Tuesday, August 25, 2009

James Hardie's lack of corporate ethics

I doubt company directors and CEOs ever consider themselves thugs. Generally, they would claim their only aim is to protect shareholders' funds; often they claim that as their overriding legal obligation.

Yet James Hardie's managers indulged in thuggery - and they've been caught out.

With a significant liability on their books due to ongoing and emerging claims from their asbestos business, they sought a way to limit that liability. What better way than to sequester set funds in a trust, then high-tail it off to a foreign jurisdiction?

Which they did, reincorporating from Australia to the Netherlands. Yet thuggery it is, since they left behind insufficient cover for current and future victims.

"As a sufferer of asbestosis since 1992, I have no sympathy for their public humiliation. They brought it on themselves by their contemptible behaviour."
..."Big deal. You can guarantee they will not be driving cabs for a living."

- letters to the editor, SMH, 22-Aug-09

The specific crime was a mere technicality. The ten directors were punished because they approved a media release (claiming the trust was "fully funded") which was inaccurate, but deemed to be intended to affect the market.

Penalties were fines of $30,000 to $350,000, and being banned from CEO and board positions for five to fifteen years. The latter tends to have the greatest effect - on their careers. All have left James Hardie; some have resigned other management positions. However, a couple of them are working in the US, where the bans don't apply.

Their defence: each one of them claims they didn't read or don't remember reading the draft press release. Those claims were judged not to have been genuine.

And the James Hardie business (building supplies) has started to rebound from the recession already.

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