ordinary citizens of this country now, very little.

The BCA membership includes the big banks, the grocery giants Woolworths and Wesfarmers, Telstra, Rio, BHP and ASX – all of whom pay plenty of income tax. But it also includes Uber, Shell, News Corp, McDonalds, Exxon, Chevron, and Google – many of whom pay no tax or have aggressive histories on the tax front.

Further, the membership list includes a bevy of other non-Australian multinational companies, Wall Street investment banks like Goldman Sachs and the very engineers of global tax avoidance themselves: the Big Four accounting firms.

When it comes to decent corporate behaviour, this is a membership divided and it is difficult to bring credible leadership to national debates over tax and so forth when half the membership is so utterly compromised on basic things like the obligation to contribute reasonably to the society in which it operates, and from which it profits.

It is important to bear in mind that most of the members of the BCA are multinational companies with the majority of their shareholdings overseas. Even the majority of the shares in local giants such as BHP and Rio are held by foreign investors while the balance is mostly held by large domestic superannuation funds.

The political and financial interests therefore of these organisations is at odds with ordinary Australians and the members of the BCA, the chief executives themselves, are incentivised by share options deals which benefit from rising share prices in the short term, usually three to five years.

This is not a timeframe in which to build an enduring future for this country.

This is the first story in a series about the power, the influence and the financial affairs of Australia’s leading business lobby groups. The investigation is funded by political activist group GetUp!

Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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