Keith De Lacy talks to Tony Featherstone about the deteriorating relationship between government and business in Australia, life after politics and the joys and challenges of being a company director.
A full-time board career is an obvious, orderly, linear progression for many directors after their executive life. By comparison, Keith De Lacy’s rise to become one of Australia’s most respected resource company chairmen has been more like a weird and wonderful abstract painting.
He came from a poor family, started his working life as a tobacco farmer, moved to underground tin mining, ran a news agency with his wife, led an agriculture college in Papua New Guinea for nine years and most notably was Queensland Treasurer from 1989 to 1996. If that was not enough, De Lacy AM FAICD wrote a well-received fiction novel, Blood Stains the Wattle, after leaving politics.
Chairing several Queensland Government-owned corporations (GOCs) sparked a passion for governance and De Lacy was in demand after leaving politics and finishing his book. He chaired Macarthur Coal from its initial public offering (IPO) in 2001 that valued it at $128 million to a hugely successful $4.8 billion coal producer that was taken over by Peabody Resources last year.
Along the way, De Lacy chaired several agricultural organisations and most recently advised the China Oil and Food Corporation (COFCO) Australia on its controversial bids for Queensland sugar mills. De Lacy is bullish on the outlook for soft commodities and the involvement of Chinese organisations in Australia’s agriculture sector, parts of which have been starved of local investment.
De Lacy never minces words. Unlike many chairmen who shun the public-policy debate for fear of government reprisal against their companies, De Lacy has attacked the Federal Government over its mining and carbon taxes.
He says national and state government meddling is wrecking the resources sector; that the relationship between the Federal Government and business is the worst in his lifetime; and that both sides of politics have squandered a once-in-a-generation resources boom.
Some might see this as De Lacy talking up his book, given his long involvement in the Queensland mining and agriculture sectors. But he simply tells it as he sees it and is not afraid to say what many boards privately think: that governments should get out of the way of business, stop trying to fix every problem with a new law, aim for smaller government, cut red tape and regain an appreciation of the "social dividend" that comes from a vibrant, well-performing and well-governed business sector.
He also says both sides of politics should stop paying so much attention to 24-hour news cycles and start delivering genuine long-term public policy that is good for the nation, but not always politically convenient. It’s a message many in business agree with, and perhaps wish it was delivered by more elder statesmen of Australia’s largest boards who could follow De Lacy’s lead and use their positions to comment on issues beyond their companies.
De Lacy still chairs Hynes Lawyers and Nimrod Resources, and is a director of Queensland Energy Resources and the Reef Casino in Cairns.
He talks fondly about his time at Macarthur Coal and pays several public tributes to the company’s founder, the late Queensland mining magnate and billionaire Ken Talbot, who was killed in a plane crash in Africa in 2010.
The 72-year-old loves life as a director and has not ruled out other board positions. As president of the Queensland division of the Australian Institute of Company Directors, he is giving more back to the state by championing good governance in small and medium-sized enterprises and in regional centres.
Here is an edited extract of his interview with Company Director.
Company Director (CD): Why don’t more politicians become company directors on leaving public life?
De Lacy (KDL): The trend of ex-politicians joining boards is easy to overstate and it is the exception rather than the rule for politicians to have successful careers as company directors. Many politicians struggle when they leave public life and suffer from so-called "relevance deprivation syndrome". The transition is not easy to plan for or make, because you are always too busy in politics to think about life after it. And let’s face it, politicians are not the most loved group of people in the community.
CD: How hard did you find the transition?
KDL: Treasurers have an advantage because they are associated with business and economic matters. As Queensland Treasurer, I was also responsible for introducing the GOCs legislation aimed at putting government businesses on a commercial and independent footing. So, in my case, it was a fairly simple transition to company directorships.
CD: Does good governance still characterise government boards in Queensland?
KDL: Unfortunately, there has been some regression and governance standards have fallen, with too many political appointments to boards, and directors being there for the wrong reasons.
CD: A recurring criticism is that many federal and state politicians lack business experience. Do you share that view and, if so, how do we encourage more business people to enter politics?
KDL: Yes I do. There are too many career politicians with very little real-world experience. Politicians seem to be getting younger and younger – not that there is anything wrong with youth, but experience is so important. I don’t know what the answer is. The US system doesn’t seem to be working any better. The sad truth is that competent people from the business world are not attracted to politics these days. There is too much spin and not enough substance, and too much focus on winning the daily news cycle, rather than on substantial long-term policy. That is not a criticism of one particular party; all seem to be heading in the same direction in this regard.
CD: Is the relationship between the Federal Government and big business as bad as it’s ever been?
KDL: When I am being critical of governments and government policy, I am an Australian first, second and third. I have no ulterior motive. Yes, the relationship between business and the Federal Government in particular is toxic and the worst I have seen in my lifetime. I’m appalled at the deteriorating business environment in Australia and the worsening conditions businesses, big and small, have to operate in. It’s come about through poor public policy, a total lack of understanding in politics about what makes the economy work and ultimately a poor appreciation of the social dividend Australian people can derive from a strong economy.
It’s a disgrace that Australia’s mining sector now feels like it is "the enemy" in this country. It’s a good thing [Federal Minister for Resources and Energy] Martin Ferguson is there because the rest of the Federal Government seems to be anti-mining. The Federal Government’s class-war rhetoric comes across as anti-business, anti-success and anti-entrepreneurship.
CD: Is business also to blame for the relationship with the Federal Government? It seems only a handful of chairmen have been willing to comment publicly on contentious public-policy matters?
KDL: Yes. Business must take some of the blame. Too many businesspeople are overly polite when it comes to dealing with government and courteous in public, yet scathing about the government in private.
In my experience, business generally wants to work with the federal and state governments, explain the issues and get a fair hearing. But the current Federal Government is very dismissive of big business, especially in the mining sector.
Also, it’s not easy for company directors to comment publicly. You don’t want to be tarred with an anti-government or anti-Labor brush, and boards of listed companies must be mindful of continuous disclosure requirements and any public comments that can affect their companies’ share prices. I have found it much easier to comment publicly since leaving the Macarthur Coal board.
CD: Why are the carbon and minerals resource rent taxes bad policy?
KDL: The carbon tax represents all that is bad about where Australia is heading. Putting a price on carbon is a grand expensive gesture that achieves nothing in terms of reducing carbon dioxide emissions globally and has an enormous negative effect on Australia’s economic viability.
The minerals resource rent tax (MRRT) in itself can be accommodated, but it is the totality that is demoralising. We have had five separate taxes imposed on the mining sector in the past three years. First, the resource super profit tax, then the MRRT and then the carbon tax, diesel tax offset reduction, and increases in state royalties.
These combined changes have done enormous damage to our standing as a global investment destination and are encouraging big miners to invest overseas. We are already seeing big miners, such as Rio Tinto, closing some Australian operations while investing billions in Africa.
Government taxes and a massive increase in red tape are making it very difficult for our mining sector to move forward. There is no way a small explorer will ever again get a mine into production without the support of a big resource company. There will never be another Macarthur Coal, because it’s now too expensive and takes too long – they don’t have the balance sheet.
CD: Is the mining boom over?
KDL: The coal industry is riding into a perfect storm of lower commodity prices and rapidly rising costs, and is a completely different place today for any business that wants to plan new projects. The first phase of the mining boom [rising commodity prices] is finished. The second phase, an investment boom, still has a long way to run, provided the projects are funded and committed. That in turn, will lead to rising volumes, the boom’s third phase.
CD: Has Australia squandered the fruits of the mining boom?
KDL: How has this country benefited from this once-in-a-generation boom? Federal and state governments have large public debts. There are huge structural budget deficits (spending based on boom-time revenue that by definition is not sustainable). Not enough money has been invested in infrastructure and we have not adequately prepared for the long-term challenge of an ageing population. It’s been a 10-year boom so far and both sides of politics have squandered it by not thinking long term.
CD: Turning to state politics, how you do rate Campbell Newman’s early performance as Queensland Premier?
KDL: He blotted his copy book by increasing royalties on Queensland’s coal industry. However, in an address to the Queensland division of the Australian Institute of Company Directors in September, Newman outlined a refreshing approach to reducing regulation in Queensland and creating an environment that is conducive to business, largely by getting out of the road of business.
The Federal Government could take a leaf out of his book. A big problem is governments wanting to solve every problem, or be seen to. In my view, not every problem deserves a new law, which nine times out of 10 does not solve the problem and adds greatly to costs, freedom and bureaucracy.
CD: How would you fix Queensland if you were its Premier?
KDL: I certainly have no aspirations to re-join politics. However, my advice would be for governments, federal and state, to focus on the fundamentals. Governments need to reduce red tape and their regulatory intrusions into business, and to understand that business can grow and create more jobs and pay more taxes without constant government intervention.
I would also suggest good policy is ultimately good politics. I recognise good public policy is often hard to sell and can seem counter-intuitive. But good government is about spelling out what is important, sticking to it and recognising that voters are not as silly as instant focus groups paint them to be. They ultimately see the benefits of long-term policy in the overall public interest.
Political debate in Australia is dreadfully tabloid. And, instant news cycles make it very hard to get an intelligent, sensible debate about long-term policy issues.
CD: Macarthur Coal was taken over by Peabody Resources last year in a hostile takeover. What advice would you give other boards when their companies face a hostile takeover?
KDL: Always focus on shareholders and put their interests ahead of everybody else’s. And, if you are going to be taken over, make sure you are taken over at the peak of the boom.
CD: What advice would you give other boards that take companies public through an IPO?
KDL: Make sure your company is listing for the right reasons. Being listed is not all upside; there are substantial disadvantages in terms of extra disclosure, compliance, scrutiny and cost.
CD: As a former chairman and representative of Chinese food group COFCO Australia, you worked on its bids for Queensland sugar co-operatives in the past two years. Do you expect more foreign takeovers of Australian agribusinesses in coming years?
KDL: Yes. Because food is plentiful in Australia, we don’t think about the challenges of feeding a hungry world. Senior people in China think about this issue every day and are focusing on agriculture investment opportunities around the world. I’ve said for some time that agribusiness is the next boom and am very passionate about engaging China at all levels. It’s a shame so little Australian capital has been interested in the local agribusiness sector, given its outlook.
CD: Are the risks of foreigners buying Australian agribusinesses overstated?
KDL: Australia was built on the back of foreign investment. Without it, we would be a poorer and less significant nation. Very little local capital was spent on Queensland sugar mills for almost 70 years; now foreign investors are doing the job. If local capital does not want to invest, it stands to reason foreign capital will take advantage of the opportunity.
CD: What makes a good board?
KDL: It needs directors with a variety of skills and life experiences and for all directors to be prepared to state their opinions while recognising the collegiate nature of boards. Good directors are intelligent, work as a team and always want to learn and grow. But first and foremost, they remember they are on the board to act in the interests of shareholders.
Good directors are also highly ethical. We learn about fiduciary duties as directors and that is the most important thing you can learn – act honestly, in good faith and to the best of your ability. If you do that you will succeed as a director, you will have the best defence against litigation and it is a good philosophy for life too.
I would like to think my strength as a chairman is to encourage open and robust debate, focus on what is important, and, yes, keep a good sense of humour. And, most importantly, pick the right CEO and three-quarters of your work is done!
CD: What skills do ex-politicians bring to boards that they might not already have?
KDL: Successful politicians have a good grasp of how the community works and how diverse groups of people think about issues. Their range of experiences can translate into effective decision-making on boards and they usually have very good networks.
CD: What is the main focus of the Queensland division of Company Directors?
KDL: Our focus is more on governance in small and medium-sized enterprises and on governance in regional centres in Queensland. The division has received very strong support from the regional committees and our membership is growing strongly.
CD: Can we expect to see you on more boards in coming years?
KDL: I hope so. I love a challenge and find being on boards tremendously exciting. I love waking up each day wondering what the day will bring in terms of board challenges and who I will meet. Directorship is very much a full-time job for me; if I’m not at a board meeting, I’m reviewing board papers or addressing other board issues.
CD: You have had so many different life experiences compared with most directors. Has your diverse background been an advantage as a company director?
KDL: Too many people become prisoners of their own prejudices. They only read what supports their own view and only listen to those with similar opinions. I think I have lived too many lives to get caught like that. My diverse background has forced me to consider how decisions affect people from all walks of life and not be rigid to one particular view. The mark of a good director is being able to consider each issue on its merits and to be flexible.
CD: How do you relax away from work?
KDL: I play golf off the modest handicap of 15. My wife and I also spend plenty of time with our three children and five grandchildren. The family home is still in Cairns, but we have an apartment in Brisbane and spend about half our time there. I still find there is nothing more satisfying than creative writing, but have long since realised you can’t be truly creative part-time, so another book is out of the question at this stage. My one regret is not keeping a diary of my life before, during and after politics.
CD: When will Queensland finally lose the State of Origin to NSW?
KDL: We like to say in Queensland: "When hell freezes over!"
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