Economy
The true story of the fall of Gray, Gay and Gunns
Businessman Geoffrey Cousins joins Lateline to discuss his involvement in the lobbying against the timber company Gunns, its former chairman John Gay and its operations in Tasmania.
TONY JONES, PRESENTER: And joining us now is Geoffrey Cousins who in 2007 led a group of celebrities in a campaign to convince the then environment minister Malcolm Turnbull to reject Gunns’ pulp mill in Tasmania.
Mr Cousins was one of the principle players in orchestrating the institutional shareholder revolt that claimed the scalps of both the Gunns chairman, John Gay, and the former premier, Robin Gray, who was a key director of the company.
Thanks for being here.
GEOFFREY COUSINS: Pleasure.
TONY JONES: I think it is fair to say that the radical changes inside Gunns were the result of a boardroom coup. Tell us how it was engineered.
GEOFFREY COUSINS: Well, basically we applied a lot of pressure to every part of that company. And when I say “We” I mean a number of people. The Wilderness Society was extremely effective in this.
And we put pressure on the financiers of the company and you saw quite some time ago for instance that the ANZ bank – who had been the long-term bankers to Gunns – refused to support the pulp mill effort.
We put pressure on the customers. We put pressure on the shareholders, finally. But also what I did was to engineer a story in the Australian newspaper that suggested there was an upside for shareholders – because you got to offer something as well, you cannot just present the negatives in cases like this.
TONY JONES: As a result of that story you were actually approached by one of the biggest institutional shareholders – not the biggest – Perpetual. Tell us what happened?
GEOFFREY COUSINS: Well, that’s right. Virtually within a day of that story running a representative of Perpetual turned up in a corporate governance advisory firm holding a clipping of that article and said “Do you think you could get these people together?”
And we could see if in fact we could get a proper social licence to operate – get the people who had been opposing the mill and opposing the company for such a long period of time to actually come out and support it.
TONY JONES: So a critical meeting was put together? Who was in it?
GEOFFREY COUSINS: It was, yes. It was an extraordinary meeting actually – a meeting that I never thought would take place. We had representatives of Perpetual, the biggest shareholder, we had senior people from the Wilderness Society and myself there and…
TONY JONES: With an open ended agenda? I mean – Let’s look at everything, maps of the forests, the whole lot?
GEOFFREY COUSINS: Unbelievably, we actually put on the table a map of the high conservation areas in Tasmania that had been under dispute for decades. You know, people up trees, lawsuits, goodness knows what. Put them on the table and said “Now look, do you really believe if this company stopped logging these areas it would have any significant impact on the share price?”
And the Perpetual people said “Not a cent”. So all of that angst and drama had taken place because of the intransigence of the board of that company and particularly of course of the person who led it, John Gay.
TONY JONES: Before we go on, the two principal or primary targets of the coup were the Gunns’s chairman, former CEO, John Gay and the former Tasmanian premier, Robin Gray, who was a key Gunns director.
Why was it so important to eliminate those two from the company?
GEOFFREY COUSINS: Well look, I said to them, from my experience on boards over a long time now -been on a lot of public company boards, I said to them, “You are not going to get significant change in this company unless you change the people at the top of the company and unless you get a decent board in place.”
And demonstrably this company had a very poor board. And I had not spoken even to representatives of one of the companies they were trying to get to help finance the pulp mill who’d said, “Well we don’t really want to talk to this company while the present leadership is there.”
Goodness me. I mean that’s hardly in the interests of shareholders. The very company they want to bring in says they don’t want to talk to the company while those people are there.
TONY JONES: Did Perpetual accept the logic that the key to this had to be effectively the decapitation of these two key players?
GEOFFREY COUSINS: They certainly did. They even – extraordinarily – went to the point of saying to me, “Would you have any candidates for a new chairman?” And I said, “Yes.” I’d been prepared for that question strangely enough.
TONY JONES: Were they asking you?
Geoffrey Cousins
GEOFFREY COUSINS: No, they were not asking me although the question of me going on the board was raised and I said “No, that wouldn’t be appropriate. People might misunderstand my motives. Shareholders mightn’t be sure whether I was really supporting the interests of shareholders.”
And you don’t want that.
TONY JONES: I should ask you at this point – for reasons of disclosure – do you hold any Gunns’s shares or any shares in any related companies?
GEOFFREY COUSINS: I don’t hold any shares in Gunns, nor have I ever done so, nor any other related company nor in any business that provides any services or any business that’s close to them or anything of the kind, no.
No, I don’t. I never have.
My interest in this is purely – as I think I said to you the very first time we ever did an interview on this was with you, Tony, three and a half odd years ago. And so I said to you my interests were twofold – one from a great love of Tasmania and secondly from a deep interest in the environment and the damage that that particular project might do.
It has now gone way beyond that though. These discussions that we were having were way beyond the pulp mill. They were going to the general forest policy practices in Australia.
TONY JONES: So the fundamental underpinning of the company and the fundamental underpinnings of the decades long fight between environmentalists and loggers in Tasmania?
GEOFFREY COUSINS: Absolutely. And as I say the shareholders sat there and said, “No, this wouldn’t have any negative impact on the share price, on shareholders interests.” And I put to them the case that there is plenty of evidence from around the world that if you take two companies with precisely the same amount of income and profit – one with a bad corporate reputation and another with a good corporate reputation – even though the financials are the same the shareholder value attributed the the one with the good corporate reputation is always way above that of the one with the poor reputation.
TONY JONES: This is a big move for conservative Australian institutional investors. Big moves like this have happened overseas but not here. Did it happen? Did they go through with it?
TONY JONES: Not quite. Not quite. They promised me they were prepared to call an extraordinary general meeting. And indeed they told the board of the company they were prepared to do that. For one reason or another, when it came to the crunch they backed away and we had to use other methods.
TONY JONES: Perpetual bottled it effectively, did they?
GEOFFREY COUSINS: They did. They did. And I think that…
TONY JONES: Disappointing?
GEOFFREY COUSINS: Disappointing and I think very disappointing for their investors because you know when they talk about their shareholding they are of course merely holding shares on behalf of people in pension funds, retirees and you know – the widows and orphans.
And they have cost then a lot of money by what they did.
If they had acted quickly and they had affected this and they had got the support of all the people that we said we could get support from, the share price would have gone up. It did in fact go up after we finally got rid of those two people.
TONY JONES: Were- Those two people included John Gay of course, who was this key figure for such a long time in the company. Did you hear from him at all during this process? Because he must have gotten wind of these moves against him.
GEOFFREY COUSINS: Well, he not only got wind of them, he came out in the press and said he would never go. And he had never called me. Through all of those years he had never made any contact with me until finally it got to the point where he saw he had a real problem and his self interest was at stake rather than the interests of the company. And then he rang me.
TONY JONES: What did he say?
GEOFFREY COUSINS: Well I got his life story which was deeply fascinating. But after we got through that basically he was saying if only he could meet me face to face he was sure he could convince me of his case.
And I said I’d be very happy to meet him but the point I would want to discuss was the speed of his resignation from anything to do with the company. Strangely he never arranged a meeting.
TONY JONES: That’s not so strange when you think about it. But what were the Wilderness Society and you and others offering the company on the other side of the equation. If they could deliver these changes, these fundamental changes, what was being offered up to them?
An end? A truce or an end to the war between loggers and environmentalists?
GEOFFREY COUSINS: Way beyond a truce because I don’t think that’s a productive thing.
That’s just saying “We’ll cease being critical.” If you want the support of people you have to be forthcoming and you have to put aside any ideological niceties that you might have and be practical about it.
And I think- In fact the shareholders said “Well the Wilderness Society will never change their minds. They’re just ideologues and they’re going to attack any forestry company. It doesn’t matter what they do.”
That was not the case. The Wilderness Society were entirely professional. They put their case, they said “if you get FSC certification, if you agree not to log the high conservation areas” – things of this kind – “if the mill can be re looked at and can be a totally chlorine free mill” – all the things we talked about early in the piece – “we will say this is positive, we will move to help you get what is called a social licence to operate.”
TONY JONES: That’s the Wilderness Society. What about the Greens? What about Bob Brown in particular?
GEOFFREY COUSINS: Well look, I didn’t have any discussions with the party but Bob and I have talked really from day one on this matter. I spoke to him, of course I did.
I said to him, “Bob, if all of this happens… Again, you might have had pretty strong feelings about this over the years. We have all got to be fair and come out and applaud this kind of action if it takes place.” And Bob has always responded and said yes.
I remember saying to him “If Malcolm Turnbull makes the right decision,” years ago, “you’ve got to come and stand in the middle of Woollahra and say congratulations even though you might have to bite your tongue.”
And Bob said, “No problem. I’m there.”
TONY JONES: What is the moral of this story? Because here’s an action that has achieved something.
I suppose the Wilderness Society and others could argue that it only led up to this point, the years of confrontation lead up to this point, made it possible. But in the end this wasn’t governments, this wasn’t protests in the streets or people tying themselves to trees that caused the biggest change.
GEOFFREY COUSINS: Isn’t it amazing that we are going to get now all these changes – changes the politician have never been able to effect, haven’t even wanted to do. And to me it is a fantastic example of the fact that activism, if it is pursued in the right way – not just being silly and criticising people for the sake of it – can be much more effective than politics.
And I think this is something that’s growing all around the world. People are beginning to understand politicians are there for awhile. They don’t really have consistent points of view over any long period of time. They come and go and change their points of view quite frankly on what they think is going to get them re elected.
So if you want real fundamental change you probably need to take matters into your own hands so long as you do it responsibly and intelligently. And I think… You know, I’m enormously encouraged by what has happened here. I’ve learnt a lot through this process. I didn’t ever think we’d quite get to where we have got.
It has been a most interesting experience.
TONY JONES: You got into it to stop the pulp mill and I just heard you say a moment ago that possibly some form of pulp mill might still be acceptable, might now be acceptable. Is that the case? Is there a clean pulp mill that exists somewhere in the world that the Greens would accept, that the Wilderness Society would accept and that you would accept?
GEOFFREY COUSINS: Absolutely of course there is. It would be a ridiculous point of view to say you are just opposed to pulp mills per say.
One of the companies that Gunns had been talking to – Sodra – a very good operator of pulp mills in Europe. They only operate totally chlorine free mills. They use SFC timber, they adhere to all kinds of excellent standards.
If they were to build a mill of that kind in Tasmania that would be great.
TONY JONES: But why hasn’t that been the focus of everybody’s attention through this entire process? Because if only someone had said, “let’s build the cleanest mill in the world,” then maybe you wouldn’t have had this confrontation in the first place.
GEOFFREY COUSINS: No, and you know, the Australian Government at the time came out and said, “This is going to be world’s best practice.” The Opposition didn’t question that.
This company has said to me directly, Sodra, they have said through a representative, they wouldn’t build a mill to the standards that the Australian Government approved. They are just not good enough.
That’s the level of our politics. It is a pretty shameful thing and as I say, it’s taken the efforts of a lot of people, many of whom have been involved in these issues an awful lot longer than I have, to get this done where the politicians turned their backs on it.
TONY JONES: What is the issue? What is at stake? Is it just money that stops this from happening? Is it some intransigence for some other reason?
GEOFFREY COUSINS: Yes, look in this case it was intransigence for some other reason. There is no doubt about that because the fact is Gunns doesn’t have any future unless it can move into this kind of area.
It is now in a position where a lot of people don’t want to fund this company.
They can do what they like but there are some responsible banks who don’t want to have anything to do with them. They don’t want to get involved with a company like this. So they are going to need to change and I think now the shareholders and hopefully the board can see this, whereas the previous people, particularly John Gay, just could not bring himself to say, “I was wrong, I have got to change.”
I have seen people like that before and the answer is, “Well, move on.”
TONY JONES: Well we are going to have to move on as well.
That’s a perfect book end for the interview that we did back in 2007.
GEOFFREY COUSINS: Yes.
TONY JONES: It’s very interesting to hear – fascinating, in fact – to hear the inside detail of how all this happened in recent months.
We thank you very much for taking the time to join us tonight.
GEOFFREY COUSINS: Pleasure.
And,
Community consultation the way forward: Gunns
Reporter: Hamish Fitzsimmons
The Wilderness Society’s campaigning against the practices of timber giant Gunns has seen the company begin to restructure its community consultation and corporate responsibility processes after shareholders sold off shares.
TONY JONES, PRESENTER: When it comes to forestry in Tasmania there’s no name bigger than Gunns.
The company employs almost 2000 people in the state and, under the leadership of its former CEO and chairman John Gay, was known for its confrontational attitude towards its critics.
But Mr Gay resigned suddenly from the board last month after shareholders dumped Gunns shares in protest over the way the company has been run.
Now there are signs of a truce between conservationists and loggers.
The company still has the unresolved issue of the controversial pulp mill, which is on hold while Gunns tries to lock in finance and deals with environmental concerns.
Hamish Fitzsimmons reports from Tasmania.
HAMISH FITZSIMMONS, REPORTER: These are the magnificent forests of Tasmania that have divided local communities for decades.
The battle between loggers and conservationists in the state has regularly been marked by confrontations, with timber giant Gunns limited often the focus. But recently there’s been a change of tack and the boardroom has become an unexpected new battle ground.
The Wilderness Society directly lobbied Japanese buyers and Gunns shareholders to demand they boycott Gunns products unless the company became more environmentally responsible and changed its board and management.
PAUL OOSTING, WILDERNESS SOCIETY: We’ve been working co operatively with Gunns major shareholders in trying to put in place the parameters to allow that company to find a new way of doing business in line with market expectations and community expectations.
HAMISH FITZSIMMONS: Saying “working with co operatively with shareholders” is almost sugar coating it in a way. You’ve been lobbying to make them force change at Gunns, isn that right?
PAUL OOSTING: Well, that’s true. We have absolutely felt that the governance of Gunns needs serious reform. The major shareholders have now taken that step which is a very positive thing in our view and it’s also been reflected in the market as we’ve seen Gunns’ share price bouncing in recent days.
HAMISH FITZSIMMONS: At the end of May the man who’d built Gunns from a small business into a huge corporation, John Gay, resigned from the board as institutional shareholders exercised their desire for change, dumping shares and sending the price south.
PAUL OOSTING: People such as John Gay had taken a very divisive and conflictual approach to the community and we believed it’s in the best interests of both the industry and also the Tasmanian community and finding people that can lead the industry into the 21st century and can understand the market changes that have occurred.
HAMISH FITZSIMMONS: That divisive reputation came from John Gay’s willingness to confront his opponents in the forests and the courts.
In 2004 Gunns famously sued 20 activists including Greens leader Bob Brown, claiming they’d damaged the company through their actions. But Gunns dropped the case in 2006.
MATTHEW TORENIUS, FINANCIAL ANALYST, SHADFORTHS: I think it’s fair to say that John Gay lived and breathed the company over a number of years. He was instrumental in the development of Gunns to where it was today.
HAMISH FITZSIMMONS: Mr Gay declined to be interviewed for this story.
The man who took over from him as CEO of Gunns 12 months ago is Greg L’Estrange. He’s keen to break with the past by moving away from confrontation.
GREG L’ESTRANGE, CEO, GUNNS LTD: Communities have moved on as well and they expect greater engagement than they perhaps had in the past. And we need to be in tune with that and I think there are good foundation stones within the organisation that have been building up over a period of time that will take us in that direction.
HAMISH FITZSIMMONS: Hobart-based timber industry analyst Matthew Torenius says the changes at Gunns have come at some cost.
MATTHEW TORENIUS: In the end you’d have to say for the sake of getting that change they have been successful. It has come at quite a large cost though. We’ve seen the share price decrease from just below – around the one dollar mark to where it stands now at under 50 cents.
HAMISH FITZSIMMONS: While the Wilderness Society is claiming success, the industry is angry the environment group appeared so ready to put Tasmanian jobs on the line to get its way.
DR JULIAN AMOS, FORESTRY INDUSTRY ASSOCIATION TASMANIA: It becomes difficult when people are engaged in a process of destroying the industry for their own purposes. They don’t take into account the sustainable nature of our practices…
HAMISH FITZSIMMONS: Julian Amos from the forest industry association says improvements in the industry have been ignored.
DR JULIAN AMOS: We’re not in a carte blanche, going in raping and pillaging the environment. It’s not that at all. I know that’s the general view within the Australian community but it’s just not the reality.
HAMISH FITZSIMMONS: One of the biggest changes Gunns is facing is the move to forest stewardship certification or FSC which requires strong community consultation.
MICHAEL SPENCER, FSC AUSTRALIA: It’s about industry, it’s about unions and it’s about environment groups sharing a vision for the industry.
HAMISH FITZSIMMONS: An international body, FSC involvement emerged after the Wilderness Society lobbied investors and is now being demanded by Japanese buyers of pulp.
GREG L’ESTRANGE: We’ve said with some of our customers we’ll recognise the high conservation areas as defined by the Wilderness Society. And until this issue is resolved we will not for example use that product for export to our Japanese customers.
HAMISH FITZSIMMONS: And already the international code is having an impact on the Japanese.
MICHAEL SPENCER: So instead of just discriminating on the basis of price they started to be very clear they were going to discriminate about the environmental credentials of the woodchip they were buying. and that had major implications, as we’ve seen, for Tasmania.
HAMISH FITZSIMMONS: Gunns has also recognised the need to value-add in Tasmania. But it’s plans for a pulp mill in the Tamar Valley have come to a standstill because of uncertainty over finance and environmental concerns.
MATTHEW TORENIUS: Unfortunately though for Gunns at the moment that seems to be more of a long term goal. The short term goal at the moment is to restructure the business, the sale of non core assets.
HAMISH FITZSIMMONS: Greg L’Estrange believes the pulp mill will be world class in its environmental standards but admits the original consultation process was flawed and led to misunderstandings.
GREG L’ESTRANGE: Leading people through the emotional side of how they work through to the right- to that conclusion, we could have done differently. We could have done that better. And there’s some engagement, we need to sit down and work through those issues with some of the people who still have concerns.
HAMISH FITZSIMMONS: While Greg L’Estrange stresses Gunns’ new style is one of engagement rather than confrontation, for some in the community the jury is still out.
Hamish Fitzsimmons, Lateline.
And, No action over forestry burns
TASMANIA’S environment watchdog has dropped action against Forestry Tasmania and Gunns over forestry burns.
But the Environment Protection Authority said it and the Forest Practices Authority would review the impact of smoke from burns.
EPA director Warren Jones said it would examine the very high smoke levels in the Huon Valley and Burnie areas, which concerned health authorities in April.
Mr Jones said the levels of fine particulate matter the most damaging to health were “clearly unacceptable”.
“The EPA has consulted with the Office of the Director of Public Prosecutions and I have formed the view that it is very unlikely that a successful case could be mounted,” Mr Jones said.
Big rise in spin doctors queried
MICHAEL STEDMAN
June 11, 2010 02:00am
THE number of ministerial advisers in Tasmanian political offices has increased by a massive 82 per cent since 1991.
Auditor-General Mike Blake looked at staffing levels in state ministerial and opposition offices as part of his inquiry into the employment of family members in political offices.
Mr Blake said he became aware of the increase in unelected staffers and their responsibilities when working on an audit of the Tasmanian Education Foundation that found key decisions were made by advisers, not ministers.
Despite advisers’ high levels of responsibilities, Mr Blake said the recruitment for ministerial staff was less rigorous than it was for the public sector.
He said this may not be appropriate.
His report follows a four-month $46,000 internal probe into staffing levels in ministerial offices conducted by former senior public servant Michael Clarke in 2008.
Mr Clarke’s report recommended six months ago that the State Government crack down on employing family members because of perceptions that nepotism was rife.
Mr Blake endorsed Mr Clarke’s findings that: “Recruitment of suitable staff on a merit-based, publicly advertised system is an essential first step to improve and maintain the quality and performance of ministerial staff.”
Mr Blake found Government staffers had increased from 66 in 1990-91 to 123 in 2007-08.
Staff in Opposition offices increased from 16 to 26 over the same period.
The audit listed a number of potential explanations for the staffing increase such as the reduction in the size of Parliament, more complex business, legal and social environment, higher levels of regulation, increased media scrutiny.
He called on all parties to work together to agree on appropriate staffing levels.
He advocated a proportional formula for setting staffing levels in opposition offices, similar to the Commonwealth’s level of 21 per cent.
The article that started it all: Gunns: Out of Control, HERE