Iconic public companies in Australia such as Qantas and Coles Myer have become targets for private equity raiders. More used to headlines about private companies going public, what does this mean for the ‘man in the street’?

 

Critics say the growing power of private equity firms is leading to job cuts, longer hours and reduced benefits for workers in once-public companies that have been taken private.

 

“As soon as a company moves to the private market it becomes a lot easier to engage in a radical restructuring than would ever be contemplated in the public markets,” according to Dr Justin O'Brien, the new Professor of Corporate Governance at Charles Sturt University’s Centre for Applied Philosophy and Public Ethics (CAPPE).

 

Public companies such as Enron in the USA and HIH Insurance in Australia abused corporate governance in spectacular fashion despite the presence of regulatory watchdogs such as the Australian Securities and Investment Commission (ASIC). And Federal Treasurer, Peter Costello has conceded that private equity does present some regulatory challenges.

 

“There is a lot of concern within Qantas at the moment about potential job losses should Qantas go private, and there are a lot of issues in terms the amount of money that is going to be made by the private equity funds as a consequence of this,” said Professor O’Brien.

 

“Of course the Federal Government had very little choice but to allow the Qantas deal to go through. But Qantas will go from a company with a massive surplus each year to a company which is saddled with $8 million in debt.

 

“Why should the lay person in the street care about corporate governance? Because they have money in superannuation funds and therefore has a vested interest in the capital markets behaving appropriately,” said Professor O’Brien. “Ultimately the value of their pension, their super scheme, is determined by the integrity and probity of the capital markets.”

 

Professor O’Brien is the author of several books dealing with corporate governance and political corruption, including Governing the Corporation: Regulation and Corporate Governance in an Age of Scandal and Global Markets, Killing Finucane: The Inside Story of Britain's Intelligence War, and Wall Street on Trial: A Corrupted State?

 

Before moving into academia, Professor O'Brien was an investigative current affairs journalist with the BBC, RTE and UTV in the UK, where his last position was an editor of current affairs.

 

Before coming to CAPPE, Justin O'Brien was a Senior Fellow at the Institute of Governance, Public Policy and Social Research at Queen's University, Belfast, UK.