ACTING CHAIR—I call the committee to order and I welcome the officers from ASIC. Mr Cooper, do you wish to make an opening statement?

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Mr Cooper—I have just a few very short remarks, if I may. Firstly, in his absence, I congratulate the chairman on his recent appointment to this committee, and reflect on the very positive relationship we used to have with the last chairman, Senator George Brandis. We look forward to having a similar constructive and productive relationship with this chairman.

I need to explain that our chairman, Mr Lucy, is at the moment still in Sydney dealing with a major enforcement matter that is currently upon us. Also, he has just returned from the UK and has a rather severe head cold, and has been advised not to fly. We pass on Mr Lucy’s apologies to the committee for his inability to attend this afternoon’s hearing. All the questions concerning ASIC will be dealt with by me as deputy chairman and by our newly appointed commissioner, Tony D’Aloisio. This is Mr D’Aloisio’s first appearance for ASIC before the Senate economics committee, and I am particularly pleased to introduce him to the committee. As you probably all well know, Commissioner D’Aloisio brings a business and legal background to the committee. He was a former chief managing partner at the law firm Mallesons Stephen Jaques and was most recently managing director and CEO of the Australian Stock Exchange, now the Australian Securities Exchange. Beyond that I do not want to make any further opening statements.

Senator JOYCE—Surely the $300 million that is anticipated to head towards the directors would hardly make them impartial advocates. That would certainly have to call into question their partiality once that sort of money is on the table for them to pick up.

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Mr Cooper—Let us accept for the purposes of this discussion that that is right.

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Senator JOYCE—I would not trust my vote if there was $300 million on the table.

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Mr Cooper—We might all be in that category. But let us accept that that is so. I think the arrangements that Qantas has entered into have meant that those people who are receiving those payments are not participating in the decision making. That is the whole point.

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Senator JOYCE—Surely they are in a position where they have some influence—quite obviously they are jumping over bindi-eyes to try to make it happen.

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Mr Cooper—I would not speculate on that. I think from what ASIC sees, the non-executive directors have been well aware of those issues and have dealt with them as best they can. What has to be remembered about Qantas is that this is a bid that has turned up on its doorstep. This is not something that has been designed internally or what have you. It has to be remembered that this bid has come from an external party. Qantas, as far as we can see, had done the best it can to deal with what is obviously potential or actual conflict.

Senator JOYCE—$300 million would be the market capitalisation of the bottom third of the stock market, and this has been offered to the directors.

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Mr Cooper—To some of management. We need to not say it has been offered to the directors; that is not right.

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Senator JOYCE—It has been offered to directors and other people—sorry. It includes the directors.

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Senator WATSON—This leads into my next question. Although the directors perceive their main responsibility is to increase wealth—and I do not deny that—does ASIC interpret this concept to be in the very short term and in relation to some unusual circumstances, or does ASIC perceive it to be in the longer term where, for example, a restructured Qantas will be saddled with a 70 per cent debt exposure, operating in an environment where external factors such as terrorism and SARS can have a dramatic effect on passenger loadings. What is your interpretation? Is it the short term, where you can take advantage of a particular set of circumstances—artificially, maybe contrived for a number of reasons—or do you take a longer view of the stability of the airline and directors’ responsibility for the long term? Directors obviously have accepted a situation where they are prepared to allow Qantas to move into a situation of a 70 per cent debt exposure. That is making it a far more fragile operation compared with what it is now. Are the directors under those circumstances, in your view, exercising their responsibility correctly and in accordance with what we understand the law to be?

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Senator JOYCE—Stewardship.

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Mr D’Aloisio—The market and companies operate in different ways, and it is not ASIC’s role to be setting prescriptive debt-equity levels for companies. While we work within a regulatory framework that pushes disclosure and transparency and makes sure that the directors comply with their duties, it is not our role to dictate to the market how they structure bids and how bids occur, unless we can see some real regulatory issue. The issues you are raising are policy matters for government.

Senator JOYCE—This is related to an article I read by Senator Murray: can you clearly spell out how your investigative powers will change once this company becomes privatised, as opposed to a public company?

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Mr Cooper—There would be absolutely no change to our investigative powers. The entity will remain a corporation. If we suspect a contravention of any of the laws that we administer, our powers are exactly the same.

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Senator JOYCE—It would stand to reason that, as the public, we are not going to be able to observe share changes. Is it possible that behind the scenes, the day after it is privatised, for someone to say to what I call ‘off-paper interests’, ‘I’ll tell you what, Texas Pacific, I’ll let you run the show. My interest in this company will be nominal. You drive it and we can work out some agreement at some point in time that you will relieve me of my shares at this price’? How would you know about that? It would be done over a cup of coffee. It would have nothing to do with you.

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Mr Cooper—There are many private businesses where the intrusion of the change of control provisions in the Corporations Act, which I think is where you are heading—

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Senator JOYCE—What I am saying is, firstly, you cannot get away from it because you have a publicly traded share; you have to go to a public market for it to be traded. But in this instance it is not a publicly traded share, it is a share that is traded on an agreement between you and me at a certain point in time.

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Mr Cooper—Whatever structure is adopted in relation to Qantas it remains the fact that it operates in a highly regulated industry. It remains subject to the Qantas Sale Act, which restricts the level of foreign ownership.

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Senator JOYCE—That is on the nominal share. It does not talk about inferences that go off shares. We know in every company that all the time there are inferences off shares. In my experience, you could be talking to the 10 per cent shareholder, but he actually runs the show. Other people are passive and it is an agreement that they have worked out that the direction of the company comes from this particular person.

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Mr D’Aloisio—But how does that differ between public and private?

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Senator JOYCE—Because