The Qantas board of directors should resign and regulators ought to investigate charging Alan Joyce with insider trading. Michael West reports. Can Alan Joyce be prosecuted for insider trading? If he knew about the ACCC investigating Qantas’ ‘phantom flights’, which is false and misleading conduct, then the answer is yes. The ACCC began investigating Qantas last year. By the time Joyce sold $17m worth of his personal Qantas stock in early June, the investigation was in full swing. It was only made public on Thursday, Qantas shares dropped almost 7% on the news to close Friday at $5.82. An ASX director’s disclosure shows Alan Joyce sold 2,500,000 shares at $6.75 on market on June 1. The ASX had not been notified of the ACCC sting, and Qantas shares have fallen almost 14% since the Joyce sale. Meanwhile, Australian superannuation funds, the stewards of retirement savings for millions of Australians, were not put in the picture as to the ACCC action and are 14% worse off than Alan Joyce as at Friday’s market prices. began its investigation last year. If he did know, an insider trading prosecution is plausible, indeed warranted, or else the perception that politicians and regulators are ‘under Qantas’ thumb’ can only deepen; indeed, that there is one rule for the rich and powerful and entirely another for the rest of us. Section 1043A of the Corporations Act 2001 (Cth) provides that if a person or company (the “Insider”) possesses inside information, and the Insider knew or ought reasonably to have known that the information was insider information, the Insider must not apply for, acquire, or dispose of, relevant financial products. Is the ACCC ‘material information’ which needs to be disclosed under the Corporations Act? The maximum penalty for what is alleged by the ACCC is a fine of 10% of annual revenue. If that is not material, what is?They did not have the benefit of this material information, that is an impending enforcement action by the competition and consumer regulator, ACCC, against Qantas. This was not disclosed by the board of Qantas, or by Joyce. The question is, did Joyce himself know? It is possible that he did not, but very unlikely. If he did know, two questions arise: why did he and the board not insist that the information be disclosed to the market under ASX ‘continuous disclosure’ laws, and two, did he inform the board that he was selling? If Joyce did not know – it is possible but also highly unlikely that the ACCC was dealing with Qantas lawyers who did not tell their superiors – then this would not equate to insider trading. According to the AFR, the ACCC
Misleading and deceptive, and material, and profitableWithout trawling through ASIC practice notes and AustLII precedents, it is fair to say that the misleading and deceptive conduct is so substantial as to be material. Qantas sold tickets to thousands of people on no less than 8000 cancelled flights. Further, whether deliberate or not, they appear to have profited from dudding their customers on an industrial scale. The ACCC only hints at this in their published materials: “We allege that Qantas made many of these cancellations for reasons that were within its control, such as network optimisation including in response to shifts in consumer demand, route withdrawals or retention of take-off and landing slots at certain airports,” Ms Cass-Gottlieb said. The key words here are ‘network optimisation’. While is it understandable that in the chaos of the airline’s recovery from Covid, the carrier was short of both aircraft and crew, and scrambling like many other airlines around the world to get back to reliable service, ‘network optimisation’ suggests one reason for the cancelled flights was to stuff more customers into fewer flights to optimise ‘yield’, that is, put more bums on seats, and spend less on jet fuel and staffing costs. The ACCC will presumably establish whether the cancellations were a deliberate corporate tactic to profiteer at the expense of customers.
Buying your own shares, que?But will ASIC the corporate watchdog pursue Qantas correspondence to establish that Alan Joyce knew about the ACCC investigation and failed to disclose it while profiting as an ‘insider’ at selling his personal shares at high prices. There is a monumental ethical failure here too, apart from questions of insider trading. That is, Qantas had commenced a share buy-back in February. That is, flush with public funds from the $2.7b in Covid subsidies (including $900m in JobKeeper) it began buying its own shares. This is an entirely legal, although often very suss, way in which corporations can ramp their own stock to make executive share incentives worth more. The ethical dimension is whether it is appropriate for a chief executive, especially one who possibly has knowledge of a looming explosive regulatory action, to sell his personal shares to unwitting buyers, shares which have been gifted by the taxpayer-subsidised company in performance stock? The answer to that would be ‘no’. It is a very bad look. Presumably Joyce told the board in advance of the sale (we don’t know this either), which is now equally culpable for this tacky decision, yet the Qantas directors were docile and let it pass. The whole point of performance stock is to retain an executive’s diligence.
What is insider trading?What is insider trading then? Insider trading is the buying and selling of securities of a publicly traded company by individuals who have access to confidential or material, non-public information about the company. Did Joyce trade the shares? Yes. Did he have this inside information at the time? We don’t know for sure. Was this information material and should it have been disclosed before he sold his stock? The stock got hammered on the news and this is a major prosecution, so yes. Is this actionable? It would appear so, if the Qantas CEO knew about the investigation. Will there be an insider trading suit? Unlikely, corporate regulators rarely pursue the Big End of Town; they prefer suing small timers like financial planners. How about police? Same deal, they prefer to charge poor people for stealing a bottle of grog from a shop than prosecute big-time directors for fancy corporate offences. The reason Alan Joyce and Qantas are such a big deal, and so worthy of public discussion, is that they represent the worst of corporate excesses, and the inexorable rise of corporate control over governments.
The fall of an icon, the fall in public trustThis was a national icon, a cherished brand, build with the sweat of our ancestors. It is also a symbol for the deterioration of public trust in institutions – and corporate welfare. This at a time when ordinary Australians are doing it tough in a cost of living crisis. It is now a symbol of greed. Not only is Qantas ‘too big to fail’, a monopolist protected by successive governments, a monopolist run aggressively for the private profit of its executives, a monopolist which exploits its influence over public officials, this corporation profited more than any other from public subsidies – a massive bail-out – during Covid. It then used this liquidity for its directors, shareholders and executives to profit personally, at the expense of customers. It was an epic mistake for the previous government, and sadly one supported by the Opposition at the time, to give billions to Qantas in public money with no strings attached. Not a loan, no performance demands, just a gargantuan gift in JobKeeper and assorted aviation hand-outs. Insofar as Qantas is also a symbol for rampant corporatism, the last government’s pandemic response was to allow Alan Joyce and the Qantas board a free pass to restructure its workforce, to get rid of who it wanted, to impose complex and onerous IR changes which crushed the confidence and morale of its workers. This, even to the point where the Federal Court has made two decisions (now on appeal with the High Court) ruling Qantas had illegally sacked hundreds of its workers. Customers, as evinced by the ACCC claim, have been treated just as poorly. Yet as Qantas operates as a duopoly with Virgin, the flying public does not have enough choice for this to be considered a ‘free market’. The massive recent $2.5b profit was struck by gouging customers who are captured by lack of choice in a duopoly market. When Alan Joyce infamously pointed the bone at his customers for Qantas service failures as the group emerged from the pandemic, saying they were not ‘match fit’ (sufficiently ready for flying, hence the queues), it can be said with conviction now that Qantas management is not ethically fit to be stewards of this airline. In fact the ethical failures are such that, in trashing the Qantas brand, they also constitute incompetence.
Photo above: AAP
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