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Shareholders helping to shift the dial towards principled profit

AGL's Macarthur Wind Farm in western Victoria.

AGL’s Macarthur Wind Farm in western Victoria.Credit:Bloomberg

Of course, we are well short of Friedman’s nirvana of a free society and free competition. Indeed, as one of my colleagues, a very successful businessman, lamented recently, “the only businesses that have been consistently successful [read profitable] have been those that have ‘gamed’ the system”.

Various inquiries and investigations have exposed the excesses in the behaviour of some of our corporations, a situation compounded by regulatory failures – from banking to aged care.

The banking royal commission exposed the culture of “greed” that empowered a blinding pursuit of profit at all costs, through conscious breaches of law and ethics. This was compounded by conflicts of interest, poor leadership and poor governance.

Similarly, in aged care, patients have been overcharged and denied adequate medical and nursing services to maximise profits to providers – a national disgrace.

The privatisation of infrastructure assets – such as power networks, telecommunications, roads and ports – have also compromised the quality and reliability of service delivery and have generally exploited its price, to the detriment of the public that relies on these services.

In mining, we have seen multinationals ignore Indigenous rights and heritage; coal miners and operators of coal-fired power stations ignore their pollution without penalty; and oil majors exploit “dirty fuel” and resist improvements in fuel standards, content to ignore that vehicle pollution kills more people annually than the road toll.

And now, globally, as a result of the COVID-19 pandemic, airlines, carmakers, logging industries and fossil fuel companies are seeking billion-dollar government bailouts that enable them to carry on their climate-wrecking business practices.

In aged care, patients have been overcharged and denied adequate medical and nursing services to maximise profits – a national disgrace.

This is the time for the federal government to step up and build on the work of shareholders trying to hold companies to account. The government must improve regulatory frameworks to enable markets to flourish, with policy and regulation that encourages proper competition and responsible social and financial practices.

The European Commission is considering, in response to COVID-19, the imposition of new reporting requirements on companies to shield them from growing risks of biodiversity loss and pandemics, to improve financial sustainability and make them less vulnerable to market shocks and less reliant on government bailouts. They are also seeking advice on linking manager bonuses to emissions reductions and green capital requirements.

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Our Coalition government would do well to take note. It needs to set a regulatory framework that allows the country as a whole to benefit from market processes – better competition policy, greater financial regulation and more thoughtful privatisation policy that does not empower near monopolies. It cannot duck this responsibility and operate as if in Friedman’s world of free competition.

This should be an essential element of the industrial reset that they have promised as the basis of their COVID Recovery Strategy.

John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.

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