David Jacobson's External Insights

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Kickback: a story about AWB's corporate culture

I have just finished reading Kickback : inside the Australian Wheat Board Scandal by Caroline Overington.

It is a very readable exposition of the AWB saga, structured in a way that tries to makes sense of how AWB came to enter into corrupt contracts with Iraq, what happened when the war began and the UN investigated the contracts and finally the role of the Cole Inquiry and the Australian political context.

It is not a legal or commercial analysis; Overington describes how she got involved in the story even though she had no business journalism background. But by placing her activities in the story as it unfolds she asks commonsense questions and explains the media perspective.

The overall messages are :

How could a reputable Australian company become complicit in corruption?  Is it as simple as not wanting to lose a $1 billion a year customer? Was it a culture of doing business and making money no matter what the ethical cost? whatever it took to get the business done? Did it just believe that if AWB did not agree to Iraq's demands for kickbacks, some other country would and the payments were just a cost of doing business?

How could the Australian Government ignore the warnings about AWB's activities? Did it not investigate AWB earlier because it did not want to know the truth?

The C7 case: mega-litigation and business reputation

In Seven Network Limited v News Limited [2007] FCA 1062, Channel 7 lost a long-running and expensive court case which alleged anti-competitive conduct against its former partners in a media venture.

The noteworthy feature is the effort that the trial judge (Judge Sackville) went to in describing the process of the litigation and its cost:

The case is an example of what is best described as ‘mega-litigation’.  By that expression, I mean civil litigation, usually involving multiple and separately represented parties, that consumes many months of court time and generates vast quantities of documentation in paper or electronic form.  An invariable characteristic of mega-litigation is that it imposes a very large burden, not only on the parties, but on the court system and, through that system, the community...

The trial lasted for 120 hearing days and took place in an electronic courtroom.  Electronic trials have many advantages, but reducing the amount of documentation produced or relied on by the parties is not one of them.  The outcome of the processes of discovery and production of documents in this case was an electronic database containing 85,653 documents, comprising 589,392 pages.

Apart from losing the case (and a likely huge costs order against it), the judge was critical of Seven ("there is more than a hint of hypocrisy in certain of Seven’s contentions" (Para 157)), its CEO, its counsel and the general conduct of the case. (He also complained about other parties'  executives, witnesses and document retention issues).

All in all, it shows that once litigation starts, you're never really sure where it's going to end up. The judge refers to the Duke case which had multiple appeals.

It's a matter of trust

The best business relationships are those where mutual benefit has been enhanced by "trust".

If there is trust, then the relationship can survive unexpected glitches.

If there is trust, the relationship will be more productive.

How do you develop trust?

This week's Blawg Review hosts The Carnival of Trust with examples of trust in different settings:  leadership and management, sales and marketing,  strategy and advising.