Last of the mutuals and shareholder's champion, Nick Whitlam
by Kerry Ans A majority of members of the NSW National Roads and Motorists' Association (NRMA) recently voted to de-mutualise their organisation. How does one explain the very determined push by the chair of the NRMA, Nick Whitlam, to ensure the de-mutualisation goes ahead after an unsuccessful first attempt? What did he get out of it? Why will the shareholder class benefit from yet another float of a mutual organisation on the stock exchange? Whitlam's base annual salary package, as chair of NRMA, of $105,000 in 1998 grew by leaps and bounds to $524,000 by April 2000. Does this 500 percent increase reflect bonuses for vast productivity improvements? Did the NRMA hit oil while prospecting for more roads? No, it reflects the sort of pay-outs that those who "chair" the restructuring of large organisations pay themselves these days. Whitlam gained the increases from the following sources: * payment of $105,000 for the non-executive chair of SGIO (bought by NRMA in late 1998); * $80,000 for the non-executive chair fees for a building society NRMA purchased from MLC; * $72,000 for the chair of NRMA's "Project Outlook" (the de-mutualisation committee); * $72,000 for the chair of the diligence committee (whatever that is!); and * $90,000 for overseeing the merger of the Royal Automobile Club of Victoria and the NRMA insurance operations. All these mergers and buy-outs were designed to set the NRMA up for its eventual float on the stock exchange. Mutual organisations, owned by the members (credit unions are the few remaining examples) return any gains to the membership. In the case of the NRMA these benefits used to be paid as lower insurance premiums to members, and as services, the most valued of which was the world class vehicle road-side service. Since the takeover a few years ago of the NRMA board by the merchant banker and stockholder class, the organisation has been readied for de- mutualisation. Inspection stations closed The road-side service (previously subsidised by the insurance arm) has been restructured, with many suburban inspection stations closed. This means the quality of vehicle inspections is no longer uniform, since there are significantly fewer inspection stations offering hoist facilities. The lower vehicle insurance premiums, which acted to contain levels across the industry, have gone up, to the glee of the other private insurance companies. Seduced Now that the required proportion of the membership has been seduced to vote for de-mutualisation (by way of a bribe of free shares), and the float will go ahead soon, any benefits will now go to the shareholders. Whilst the likes of Howard and Whitlam will claim these are the "mums and dads" of Australia, history shows that within a couple of years many of their shares will have found their way into the hands of bigger investors. The driving force for the NRMA insurance group and the road service group (given that this group will get 20 percent of the shares as its major source of income), will become dividends, not mutual benefits, as was formerly the case. The NRMA de-mutualisation follows on from others, like the AMP, and joins the rank of privatisations (Qantas, Commonwealth Bank, NSW GIO, Telstra) which have delivered huge salary pay-outs to the individuals who readied them for sale with future profits to big shareholders. Some of the privatisations haven't delivered much to the ordinary users of the enterprises. Fuelling ASX transactions These sorts of floats have fuelled the record number of daily transactions now taking place on the Australian Stock Exchange (ASX). The average number of daily transactions increased 70 percent in the past year. The Howard Government's halving of the capital gains tax will fuel further demand for stocks. On June 30, the day's trading volume reached a record of 102,363 trades, worth $4.16 billion. In the year to June 30, $115 billion was added to the value of shares traded on the ASX. Many of the small NRMA shareholders who need cash rather than a share certificate are also bought out, perhaps at a small profit, often at a loss. In the long run the stock exchange serves as a mechanism for a small group of wealthy individuals and professional money managers, acting as agents for the ruling class, to assert ownership and control over a significant proportion of the productive enterprises in an economy. Nick Whitlam has done his bit! Watch the Honours List!