Lost in the noise

Lost in the noise of Prime Ministerial “succession” matters in Canberra last week, there was another “succession” event that occurred; the unexpected and early departure of AGL CEO Andy Vesey which also occurred on Friday 24 August 2018.

Reported in the AFR and hinted all over the place, a key reason for Vesey’s “retirement” was the need to improve relations with Government.  So writes Matthew Stevens in the AFR:

In the end, for reasons that stretch from the need to reset AGL relationships with governments to the way he was running the business (as opposed to the results he was generating), Vesey did not get the chance to complete his mission.

Much can be debated about AGL’s conduct and performance, but it seems a very disturbing sign that a key performance indicator of a private sector business CEO needs to be the maintenance of good relations with Government, which nowadays is a euphemism for being a vehicle for government policy.

So much for Milton Friedman’s the business of business is business concept:

There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

This event also brings a whole new meaning to the duties of Australian directors to act in good faith in the best interests of the company and for a proper purpose when acting in good faith means behave lest the Government regulate/legislate the profit out of you.

What’s next?  Having government agents embedded within companies to make sure they behave?  Oh hang on ….

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19 Responses to Lost in the noise

  1. …the maintenance of good relations with Government, which nowadays is a euphemism for being a vehicle for government policy.

    Hasn’t it been a mainstay of all companies to lobby government for their own self-interests? Surely shareholders want companies to maximise the benefits that they can draw from government?

    Is this what you’re opposing or am I reading things wrong?

  2. Bemused,

    Hasn’t it been a mainstay of all companies to lobby government for their own self-interests?

    Yes. You are correct. And the Vesey departure is the other side of the same coin. But this is the point. As Thomas Jefferson said, a government big enough to give you everything you want is a government big enough to take away everything that you have.

    This applies equally to businesses as it does to citizens.

    Smaller government is the only answer.

  3. RobK

    At the risk of reading too much into the resignation, I suspect the CEO can see that navigating the company to some carbon free status is going to be painful both technically and politically. The reality will hurt. Prices will be high and the economy will be decimated. It’s not a nice trajectory but it seems for ideological reasons he is not prepared to speak up either. He was hired for green cred.

  4. Habib

    Vesey was a good operator in taking advantage of the idiocy in every level of government, which was starting to become a PR disaster for AGL. Their brand is now almost as whiffy as governments. Mind you, it’s not exactly an onerous task to take advantage of government in this dump, rubes at a hook-a-duck stall in some bucolic backwater would present a bigger challenge to the most sleazy grifter. While we remain a socialist basketcase, relations with government will continue to be a major factor. They shouldn’t matter in the least.

  5. stackja

    Vesey was bad news for the brand. Like MT.

  6. Alan moran

    Vesey milked the regulatory regime governments set to the immense enrichment of his shareholders. The government did not realize its regulatory regime would also mean high prices and applied action of corrective regs would be difficult. So it tried jawboning to allow Liddell to remain open but Vesey would not play. Perils of the regulatory state.

  7. Tom Atkinson

    AGL certainly did NOT “… engages in open and free competition without deception or fraud.”

    Vesey was grossly deceitful about climate change. As Robert Gottliebsen has pointed out, there is a law against the kind of misinformation that was given by Vesey to the government. Hopefully Vesey will go to jail for having wilfully broken this law.

  8. Leigh Lowe

    This from Powerline succintly describes the problem…

    It is easy to tell when an energy source is “dumb”–i.e. inefficient, unreliable and expensive. Smart energy sources like coal, nuclear, hydroelectric and natural gas, exist because they satisfy a permanent demand for cheap and reliable energy. Dumb energy sources, on the other hand, exist because government has put its thumb on the scale in the form of subsidies and mandates. The most valuable employees of companies that sell dumb energy are lobbyists, not engineers.

  9. Smaller government is the only answer.

    I certainly agree with that. I also have no love for AGL.

  10. FelixKruell

    If your business is in a highly regulated industry, where Government policy can have a massive impact on your future investments and profitability, ‘good relations’ with Government are crucial (even if that doesn’t mean you have to do what they want you to do).

    Vesey clearly had the opposite of good relations with this Government.

  11. Dr Fred Lenin

    Subsidies for any purpose create a culture of crawling to politicans , they after all lay the golden egg and you dont wring the neck of those geese .

  12. Mother Lode

    The government did not realize its regulatory regime would also mean high prices and applied action of corrective regs would be difficult.

    I suspect they never really thought to check.

    They just had in mind what they wanted people to do and assumed that is what they would do, not considering they might be busy about their own advantage rather than the policy’s.

  13. This story kind of fits the bill: https://www.theage.com.au/national/victoria/bankrupt-gordon-gekko-scores-development-on-government-land-20180825-p4zzr4.html.

    A failed Melbourne businessman who styles himself on Wall Street character Gordon Gekko has become a partner with a state government agency in a luxury ski resort project, even though he owes more than $61 million in bad debts.

    Government and regulatory authorities have granted access to public land at Mount Hotham for a major new hotel that is backed by still-bankrupt developer Anton Joseph Wilson.

  14. Bruce of Newcastle

    Selling patent medicine is a good business, until you get run out of town.

  15. Cynic of Ayr

    “Good Government relations” by AGL requirements, is to keep the subsidies flowing. Without subsidies, AGL is in trouble. The business is reliant on subsidies. Wasn’t always thus. They deliberately moved that way.
    AGL has run down it’s coal stations, in the belief/expectation that the renewable’s subsidies will more than make up for it. Waaayyyy more!
    Which brings me to another furphy bandied about by the learned talking heads on the ABC etc. Unfortunately, too many others believe this also.
    That furphy is that a Coal Power Station reaches the end of it’s life. This, readers, is bullshit!
    Maintenance and periodical rebuilds relegate the only reasons for end of life, to end of fuel, or a sudden (more or less) replacement by another technology, like nuclear. And no, wind and solar ain’t it!
    Hazelwood had poor fuel. Everyone knows that. But the fuel wasn’t the cause of end of life.
    Hazelwood had eight units. I’ve never been there, but eight units would, to a fairly clear degree, have been separate, feeding into a common outlet. A unit could have been closed down for a period – a year or less – for replacement. No need for further power interconnections. No need for another mine. No need for further fuel delivery systems. No need for environmental studies to see if a few insects might have their noses – probosces? – out of joint.
    This is always occurring in factories all over the place. My four local Sugar Mills have been doing it for years, and years and years. In fact, for 100 years or so.
    At these mills, there is ample evidence of expansion, renewal and change. Redundant Tram lines go into the walls of buildings. Foundations of demolished buildings are car parks. New brick offices are built beside the old timber and iron offices, which are demolished or turned into something else, like storage. New steam boilers are built beside old ones. Controls are centralised and modenised.
    Think about HELE. Apparently, a fine technology, well worth building. But what is it? It is a boiler. Nothing else but a boiler.
    It doesn’t produce electricity directly. It boils water, over and over, and supplies pressurised steam to a turbine/alternator, exactly the same as today’s boiler does! No different!
    The steam is the same stuff out of either boiler type.
    There is no need to build new turbines/alternators, power infrastructure and so on. Just a bloody boiler!
    The aforementioned sugar Mill don’t have the original boilers! Far from it. In my lifetime here, they’ve had several new boilers each. All they did was walk into the office of Babcock & Wilcox, and say, “A new boiler please. How much?”
    If – if – it’s envisaged that existing Power Stations (boilers) be replaced with HELE, the reasons for new stations, rather then rebuilding or refurbishing present ones are:
    Politicians like to open new stuff. They think it makes them look impressive. They don’t like to open repairs;
    There’s a lot more money to be made by drawing up a completely new station on a new site, than drawing up some rebuild. Which one would a designer prefer? A small job or a big job?
    Environmental. There’s millions of dollars to be made to investigate insect damage (as mentioned above) on a new site. It would also reinvigorate the greenies, who have been languishing in their digs on the dole, giving them new purpose in life – to continue to languish on the dole.
    Anyway, it all doesn’t matter, because Morrison is Turnbull lite, (might even turn out to be Turnbull heavy!) and it’s years of pain before it dawns on them that they’ve been conned.
    (I’m going to post this on Jo Nova’s site too. Might as well cop it from the armchair engineers, from more than one source.)

  16. H B Bear

    My read is like most US CEOs in Australia they fail to fully understand the natural rent-seeking oligopolies that exist under the Holy Trinity of Big Business, Big Government and Big Union. Vesey knew AGL could make more profit by taking Liddell offline and jacking up the wholesale price of whatever kW he could get out of the windmills and remaining coal plants. Instead of doing the right thing by the Holy Trinity and keeping things comfortable when tapped on the shoulder by Lord Waffleworth, Vesey told him to rack off.

    This is not how it is done in Australia and there were already murmurings of a Royal Commission, threatening to drag everyone to exactly where the banks currently find themselves. Hence the plane ticket back to the States with a fat pay-out – pretty much what happened to Trujillo at Telstra when he pointed out what a bloated regulatory regime they operated under.

  17. Speedbox

    I am not a fan BTW but his refusing to sell Liddell, milking the maximum extent of stupid concessions offered by Govt and talking up the climate change crap was what should be expected from an energy company CEO. Thus, his position was ultimately untenable because he impinged on the ‘social licence’ our politicians like to go on about and Vesey wouldn’t play ball. He was focussed on the return for shareholders. In some countries, he would be lauded – but not here ‘cos we’re, you know, special.

  18. Norman Church

    Speedbox – don’t disagree with your analysis but I think you’ll find the correct term is socialist licence to operate.

    The ‘ist’ is silent. Like in “social justice”.

  19. bollux

    He was focused on ripping off consumers. Period. AGL broke three contracts with me, but I am not giving in, even though this jerk has scuttled off back to America. Let’s hope he takes Skye Laris and all his “green” friends with him.

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