The Billionaire Sex Saga is the latest scandal for Rock Australia’s CEOs

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(Bloomberg) — Alleged sex-for-investment involving Australian tech billionaire Richard White is just the latest business disaster in a country that is fast losing its reputation as a tightly regulated market with strong governance standards.

More than A$7 billion ($4.6 billion) in market value has been wiped out from WiseTech Global Ltd. this week after media reports that White – the company’s founder, chief executive and largest shareholder – paid millions of dollars to a former sexual partner. to resolve allegations of misconduct.

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As the board review continues, the crisis surrounding the software giant and its chief executive deepened on Thursday as the Australian Financial Review reported that the former director had accused White of intimidation and manipulation. Earlier, the newspaper said White had a years-long relationship with the employee before giving him A$7 million for a waterfront home in Melbourne. The transaction was not disclosed to the board, according to the report.

Helen Karlis, a spokeswoman for Mhlophe’s lawyers at Clayton Utz, said the law firm had no comment on the latest allegations. The company has not responded to repeated requests for comment.

In just a few months, allegations of misconduct have hit two of Australia’s biggest supermarkets, one of Australia’s biggest banks, the biggest insurer, a major listed media company and Sydney’s biggest casino. In a country with the world’s largest pension pools, where employee contributions are mandatory, everyday savers pick up the tab when stock prices fall.

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Another tycoon who is the founder of Mineral Resources Ltd. Chris Ellison, this week also found himself in disgrace with the company investigating the history of undisclosed payments that helped him avoid taxes. The Australian corporate watchdog has launched an investigation, and nearly A$2 billion has been knocked off the miner’s market value since Monday.

The mining giant described its action in a statement on Monday as “a bad decision and a lack of bad decision.” He had then “voluntarily” disclosed the affairs to the Australian Taxation Office in full, with all outstanding tax, penalties and interest refunded. The company’s board said earlier this week that it still has confidence in Ellison.

Although the breach of administrative or business laws is a global phenomenon, it seems to be particularly felt in Australia, where the factors are converging. Many of the country’s major industries – aviation, banking, grocery and retail – are duopolies or oligopolies, comfortable environments that can easily be abused by market power.

Australia is home to only 27 million people and has a small pool of independent board directors to represent listed companies. Many directors have roles in many businesses. Bar associations have long said that board members do not want to speak up when standards are weakened at one company for fear of losing a board position at another company.

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That is not the only problem. Some state watchdogs lack resources, have little corporate skin to their names, or issue fines that do little to deter bad behavior. Star Entertainment Group Ltd. this month it was fined just A$15 million – less than 1% of its revenue – by its regulator after an investigation found the casino operator had repeatedly breached its license and was not fit to run its flagship Sydney complex, even though it had one. two years to deal with its problems.

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The head of a Senate inquiry into the Australian Securities and Investments Commission, the country’s main corporate regulator, in July described the agency as “an organization with no transparency, few prosecutions, and a range of cultural, structural and governance issues.”

One of the most damning assessments of the Australian workplace came last week when Nine Entertainment Co., publisher of the Sydney Morning Herald and AFR, released an independent review of its practices. The report exposed systematic abuse of power and authority, bullying, discrimination and sexual harassment.

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In too many businesses, internal management practices don’t catch problems before they become public scandals, said Rahat Munir, a professor at Macquarie University’s business school who heads the department of accounting and corporate governance. Australia’s remoteness, away from the world’s major financial and corporate centers, means its companies are at risk of operating in their own bubbles, he said.

“Because of this, it is very easy to use the local market,” he said.

WiseTech Woes

At WiseTech, shareholders hurt by claims against White and the board include Australia’s wealth fund, and the largest superannuation fund, AustralianSuper Pty. Shares of WiseTech fell as much as 5.8% on Thursday, the stock’s worst monthly performance. effective from February 2020.

“We should all be concerned that these are not isolated examples, but a pattern of behavior that causes direct losses to shareholders,” said Brendan Lyon, a professor in the business and law faculty at the University of Wollongong. Corporate governance is failing, Lyon said.

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The outbreak of allegations against WiseTech and White now threatens the leadership of the company. Former director Christine Holman accused White of “continued intimidation and bullying” as she left the board in October 2019 after less than a year, the AFR reported on Thursday. The AFR said it was not suggesting White was bullied or threatened by Holman, but accused him of doing so. Holman declined to comment to this newspaper.

AGL Energy Ltd., where Holman is now a board member, sent him an interview request from Bloomberg News earlier this week, which he declined. AGL did not respond to a new request from Bloomberg on Thursday for comment on Holman’s reported resignation from WiseTech.

A spokesperson for WiseTech would not comment on the latest AFR report, but said the company has clear policies related to disclosure of intimate relationships in the workplace. White confirmed that he complied with the policy, according to the spokesman.

“The board continues to investigate a number of issues, monitor the situation and carefully consider all relevant factors,” said a spokesperson for the department.

On Monday, the AFR quoted White as saying he was concerned about any allegations, even those that had not been verified.

Last week, White reached an out-of-court settlement with his alleged ex-girlfriend who was seeking bankruptcy protection, a case that brought her into the media for the first time. The woman is said to have expected White to sleep with her in order to get money from his business.

—With assistance from Amy Bainbridge, Ainsley Thomson and Georgina McKay.

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