EXCHANGE Autumn / Winter 2016 by The Faculty of Business and Economics, The University of Melbourne

AUTUMN/W INTER EDITION 2016

02 H ow has Australian leadership changed in 20 years?

12 COVER STORY: Accountants help business go green

20 C an women have it all?

Business and Economics at the University of Melbourne fbe.unimelb.edu.au/exchange

30 Corporate pay, and the power to manipulate

AT UM N/ W IN TER EDITION 2016

FROM OUR DEANS 2

Do Australian business leaders have what it takes?

It’s time to disrupt your own industry

In focus: Human Resources

Personal space: Where social media natives draw the line

COVER STORY – Accounting collides with botany

Workplace diversity: Gender

Business as usual is not good enough

Why women are still doing it all

Gendered toy marketing

Melbourne Institute Outlook Conference

The next recession we have to have

Corporate pay, and the power to manipulate

HIV treatment: An anti-depressant driving economic growth

Is home ownership becoming a pipe dream?

A leaner bill of health

Trading in the dark

When delinquency is a career choice

Online corporate finance specialisation

Australian Undergraduate Business Case Competition

Industry partnerships accelerate future leaders

Melbourne Foundation for Business and Economics Dinner

Coordinating Editor: Niamh Cremins, Sub-editor: Clare Barry, Mediaxpress. Photography: UACreative, Chris Hopkins, Matthew Lynn, B.A. Van Sise, Les O’Rourke, Justin Cooper, Ryuhei Tsukamoto, Samantha Ann Francis, Angus Porter Photography, Macro Team.

Welcome to the second issue of EXCHANGE – the Faculty of Business and Economics magazine. The breadth and scope of business and economics research continues to expand with critical international and inter-disciplinary collaborations. We have defined three research themes under which the Faculty delivers analysis and groundbreaking research – decision making and markets, health and wellbeing, and corporate governance. We have grouped research articles by these themes and other articles by topic to help you navigate the stories of interest to you.

Professor Paul Kofman Dean, Faculty of Business and Economics Sidney Myer Chair of Commerce

In this issue, we present the initial findings from SAL, the largest survey of Australian leadership in 20 years, and unpack the social and economic implications of gender equality in the workplace in a special diversity feature. Our cover story tracks the progress of the innovative inter-disciplinary research initiative between accounting and botany, in partnership with Chartered Accountants Australia New Zealand (CA ANZ), to help business go green. The Outlook Conference, hosted by the Melbourne Institute and The Australian in October 2015, encouraged interesting economic and social debate among policy makers, practitioners and researchers. Here you can read about some of the highlights. Also from the Melbourne Institute, new research by Guay Lim and Sam Tsiaplias suggests that the Australian dream of home ownership could be a pipe dream and Anthony Scott analyses the economics of the health care system. Alumnus and Chief Economist at the Australian Institute of Company Directors, Stephen Walters, says that a recession in Australia is inevitable, and Hillan Klein, recipient of the alumni of distinction rising star award, talks new technology and business disruption. Carole Comerton-Forde provides insight into the world of dark trading, and Shannon Ward discusses research which, for the first time, links delinquency to education participation.

Professor Zeger Degraeve Dean, Faculty of Business and Economics Dean, Melbourne Business School

Later this year, the University of Melbourne will host the Australian Undergraduate Business Case Competition, with participants from all over the world. Find out what to expect from Bachelor of Commerce student Laura Foo’s coverage of the 2015 competition in Sydney. These are just some of our outstanding researchers, alumni and students. For exclusive online content visit fbe.unimelb.edu.au/exchange or subscribe for monthly updates.

DECISION MAKING AND MARKETS — Research

DO AUSTRALIAN BUSINESS LEADERS HAVE WHAT IT TAKES?

Joshua Healy and Andrew Bevitt

The largest survey of Australian business leadership in 20 years reveals that only 57 per cent of workplaces are achieving their profit targets. The Study of Australian Leadership (SAL) also found that executive managers are over-confident in their leadership ability.

Australian businesses are facing unprecedented levels of change that will only continue to escalate. From the shift of global economic power to Asia, to intensifying disruption from technology, as well as key demographic and cultural changes, business as it exists today will be almost unrecognisable in as little as 10 years. In the face of this, what do Australia’s business leaders think are the critical challenges for their organisations? How well equipped are they to respond to the emerging challenges? Which aspects of their businesses are doing well, which are lagging, and do these differences in performance reflect leaders’ own practices and capabilities? The Study of Australian Leadership (SAL) provides answers to these and many other questions about business leadership and performance in Australia today. Conceived by the University of Melbourne’s Centre for Workplace Leadership (CWL), and supported by the Australian Government’s Department of Employment, SAL is the most comprehensive study of Australian leadership since the 1995 Karpin Report, and one of the largest studies of its kind in the world.

A mixed bag of workplace performance SAL shows some surprising differences in workplace performance. We asked workplace managers whether or not they were meeting their performance targets, ranging from sales and profits to customer satisfaction and employee turnover.

Figure 1 – Workplace performance is mixed

A total of 97 per cent of Australian workplace managers said they were meeting or exceeding their target for customer satisfaction. However, only two-thirds of managers (66 per cent) thought their workplace was meeting its sales target. Satisfying customers thus does not necessarily translate to success in the bottom line. Even fewer Australian workplaces (57 per cent) are meeting their profit targets. The news is better when it comes to employment relations and HR practices. Most managers (more than 80 per cent) are happy with their workplace’s performance in the areas of labour productivity, wage costs and absenteeism. So it seems that the reasons for under-performance in relation to sales and profits are not found in mismanagement of customers or employees. It may be that targets for sales and profits have simply been set too high in a difficult economy.

CUSTOMER SATISFACTION 97%

LABOUR TURNOVER 88%

ABSENTEEISM 85%

LABOUR PRODUCTIVITY 84%

UNIT LABOUR COSTS 81%

TOTAL COSTS 78%

VOLUME OF SALES 66%

PROFITS 57%

RETURN ON INVESTMENT 57%

Figures are percentages of Australian workplaces that were meeting or exceeding their performance targets. Workplaces that did not have a particular target were excluded (eg public-sector workplaces that did not measure profit).

Watching me, watching you – views from the top to the coal face Much is known about the Australian employee workforce, but little information is available about business managers. We have collected detailed information about how managers across the Australian economy view their responsibilities and go about their work. We investigate all levels of employees from CEOs through to front-line staff, as well as non-supervisory employees, providing an advanced perspective on the organisation and a check on managers’ claims. Combined with detailed evidence on firm performance – hard numbers about income, expenditure and profits – SAL provides unique insights into the relationship between leadership, culture and performance. Our sample included 2500 senior workplace managers and almost 4500 of their employees across a broad base of industry sectors and a mix of workplace sizes. This breadth allows comparisons between different types of workplaces, and will eventually enable us to develop benchmarks for high performance.

4.5

Any leadership programs No leadership program

Figure 4 – Mixed effects of leadership development

4.0

Back to basics: Good communication counts

Workplace Managers Frontline Managers Employees 3.4

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3.5

A key finding of the 1995 Karpin Report was that a few fundamental management practices go a long way to improving the effectiveness of leaders and their impact on performance. Twenty years later, we find that the leadership fundamentals, in particular communication, still matter.

CEOs of Multi-site Organisations

3.8

4.0

4.2

Figure 2 – Employees’ perceptions of leaders versus leaders’ self-ratings Figures are mean scores, measured on a five-point scale from 1 (Strongly disagree) to 5 (Strongly agree). Higher scores indicate more favourable perceptions of leaders.

Take me to your leader, or maybe not Just as managers’ perceptions of workplace performance are mixed, so too are the perceptions of leaders themselves. CEOs, workplace managers and frontline managers were asked to assess their own effectiveness at direction setting, gaining commitment and overcoming obstacles, which when combined equate to a ‘leader self-efficacy’ score. Employees also rated their leaders’ effectiveness. There is a clear positive association between respondents’ seniority and their average assessments of leaders. CEOs have the highest self-ratings (mean of 4.14). Frontline managers are significantly less confident in their own leadership capabilities (mean of 3.87), but this may be a result of differences in job tenure and experience. More concerning is that non-supervisory employees reported the lowest ratings of leaders (mean of 3.67).

Only senior managers

3.5

3.6

3.7

All employees

3.73 0

Figure 3 – Good communication counts The figure divides all Australian workplaces into four categories, according to how widely communicated the workplace’s performance targets are. The bottom axis shows the proportion of all workplaces in each category. The top axis shows the mean performance of workplaces in each category, on a five-point scale from 1 (Well below average) to 5 (Well above average). To measure performance, we asked managers: “Compared to other workplaces in the same industry, how would you rate your workplace’s [performance]?”

Leader Meeting self-efficacy workplace targets

SAL provides a unique national resource for business leaders, governments and researchers. It gives a new perspective on the role of leaders, the challenges facing Australian workplaces today, and the drivers of high performance. Most importantly, it provides opportunities for benchmarking, learning and developing strategies that will lead to higher future performance.

• For workplace managers: Consider how your

Employee engagement

own workplace stacks up. How many of your performance targets do you meet? How widely are these objectives known throughout your organisation? Do you offer leadership development training – and if so, does it deliver better performance outcomes where it counts?

Can you learn to be a better leader? We have seen that ratings of leaders are lower among non-leaders, and that better communication is related to better performance. So what can be done to bridge the gap in perceptions, and to give leaders the skills and understanding they need to be more effective?

3.65

3.73

2.5

3.8

Managers and most employees

Learning from SAL

Here are some ways to engage further with the SAL findings, depending on your role:

3.49

Managers and some employees

Employees consistently saw their managers as less effective at things like information sharing and gaining commitment than those managers typically perceived themselves. For instance, while 84 per cent of frontline managers believe they are effective in gaining employee commitment, only 50 per cent of non-supervisory employees agree that their manager involves them in decision making. Many Australian workplaces appear to have this sort of ‘perception gap’ between what managers see and what employees experience day to day.

3.0

In general, the more employees in a workplace who know about the designated targets, the better the performance of that workplace within its industry. For instance, in 21 per cent of Australian workplaces, performance targets are known only to senior managers. These workplaces have the lowest average performance, when measured on a five-point scale from 1 (well below average) to 5 (well above average). Compare this to the 34 per cent of workplaces in which performance targets are known to all employees and have the highest average performance on the same five-point scale. Communication within workplaces is still critical for performance. The best-performing workplaces are those in which the targets are widely known.

3.4

Figures are mean scores, comparing workplaces with leadership programs to workplaces without leadership programs. The sample is senior workplace managers from larger, multi-site organisations. Higher scores indicate more favourable results.

• For aspiring managers and business owners:

Discover the main challenges and opportunities in your chosen industry. What are your potential competitors doing well, and where are they falling down? What would you offer or do differently to attract customers and employees?

One obvious route is through more, and better types of leadership development programs, such as leadership qualifications, seminars and workshops, and executive coaching. We surveyed larger, multi-site organisations about their leadership development programs and found that 86 per cent had at least one type of program. Their direct impacts on workplace performance, however, appear to be weak.

• For policymakers: Learn about the critical

We compared three performance outcomes – self-efficacy, workplace targets, and employee engagement – for workplaces that did and did not offer any form of leadership development. We find that leaders evaluate their own performance more highly when leadership development opportunities are available than when they are not. Leaders thus personally believe that they benefit from taking part in leadership training. The impact on other workplace performance outcomes, however, is less encouraging. The workplaces with leadership programs are not more likely to be meeting or exceeding their targets (there is a small difference, but it is not statistically significant). Nor do we find significant evidence that employee engagement is higher in workplaces that offer leadership development programs. Current leadership development practices in Australian workplaces thus seem beneficial for leaders, but ambiguous in their payoffs for workplace performance and employee engagement. Perhaps this signals that different approaches to leadership development are needed. Doing ‘more of the same’ does not seem likely to deliver the productivity dividend that Australian workplaces need.

challenges facing Australian businesses. How much do these concerns overlap with government priorities? What else could governments do to cultivate a better business climate or eliminate some of the perceived barriers to success?

• For researchers: Help us to build the evidence

base from SAL. Our first findings report offers a glimpse of the key results, but there are many more analytical possibilities to explore. The SAL data will be made available in a confidential format to approved academic researchers.

Josh Healy is a Senior Research Fellow at the University of Melbourne’s Centre for Workplace Leadership. @youralarmbells Andrew Bevitt is a Research Associate at the Centre for Workplace Leadership and a programmer and database manager at the Melbourne Institute, the University of Melbourne.

Explore SAL further workplaceleadership.com.au/sal @leadingatwork 5

FUTURE OF WORK — Comment

IT’S TIME TO DISRUPT YOUR OWN INDUSTRY Hillan Klein

The disruptive force of technology will only intensify. Harness it before your customers find a better experience elsewhere.

Technology has become a constant driver of change in every industry around the globe, with incumbent organisations often lobbying to prevent such disruption from loosening their grip on their industry. Take, for example, Uber, an application that pairs professional drivers with passengers who need a ride, through the use of a smartphone. This disruption was the result of applying current technology to an industry that had been running with little innovation or modernisation for centuries, to provide a more seamless, intuitive experience for consumers. In Melbourne, taxi drivers have gone on strike and attempted to lobby the state government to ban Uber from operating in Victoria. This is a familiar story for Uber, which has had to overcome similar battles in countless locations, including New York City, where I now live. Unfortunately for many of the dominant incumbent industry leaders, consumers are speaking with their e-wallets, through their smart phones, at whatever time is convenient for them. Traditional ways of engaging people have changed, and as more users adopt technology, we will continue to see more and more demand for technical solutions to realworld problems. As the Chief Operating Officer for Namecheap, the world’s fastest-growing domain registrar, I have witnessed this movement first hand through our customers – they ideate, define and build small businesses, then dream of success that disrupts industries and creates a better experience for their users.

Since graduating with a Master of Applied Commerce from the University of Melbourne, I have forged a career that has spanned a number of industries, with one common thread at the core – technology and its effect on consumers’ constantly evolving behaviours. While at one of Australia’s big banks, I focused on building a more intuitive and seamless user experience for customers by redesigning the bank’s website, pioneered mobile banking with the launch of the first financial services iPad application in Australia, and led the charge to establish its presence on social media channels. As part of the digital team, I focused on how technology could better enable the experience a bank can provide its customers.

Non-profit organisations are not immune from the disruptive effects of technology, as it changes the way donors engage with causes. In lieu of a seamless and intuitive way for people to identify causes relevant to them and donate on their terms, non-profits are left to battle the rise of “slactivism”, whereby potential donors achieve a sense of altruism by liking, commenting or sharing information about a cause through social channels. While awareness is important for non-profit organisations, it doesn’t fund medical research, reduce domestic abuse or provide fresh drinking water to third-world communities. Inspired to contribute to the wider community, I left the bank to launch Budge, a social gaming platform to engage millennials to donate to charity through mobile and social channels. Our goal: build an agnostic platform that allows organisations that are changing the world to focus on what they do best, while Budge enables the digital generation to contribute in a way that resonates with more meaning than traditional methods of fundraising. I strongly believe that positive disruption can enable non-profits to thrive, rather than creating a barrier, as is being observed in more competitive environments.

Technology has become agnostic toward industry and is here to stay. Irrespective of whether new application of technology comes from a large corporation or a new startup, a University of Melbourne student or a selftaught entrepreneur, any individual or organisation that can effectively build an experience that solves a problem and disrupts the status quo, can build the next Uber. Hillan Klein graduated from the University of Melbourne with a Master of Applied Commerce in 2008. He is Chief Operating Officer at Namecheap and recipient of the 2016 Alumni of Distinction Rising Star Award. @Hillank Nominations are now open for the 2017 Alumni of Distinction Awards fbe.unimelb.edu.au/alumni/awards

At Namecheap, we are active in donating and raising awareness for everybody’s right to freedom of speech online. We believe that this freedom allows people to create ideas and build platforms that connect people, simplify industries, and disrupt the antiquated, slow and fragmented experience that so many large corporations are struggling to improve. New business is about the consumer experience, allowing them to take things into their own hands, and it focuses on empowering people to get more done, in less time.

Social media, such as Facebook and Twitter, act as distribution, communication and support channels all in one. In order for an organisation to support real-time interaction with customers, it’s crucial to understand the psyche of the users on the platform, and to reorganise the way the business operates. The bank’s forward thinking and willingness to embrace technology’s impact for consumers is needed if an organisation is to grow and continue to be relevant for today’s consumers.

behavioural and strategic skills is crucial to his position, overseeing the HR functions for over 25 companies with a total of more than 3500 employees.

CORPORATE GOVERNANCE — Alumni interviews

Can you describe your role as HR Director for Rawabi Holdings? The role is very challenging because it deals with various business sizes and industries. The main challenge for me is playing the role of a true business partner in helping organisations to overcome problems. This can’t happen without solid business acumen, so I am grateful for my business degree. The most rewarding aspect is when HR is able to offer a relevant and feasible business solution that then proves successful.

IN FOCUS: HUMAN RESOURCES

How has human resources changed as a business function over the past decade?

Tessa Shaw

Managing and developing human resources is pivotal to the success of any modern organisation, and its development as an industry in its own right is increasingly acknowledged by local and global players alike. So if HR has such a prominent role to play, how should those pursuing a career in the sector prepare? I interview three of our alumni to find out more.

KATE SHAW Master of Management (Human Resources), (2013)

NAWAF DHUBAIB Master of Management (Human Resources), 2008 HR Director, Rawabi Holding, Al Khobar, Kingdom of Saudi Arabia With great foresight, Dhubaib completed his Master of Management degree in 2008 as HR began to grow as a strategic business function in Saudi Arabia. Launching his career in human resources information systems (HRIS), and then moving into a role that aligned more closely with his passion for anticipating the behaviours of people within organisations, he quickly developed a broad skill base. This combination of analytical,

Human resources management has transformed to now play a strategic role in organisations. There is an increasing expectation from HR functions to mitigate constant economic and demographic changes. The less time HR professionals spend on transactional, repetitive tasks, the more time they can spend helping businesses to succeed. In the Saudi market, HR has only gained importance in the past decade, driven mainly by the need to lower the high youth unemployment rate. The government updated the labour law to enforce employment quotas for businesses operating in Saudi Arabia, creating a big demand for HR management professionals. What are your top tips for others who wish to progress within HR? In my opinion, a true understanding of HR overlaps three disciplines: economics, psychology and sociology. The more understanding one has in all these areas, and the more exposure one can get within these disciplines, the higher the odds of success as an HR professional.

MICHELLE LEUNG

HR Coordinator, Macquarie Group, Sydney, Australia

Bachelor of Commerce (1995) and Master of Business Administration (2002)

University days still fresh in her mind, Shaw happily reminisces about the professors and classmates who enriched her learning and enabled her to build networks that span disciplines, industries and the world. “The Faculty of Business and Economics exposed me to the best practices of businesses globally, and facilitated my exchange program to Bocconi University in Milan,” says Shaw. “This international experience was one of the highlights of my course.”

HR Director, Asia Pacific, Abbott Laboratories, Singapore With an early interest in organisational behaviour, Michelle Leung has built a career in HR that has taken her from Australia to Hong Kong, Singapore and Cambodia, and back to Singapore for her current role. She says that passion, drive and hard work underpin her success, along with the self-discipline she learnt as an undergraduate.

Tell us more about your role at Macquarie Group. I am an HR coordinator supporting Macquarie’s retail group, commencing last year after completing the graduate program where I rotated into multiple areas of the HR function including employee relations, global mobility, remuneration, talent and recruitment. I enjoy advising and partnering with the business to understand and help bring our strategy to life through people-based initiatives. Why did you choose a career in human resources? I sought a career where I would be able to engage with multiple stakeholders on a daily basis and encounter a wide variety of content. I enjoy exploring the cultural landscape of an organisation and then building a strategy that helps shape culture and achieve business priorities. I particularly appreciate being able to drive initiatives that align with moral imperatives such as diversity and inclusion. I have recently worked on the design and delivery of a Diversity Champions workshop which aims to equip individuals with the skills to be able to stand up for those who are marginalised, especially in the workplace. As a strategic partner to business I have the ability to truly engage with and drive strategic priorities, contributing to business performance and the experience of people within the organisation. 8

Why did you choose to work in Singapore?

What is the biggest challenge you face in your career? The rate of change today means that it can be difficult to stay up to date, and continue to help keep the business relevant. The need to innovate quickly in a highly regulated environment is a business imperative for everyone. ‘Digital disruption’ is a term that is relevant to most industries today, and equally applies to HR. We must find ways to encourage a high-performance culture and an environment in which innovation can flourish.

Simply, I chose to work in Singapore to advance my career. In today’s global world, being restricted to one country is often career limiting. Once a career base is established, there are many more opportunities in large companies that operate from the major global business hubs. You must be mobile to take these up, sometimes in less desirable places than Singapore. How do the HR industries in Singapore and other Southeast Asian countries compare with Australia’s?

What advice would you give graduates pursuing an HR career overseas?

As Singapore is an economic hub for much of Asia (and especially developing countries around Asia), the HR discipline is governed by significantly different business and economic characteristics and cultures than apply in Australia. In developing countries, the national GDP, generally lower standards of living, underdeveloped infrastructure and business systems, and a lower average workforce age create challenges for businesses. It is harder to find suitable candidates for senior roles, especially since multinational companies are relatively new in developing countries.

First of all, be ready to take the opportunity when it presents itself. Be confident in your work experience and knowledge in the field. This kind of life experience offers a deeper insight to your capabilities as a leader and an individual. International experience is often highly valued by prospective employers because it demonstrates that a candidate is able to learn quickly and adapt into a foreign environment, which is useful when working across cultures and different functions.

HEALTH AND WELLBEING — Research

PERSONAL SPACE:

WHERE SOCIAL MEDIA NATIVES DRAW THE LINE

Susan Ainsworth and Bill Harley

Social media has blurred the already fine line between work and personal lives. In an ‘always on’ world, is privacy a thing of the past? Major advances in technology are always accompanied by claims that they herald fundamental social and economic change, either positive or negative. We are constantly confronted by headlines claiming social media is revolutionising society, from the way we shop to the way we work; that it is ushering in a ‘brave new world’. Many argue that social media has the potential to entirely change our relationship to work and employment. However, many of the issues concerning social media use in organisations are not new. They are based on the much older common law duty all employees have to act in good faith towards their employer. Legal issues concerning employee behaviour on social media, such as comments posted on personal accounts that damage an employer’s reputation, are becoming more common. So, while the issues have not changed, the media employees are using has far greater reach and potential impact. This raises important questions about the shifting boundaries of ‘work’ and ‘private’ lives, and what parts of our lives are ‘off-limits’ to employers. When an employee uses social media outside working hours, should that be considered part of their private life, or is privacy a thing of the past? We might expect that of all of us, young graduates would be comfortable with social media. These digital natives are used to being constantly online and in contact, checking their phones and posting photos and comments as soon as they wake up. We commonly assume they don’t care about privacy and accept that the lines between work and non-work will be blurred as part of being ‘always on’. The findings of our recent qualitative research on the use of social media during graduate recruitment challenge these common assumptions. We conducted interviews with young graduate jobseekers in Victoria to understand how they perceive the ways in which their online activity might affect their recruitment into graduate positions. Our concern was not with employers using social media to screen job applicants, but whether, and how, the possibility of such employer activity influenced graduates. Our respondents overwhelmingly perceived a high likelihood that employers would view their social media activity and that this would influence their chances of getting the job they wanted. Far from being unconcerned about privacy, it was of primary importance. One student said: “If they could bypass the Facebook restrictions to see everything on my wall, I’d be pretty annoyed because I want to have control over my Facebook and limit what employers see.

I don’t want them to see anything too personal.” Accessing candidates’ personal information via Facebook pages was likened by another to someone breaking into her house, not stealing anything, but looking around. Respondents were particularly worried that photos and comments they posted would be taken out of context. They argued, for example, that a photo that showed them drunk should not be taken as a reflection on their work ethic or ability. Those we interviewed wanted to draw and maintain a clear boundary between their personal and work lives. In social media this meant keeping personal and professional networks separate. They also acknowledged that the internet is a public domain and that they need to take responsibility for their digital footprint. But they agreed that is much harder to do in practice. For example, what would they do if someone more senior from work sent them a ‘friend’ request on Facebook? While they did not want to mix work and personal networks, it seemed unlikely they would be able to say no given they were graduates at the beginning of their careers. Maintaining two Facebook pages – a work page and a personal page – was one option, but considered hard to maintain. Respondents were conscious that they could not always control everything that was posted about them online. Many expressed concern that posts or photo tags made by their Facebook friends would reflect on them if seen by a prospective employer. Our results do not suggest that there has been fundamental change in perceptions of privacy or the boundaries between work and non-work lives. But it is clear that something has changed. In the workplace, as elsewhere, the impact of social media is being negotiated as people work through how to use it. In part, this reflects the inevitable lag between technological development and accepted norms around its use; ethics and law always trail behind.

We are finding our way with social media, just as we have done in the past. When the telephone was first introduced to households in America in the late 19th century, people needed instructions posted nearby on how to use it. By the early 20th century the telephone was heralded as both a revolutionary new way of building community and the mechanism that would destroy it. Of course it did neither. If this sounds familiar, it is because discussions about the impact of technology on work often gravitate to extremes. The utopian view is typically that new technologies will free workers from boring and repetitive work, enhance skill levels and increase participation in decision making. A more dystopian view is that technological change will intensify work, degrade skills and undermine employee freedom. Beyond the world of work, a similar split typically emerges, with the internet being seen as either ushering in a new era of democratic participation, individual empowerment and ground-up activism, or the kind of authoritarian surveillance society George Orwell depicted in 1984. Our research reinforces the fact that technological change rarely, if ever, follows a single pre-determined trajectory. Instead it unfolds in complex and unpredictable ways.

Rather than fundamentally changing the employment relationship, social media highlights long-standing tensions that are being played out on different platforms, albeit now in a much more public way. Susan Ainsworth is an Associate Professor in Management at the Faculty of Business and Economics, the University of Melbourne. Susan holds a Masters of Commerce and a PhD from University of Melbourne. Bill Harley is Associate Dean (Global Engagement) at the Faculty of Business and Economics, the University of Melbourne and specialises in human resource management.

COVER STORY: DECISION MAKING AND MARKETS —Research

ACCOUNTING COLLIDES WITH BOTANY Niamh Cremins

A unique collaboration between scientists and accountants will help business go green. Little did Associate Professor Brad Potter realise when he helped to establish the Melbourne Business Practicum (MBP) subject in 2010 that it would set in motion his most exciting and perhaps unusual research project yet. The research will have significant sustainability implications for individuals, organisations and, in particular, councils and governments committed to being carbon neutral by 2020. Through the MBP, students are placed with industry partners to apply their knowledge to a real-world consulting task. One of the first pilot projects saw Masters students partner with the Royal Botanic Gardens Victoria to begin a carbon audit for the gardens’ entire operations. A complex urban ecosystem, the gardens stretch the limits of existing approaches to carbon accounting, which have primarily focused on carbon emissions from energy use and transport.

Much of the research into tree carbon – the major driver of carbon accumulation in the gardens – is currently based on American data, with Australian research mainly focused on plantations. The MBP was addressing this significant knowledge gap but it became clear that approaching it from narrow, single-disciplinebased perspectives was not going to provide a complete enough exploration of the issues. A unique collaboration between scientists and accountants was born. In partnership with Chartered Accountants Australia and New Zealand (CA ANZ), the researchers were awarded an Australian Research Council (ARC) Linkage Project grant to develop a process-based model of the carbon cycle of the Royal Botanic Gardens Vicotoria and explore the best way to report this information to decision makers.

The numbers behind corporate decision making Accounting is all about information. Business stakeholders – managers, lenders, shareholders, consumers and regulators – rely on accounting information to make the decisions that drive their business, from managing operations to informing strategy.

Where does carbon go?

As the business environment evolves, stakeholders are increasingly looking beyond financial information in making decisions and seeking to understand the broader social and environmental dimensions of organisational activities. Carbon capture is an important element of greenhouse gas impact, and capturing carbon is one way to combat increasing carbon in the atmosphere. Because of the diversity of plant life and environments, the Royal Botanic Gardens Victoria provides a rich setting to help understand and model carbon uptake. The investigators seek to understand carbon accumulation of different components of the gardens, including the trees, turf and ponds. Insights gleaned from the model can be applied to other settings and all kinds of organisations to provide a more complete understanding of their greenhouse gas-related activities and inform strategic decisions.

Leaves

But the accountants couldn’t do it alone.

The science behind the numbers Stakeholders like hard numbers and reliable information, but turning trees and carbon sinks into dollar values is difficult. That’s where the botanists come in. Professor Ian Woodrow from the School of BioSciences at the University of Melbourne brings a wealth of expertise about the differences in growth rates of various tree species in different environments and, as Potter refers to them, “some very expensive toys”.

Woody debris

40%

Trunk and branches

According to Professor Woodrow this study will be one of the world’s largest measurements of urban tree growth, and a first for Australia. “You could pull numbers out of the air on Melbourne’s trees but it would be drawing on data from elsewhere or data that’s roughly estimated; it’s not well established by actual measurements.”

45%

Soil and organic matter

13% Tree roots

Associate Professor Brad Potter, Professor Ian Woodrow, and Professor Naomi Soderstrom

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AVERAGEAVERAGE RELATIVERELATIVE GROWTH RATE IN KGRATES CARBON P/A GROWTH

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Like butter and vegemite or bacon and eggs, botany and accounting are a winning combination. “Scientists have it in their DNA to be able to measure some of this stuff, but the reporting isn’t something they’re as comfortable with,” says Potter. “The reporting is more comfortable for us but we don’t do science.” And it’s not only their skills that complement each other; they actually have a lot in common. “Plants are intrinsically like an economy,” says Woodrow. “We both use ‘relative growth rate’ as our unit of measurement and in both disciplines it is denominated in percentage terms. “The fastest-growing plants, of course, are better than the fastest-growing economies,” he says with a smile. “We can have plants with a 50 per cent growth rate, but you think China is great with 7 to 8 per cent growth.”

0.06 0.05 0.04 0.03 0.02 0.01

So how does it work?

Turning information into action

For decades the gardens’ weather station has recorded weather and climate data, and the almost 6000 trees and plants have been mapped using high-resolution GPS. Most recently, dendrometers that measure tree trunk expansion in real time have been installed on selected trees. The growth is an indicator of carbon being taken out of the air, giving a comprehensive overview of how different species behave.

Professor Naomi Soderstrom, from the Faculty of Business and Economics at the University of Melbourne, specialises in environmental archival managerial accounting and corporate social responsibility. Together with Potter, she has played a significant role in exploring and reporting methods that will enable the findings of this project to support environmental sustainability at an organisational level.

Development of the Royal Botanic Gardens Victoria carbon model requires the measurement of all of the major carbon pools and fluxes. The researchers have completed growth and mass estimates for more than 1000 trees and have used this data, together with mass estimates made 25 years ago, to estimate total carbon uptake and content for the gardens’ entire tree population. They have also completed sampling of all of the lawns for soil carbon estimates, enabling them to anticipate variance in soil carbon due to slope, aspect, and proximity to trees. Similar samples have been taken for garden bed carbon, above and below ground. The final major carbon pool under investigation is the system of lakes and ponds. Researchers have just installed a series of sediment traps to estimate carbon influx, and are about to core the lake beds to estimate the amount of carbon in the presumably deep sediments.

“A unique feature of this project is the opportunity to understand the nature and extent to which this type of information affects decisions made by users,” says Professor Soderstrom. Decades of accounting research has provided evidence that if information is to be useful in decision making, then it must be ‘material’ (or important) to that decision. When information is expressed in financial terms such as revenue or cost, accounting standards tell us that the materiality of a piece of information is determined by its relative importance to the base figure (for example, an expense that is 10 per cent or more of total expenses would be deemed ‘material’). However, when information such as carbon emissions is reported in non-financial (qualitative or volumetric) terms, determining what is and is not material is more problematic.

“The gardens had the foresight to document the plant sizes, location and health 25 years ago, providing us with a solid baseline,” says Professor Woodrow. “This historic data coupled with the scope of the sampling regimes will enable fluxes to be estimated with considerable accuracy.”

0.00 EUCALYPTUS 7.9%

PINUS 4.2%

AGATHIS 5.2%

PODOCARPUS 5.1%

ARAUCARIA 3%

“Adding to this complexity is the different ways that different stakeholders determine materiality,” adds Potter. “For example, donors to an organisation prioritise social and environmental performance ahead of financial performance; however, institutional investors tend to prioritise financial factors and therein we find discrepancies in perceived materiality.” Factors such as company size or industry may also impact perceived materiality and should be considered when reporting non-financial information.

The Royal Botanic Gardens Victoria houses just about every urban tree planted elsewhere in Australia, so the data is transferable. For example, some stakeholders may judge the materiality of carbon emissions across organisations based on total emissions, while others may take the organisation’s size into account.

Once information is deemed to be material, accounting standards dictate that it must also be reliable. There are ongoing issues associated with the reliability of corporate carbon emissions disclosures, with some scepticism around organisational intentions in sustainability reporting. Research in the field tells us that stakeholders generally favour information expressed in quantitative terms, particularly when that information is closely aligned to the strategy of the organisation. Advancing our understanding of how non-financial information, such as carbon emissions, can be used in an organisational context will be vital in achieving real impact and environmental change.

The Royal Botanic Gardens Victoria houses just about every urban tree planted elsewhere in Australia, so the data is transferable. “You can predict, with great certainty, that the pine tree you plant in, for example, suburban Brunswick will grow at a certain rate and lock a certain amount of carbon,” says Woodrow.

ULMUS 1.5%

Urban forest strategies will play a significant role in achieving carbon neutrality.

Urban forest strategies will play a significant role in achieving carbon neutrality and Professor David Cantrill, Chief Botanist at the Royal Botanic Gardens Victoria, who has been instrumental in the project since its conception, wants to see all parklands adopt the model. “They [councils, governments and organisations] need to understand their ‘carbon cash flow’; understand how their carbon balance sheet is working. Generally they’ve had no idea because they’ve never needed to,” says Professor Cantrill. Chartered Accountants Australia and New Zealand (CA ANZ) agree that these tools will be invaluable in the corporate world. “Our members aren’t just in practice; they work in or provide advice to all aspects of the business sector, including planning and the built environment,” says Karen McWilliams, Leader of Policy and Thought Leadership, CA ANZ. “Progressive organisations genuinely want to be better able to measure their carbon reduction activities,” she continues. “If tools and information become available that help people make better decisions about which trees they can plant that will have greater net carbon benefit, people will want to know about it. It will make a difference.”

With this unique collaboration between accountants and botanists, and the development of a process-based model of the carbon footprint of a complex urban environment, we have the opportunity to determine the best way to measure carbon capture and report the results in more meaningful ways to decision makers. We have the opportunity to contribute significantly to a sustainable future.

We know little of the factors that shape the usefulness of nonfinancial information such as carbon emissions, and less still about the usefulness of carbon sequestration for stakeholder decision making. As our knowledge about carbon emissions, plant species and their environments grows, so too must our understanding of how carbon reporting can be designed to best deliver information that will help businesses and regulators achieve environmental sustainability.

Brad Potter is an Associate Professor in accounting, a Director of the Centre for Accounting and Industry Partnerships and co-director of the Asia Pacific Social Impact Centre. His diverse teaching experience encompasses accounting at undergraduate, postgraduate and executive level, both in Australia and overseas. Ian Woodrow is a Professor in the School of BioSciences and leader of the Plant Physiology Group. Ian undertook his BSc (Hons) at the University of Melbourne and his PhD at the University of Sheffield (UK). @iwoodrow Naomi Soderstrom is Deputy Head of Department and Professor of Management Accounting at the Faculty of Business and Economics, the University of Melbourne. She joined the Department of Accounting in 2012 and has taught on four continents.

The University of Melbourne’s Dr Jason Goodger takes lake sediment samples for carbon analysis.

DIVERSITY The workplace of the 21st century is a rapidly changing environment. While the way we work, the places where we work and how we communicate are advancing quickly with new technology and people-led innovative solutions, workplace diversity remains a global challenge. In particular, gender equality, while now a strategic objective within many organisations, continues to evade. Janine O’Flynn, Guyonne Kalb and Cordelia Fine unpack gender diversity in the workplace, looking at education, unconscious bias, gendered toy marketing, and the role of organisations and policy makers in achieving truly gender diverse workplaces.

PUBLIC LECTURE

BUSINESS AS USUAL IS NO LONGER GOOD ENOUGH Janine O’Flynn

Women’s human potential is being tapped on the cheap, or in the developing world simply denied as they come second in the fight for education.

As International Women’s Day rolled around again this year, the debate about the gender pay gap and equality in the workplace got plenty of attention. Old debates were rehashed and commentators set out strategies to deal with this seemingly intractable issue. In November last year, Australia’s first female prime minister, Julia Gillard, a proud University of Melbourne alumna, presented the Foenander lecture, an annual lecture series addressing issues in industrial relations and human resource management. Gillard chose to focus on education and equality, shining a spotlight on educational opportunities for girls and employment equality. The two, of course, are inextricably linked and help us to articulate the puzzle of gender inequality.

• Imagine that girls and women outperform men in

educational attainment but when they take their first job out of university women earn around 4 per cent less than men with the same qualification. This happens. And it amplifies throughout their working lives.

• Imagine that two people – one female, one male –

apply for a job with exactly the same CV, but when they are assessed against the job the male is judged to be more qualified. This happens. Our perceptions of merit are not objective.

Having made massive human capital investments in girls and women, we have a situation where women get paid less than men in many countries, and the gender pay gap is widening. • Imagine that students take an online class taught by

The notion of human capital was centre stage in Gillard’s lecture, positioning the transformative power of education and gender equality as vital agendas for the 21st century.

Julia Gillard presents the Foenander lecture at the University of Melbourne

Women’s human potential is being tapped, but on the cheap, and the barriers that women confront in the workplace have moved from predominantly structural, to cultural. Many have written on the power of unconscious bias – the prejudices we hold but may not even be aware we are enacting. The examples of unconscious bias drawn by Gillard in her lecture made many of us in the audience pause and reflect on our own actions. Consider the following scenarios.

In the developing world, where Gillard’s current work is concerned with the educational opportunities afforded to girls, a strong global narrative has emerged. Educating girls can help drive development through investment in human capital. And increasing education has a range of positive social and democratic effects. Millions upon millions of young people do not have access to education – around 124 million who should be in primary and lower-secondary schooling, or 250 million if you factor in those with access to education that is of such poor quality that even basic literacy and numeracy benchmarks are not met. Of the 59 million young people not in primary school, around 31 million are girls. Let those numbers sink in for a moment. If we placed all these young people together they would form the fifthmost-populous country in the world. What we also know is that it will take decades to address this issue and that girls will be the last to get access to educational opportunities. The scale of the problem is breathtaking and requires global action. As Gillard argued, “business as usual is … nowhere near good enough. This is a denial of human potential”. In the developed world, the narrative is different. Having made massive human capital investments in girls and women, we have a situation where women get paid less than men in many countries, and the gender pay gap is widening.

the same person, but in one they are told the teacher is female, and in another the teacher is male. Imagine that they deliver much harsher feedback and poorer performance ratings for the female teacher. This happens. Our ratings of others’ performance is not always objective.

• Imagine an experiment is run where the same scenario and facts are presented to a group. In one scenario the leader is male, and the other a female. Imagine that the female leader is reviewed as being less likeable (on the same facts) when she was more successful than the male. This happens. Our views on leadership are not gender-free.

Structural barriers to women’s participation in the labour market remain, however, many argue that these psychological and cultural factors are just as powerful in constraining women’s equality. Addressing them, however, requires different strategies – it is hard to legislate these problems away. Gillard’s advice squares with the leading research in this area – we need to analyse our own remaining prejudices, and call out sexism and other forms of discrimination. The progress to date and the ongoing struggle for the pursuit of equality were important place marks in a powerful address. Opening up education to young people, girls especially, is critical to ensuring a more just and equal world. However, the current state of labour market outcomes also shows us that the fight for equality has a long way to go. Janine O’Flynn is Professor of Public Management, School of Social and Political Sciences (Arts) and Melbourne School of Government. Janine holds a Bachelor of Commerce (Hons.) and a PhD from Business and Economics at the University of Melbourne. @JanineOFlynn

5.0 5.0 WORKPLACE DIVERSITY — Comment

45.0 MALE

Guyonne Kalb

WHY WOMEN ARE STILL

DOING IT ALL Australia has a long way to go before all employees are equally able to follow career and family goals.

FEMALE

GP MALE

FEMALE

MALE

FEMALE

SPECIALIST

FEMALE

DOCTOR TYPE GP SPECIALIST Figure 1: Proportion of doctors who agree with the

statement that theirTYPE employment is restricted due to DOCTOR lack of access to childcare

40.0

Source: Own calculations from the Medicine in Australia: DOCTORS WITH Balancing Employment and Life (MABEL) data.

NEWBORN

DOCTORS WITH NEWBORN

DOCTORS WITH CHILD AGED 5+

35.0

DOCTORS WITH CHILD AGED 5+

30.0

The economic sustainability of societal equity The old adage ‘can women have it all?’ – children and a career, and, perhaps, some time for herself – is often raised in workplace policy conversations. But is it the right question to ask? A more relevant question may be ‘Must women do it all?’ If the answer to the latter is no, then perhaps the answer to the first question can be yes. If, however, women must do it all, then to have it all may no longer be desirable.

There is economic and social value to be found in a more equitable approach to market work, household work and caring tasks. In a time where divorce is relatively common, specialising in household work and caring at the cost of market work is not in women’s interests, but there is also a price to pay for society when women with little labour market expertise and earning power become more reliant on the state. However, regardless of this, when highly capable women exit the labour force (even temporarily) or downgrade the occupation they choose because of familial pressures, there is a loss to society.

As we advocate for the economic and social benefits of a diverse workforce, we need to address the underlying impediments for women and the responsibility of policy makers and employers to provide an equitable framework. Only then can we hope to achieve a workforce where all employees are equally able to pursue career and family goals.

Things are changing, but not quickly enough. Government policy, despite talk about increasing female labour force participation, does little, and often even seems to act counterproductively by maintaining policies that encourage women to become stay-at-home mums, such as Family Tax Benefit part B, which penalises the secondary earner on return to work.

A woman’s responsibility What I mean by ‘do it all’ is work full time; do all (or most) of the caring work at home – organising childcare, transporting children, staying at home to look after an ill child – and household work. The logical answer to ‘Must women do it all?’ is no. Why should women feel more responsible for all of the above when most children have two parents? In practice, however, the answer to this question often seems to be yes. Even among very highly trained individuals, such as medical doctors, women with children aged 0 to 4 are more likely than men to work part time: 79 per cent of female GPs and 65 per cent of female specialists work fewer than 35 hours per week compared with 16 and 8 per cent of their male counterparts respectively. Women are also much more likely than men to agree with the statement that their employment is restricted due to lack of access to childcare. Women and men are expected to perform equally in the workplace but the expectations of women as homemakers have not kept pace with this change.

Women need supportive partners who are willing to share the workload at home and in the labour market. However, to enable partners to be supportive, the Government and employers need to put policies in place that do not penalise such behaviour. For example, family-friendly policies should be truly available to men and women, so men can stay at home with a sick child without being frowned upon. Access to part-time hours should also not be a hurdle. Both parents could work four days a week, reducing the number of childcare days required and keeping both parents in the labour market for close to full-time hours. Paid parental leave (PPL) has had a positive impact, but current policy reviews may undermine its success, such as proposals to withdraw government leave payment dollar for dollar if the parent receives employer-paid parental leave, and stricter income tests. The parental leave debate is often quite confused, with paid parental leave seen as a welfare payment rather than a work entitlement, as is the more common view in European countries. It is true that PPL allows women to stay at home for a few weeks after birth without financial hardship and, as such, can be seen as income support, but paid leave also plays another role. Recent research shows that although women with paid leave at first delay return to work, after six months they return to work at a faster rate than those without paid leave. One year after birth, 73 per cent of women with PPL have returned to work versus 69 per cent of women without PPL. We also found that women with paid leave have a stronger attachment to their job (and employer).

An investment in Australia’s future In Norway and other Scandinavian countries, mothers’ labour force participation is substantially higher than in Australia. High-quality childcare is widely available and at much lower cost than in Australia. The role of men in caring is supported by policies around PPL, with 10 weeks of ‘mandatory’ (use it or lose it) leave – about 20 per cent of total leave available – designated to the father.

25.0

20.0

Such expenditures are clearly an investment in the country’s future by ensuring economic growth, high productivity, and a well-adjusted and educated next generation. That seems money well spent to benefit the whole population, and the disincentive associated with somewhat higher tax is much less than the disincentives for mothers of young children in the alternative scenario, where a few years of child rearing potentially produce a lifetime of relative disadvantage.

15.0

10.0

So we – men and women – could, with the right supports, indeed achieve work-life balance. So why does no one ever seem to wonder whether men can have it all?

5.0

Guyonne Kalb is a Professor at the Melbourne Institute of Applied Economic and Social Research, the University of Melbourne with extensive experience in labour economics and social policy.

MALE

FEMALE

MALE

SPECIALIST DOCTOR TYPE

FEMALE

WORKPLACE DIVERSITY — Comment

WORKPLACE IMPLICATIONS OF GENDERED TOY MARKETING? It has been argued that the ‘pink for girls, trucks for boys’ toy sloganeers reinforce gender stereotypes and inequality, and can ultimately contribute to issues as serious as domestic violence. Cordelia Fine finds out what the research tells us. Does it matter how toys are marketed to girls and boys? Should society care about the stereotypes implied by the pink and blue aisles of the toy store? In November 2015, the Senate referred the issue of domestic violence and gender inequality to the Senate Finance and Public Administration References Committee for inquiry in 2016. The terms of reference include the role of gender stereotypes in the marketing of toys and other products. Greens Senator Larissa Waters, whose party initiated the inquiry, argues that gender-specific toy marketing contributes to “old-fashioned stereotypes” that, in turn, “perpetuate gender inequality, which feeds into very serious problems such as domestic violence and the gender pay gap”.

To some, making a link between kid’s toys and serious adult problems may seem absurd. Many assume that when marketers use labels, colours, symbols or segregation to indicate whether a toy is ‘for boys’ or ‘for girls’, this simply reflects and responds to profound, natural and timeless sex differences in what boys and girls like to play with – and what could be harmful about that? Former prime minister Tony Abbott, for instance, seemed to speak for many with his advice to simply “Let boys be boys, let girls be girls”. How are the various stakeholders in this debate supposed to make sense of these two very different perspectives? Charles Sturt University ethicist Emma Rush and I looked to the empirical literature for an answer, in work recently published in the Journal of Business Ethics.

Unfounded assumptions

Workplace diversity

The boys will be boys perspective can be challenged by decades of behavioural science – and also by a moment’s reflection. Consider yourself. Suppose that all someone knows about you is your sex. What are their chances, from this single piece of information, of correctly guessing your personality, your aspirations, your attitudes, your strengths and weaknesses, what you’re good at, what roles you play at home and work, what you find interesting and what bores you? Even if the guesser used the latest and most comprehensive information about average differences between the sexes in gendered characteristics to generate her predictions, she wouldn’t capture you. She’d predict a stereotype that rarely, if ever, exists in reality. This is because we all have a mix of ‘masculine’ and ‘feminine’ qualities.

This is important because, outside the playroom, we care a great deal about the detrimental effects of gender stereotypes. Because we recognise that you can’t accurately predict what a person is like on the basis of their sex, employers have a legal obligation to take reasonable measures to eliminate sex discrimination. It is of course against the law to consciously use gender stereotypes to decide who to employ and promote. However, the unconscious influence of stereotypes is now seen as such an obstacle to the fair evaluation, promotion and retention of women, particularly in traditionally masculine and better-rewarded roles, that organisations routinely invest considerable time and money in training to try to reduce unconscious bias. Yet toy marketing is reinforcing those very stereotypes in the next generation with unprecedented vigour.

Yet when we designate toys as either ‘for boys’ or ‘for girls’, we imply that we can accurately predict a child’s temperament, interests and traits – and therefore what kind of toys they’d like to play with – on the basis of their sex. Strong sex differences in children’s toy choices and play activities do develop. But in the first few years of life, these differences are very small, with a great deal of overlap in what girls and boys like to play with. A recent study, conducted at Arizona State University and New York University, of nearly 100 two-yearold children found that about a third of the time, a randomly chosen boy would play more with a ‘girl toy’ than a randomly chosen girl would, and vice versa for ‘boy toys’. Contributing to the greater divergence seen in older girls and boys, research suggests, is kids’ motivation to connect everything they’ve learned about what’s ‘for males’ and what’s ‘for females’ with newly established knowledge of their own gender identity, at about two to three years of age.

Of course, there are many sources of gender stereotypes. Nor does anyone think that getting rid of gendered toy marketing would solve the gender pay gap or gender inequality. It’s impossible to even quantify its contribution. But complex social problems like inequality are always multiply and interactively caused and need collective action on many fronts. How efforts and money are best recruited to achieve a social goal, and how much regulation should be invoked, are legitimate questions for debate about how best to implement our social values. But a better understanding of what science has to say about gendered toy marketing provides a better basis for stakeholders to make decisions that, in their own small way, may have repercussions from play-room to board-room. Cordelia Fine is an Associate Professor at Melbourne Business School, and author of Delusions of Gender and A Mind of Its Own.

In other words, the stereotypes reinforced by genderspecific toy marketing don’t simply reflect how boys and girls ‘naturally’ are.

OUTLOOK CONFERENCE — Highlights

Tessa Shaw

REBUILDING FOUNDATIONS FOR ECONOMIC AND SOCIAL REFORM The 2015 Outlook Conference delivered thought-provoking debate on the key issues facing Australia today.

Just weeks after the establishment of the Turnbull government, the 10th Melbourne Institute/The Australian Economic and Social Outlook Conference (ESOC) provided unrivalled access to policy evolution inside the major parties, and identified the essential ingredients of successful policy implementation. Australia’s premier public policy event, it ran over two days (5-6 November 2015) at the Grand Hyatt, Melbourne. Opened by Prime Minister Malcolm Turnbull, the conference brought together political leaders from the major parties, experts from Australia’s top universities, and leading policy thinkers and practitioners from both private and public sectors, to discuss economic and social reform. The Prime Minister used the conference, the first major policy event for his government, as an opportunity to demonstrate commitment to “a high-wage Australian economy that is more innovative and more productive than ever before”. “We are living in the most exciting times in human history,” he said. “Free markets, globalisation, long periods of peace, and above all the acceleration of technological change has produced economic and political transformations never seen before.” He asserted the importance of demonstrating that decisions are made in a thoughtful, consultative manner “(which is why) we are not trying to reduce complex decisions to three-word slogans”. With major change on the agenda, debates on innovation, tax reform, competition policy, trade and investment, and retirement policy spilled over from the plenaries into informal discussions between sessions. Here is a highlight of some of the debates that took place. Full audio from all sessions is available online. melbourneinstitute.com/Outlook_2015/outlook_2015_program

“ Free markets, globalisation, long periods of peace, and above all the acceleration of technological change has produced economic and political transformation never seen before.”

Innovation matters Innovation has become a buzzword of late, on the tips of the tongues of students, young entrepreneurs, business leaders and politicians alike. In his opening address, Mr Turnbull said a key focus of his government is to encourage a culture of innovation and ensure our children are equipped with the STEM skills they need. Later, speaking in a session focused on innovation, Deena Shiff, Non-Executive Director of the Citadel Group, observed that the move from policy to practice hasn’t always been carried out well. Identifying the need for three key changes, she called for the government to deliver an innovation statement that clearly defines the purpose and plan of attack:

• Encouraging growth in the stock of

new companies that are innovative/ use new technologies

• Commercialisation of intellectual

property from universities, chosen government-certified growth centres or the CSIRO

• A focus on education to improve

David Dyer, Principal, McKinsey & Company said we should be optimistic, observing that a shift in the drivers of national income is providing an incentive for innovation within Australia, alongside the competitiveness challenges of the Australian economy and the disruptive forces within the global economy – industrialisation and urbanisation of emerging economies, a global ageing population, disruptive technologies and greater global interconnections. “There are lots of opportunities, but we have to understand it’ll be a very different world in which we operate,” he said, and recommended that the government prioritise innovation even in uncertain conditions. Dr Matthew Butlin, Red Tape Commissioner for the Department of Treasury and Finance, echoed his view and added, “Innovation is primarily about business behaviour”. He noted the importance of not thinking about innovation as a game of who wins, but rather about the overall performance of enterprises, and coming up with avenues to strengthen their performance.

the skills base while continuing to maintain Australian standards and competitiveness.

The Hon John Brumby, former Premier of Victoria, Prof John Daley, Chief Executive Officer, Grattan Institute and The Hon Peter Gutwein MP, Treasurer of Tasmania.

Eating the icing, and not the retirement cake Australia’s ageing population prompts economic challenges and opportunities. As our demography shifts, retirement policies and pensioners become central to the discussion and recommendations from researchers in the area came with a sense of warning. Karen Chester, Commissioner, Productivity Commission, told the audience that the ageing Australian population is the biggest policy imperative facing the government. “Older Australians tend to be income poor and asset rich. Most older households rely on government payments and around 70 per cent receive full or part payment, with health and aged care taking up the bulk of the cost,” she explained. She recommended viewing retirement income as three buckets that can and should be drained – age pension, superannuation and private savings, and the family home.

“ In the perfect world, we would know exactly how much we’d need, with the last crumb just enough to put the petrol in the hearse to take us to the cemetery.”

“The age pension bucket is pretty well drained and forecast to grow to 20 per cent of GDP by 2050,” she explained. “Retirees tend to rely on super and private savings to fund their retirement lifestyles in conservative ways.

“Uncertainty makes it hard to know how to slice the retirement cake.

“Older households are unwilling to tap into the family home bucket and it is not drained that well.”

“In the perfect world, we would know exactly how much we’d need, with the last crumb just enough to put the petrol in the hearse to take us to the cemetery.”

At current rates of ‘drainage’, the retirement income for most ageing couples is not sustainable. Professor Susan Thorp, Professor of Finance at the University of Sydney Business School, explained that people retiring from work now face a new challenge – covering their expenses from their savings and pension payments, and not knowing how much to spend, and how slowly or quickly to spend it, potentially leaving behind more than what they intend to.

Rather, retirees tend to live in a haze of uncertainty, unsure how much to consume or even what size the cake will be as investments move from year to year. She has found that wealth preservation is a much more important issue than wealth dissipation, and her study with colleagues shows that annual consumptions are far lower than what would be needed by the Association of Superannuation Funds of Australia’s standard for a comfortable lifestyle. “What we see is people eating the icing off the retirement cake, but keeping the cake intact,” she explained. The reason for this is self-insurance – because retirees don’t know when they are going to die, they feel the need to create a wealth perpetuity, which is difficult to calculate accurately.

Prime Minister Malcolm Turnbull MP at the opening of the conference with Prof Glyn Davis, Vice-Chancellor, The University of Melbourne (left) and Mr Paul Kelly, Editor-at-Large, The Australian (right)

More on the topic of ‘reform’ Acknowledging the problematic nature of implementing reforms, Michael Thawley AO, Secretary, Department of the Prime Minister and Cabinet, said that it was a major factor affecting public opinion. “It is very striking just how many reforms we’ve introduced that have ‘hooks’ attached to them, and have not done what we intended,” he warned. He pointed particularly to Indigenous policy reform, which, he said, had unintentionally created another layer of bureaucracy. He acknowledged that federal-state relations are problematic because economic and social reforms could not succeed without full support from the states and territories. In the closing session of ESOC 2015, David Uren, Economics Editor at The Australian, drew further focus to the general framework, and said achieving reform had become “much harder than it used to be, and indeed, (much harder) than it ought to be”.

Liberal MP Josh Frydenberg told the audience that one major oversight of governments attempting reform was the failure to effectively explain the need for reform in the first place, which has led to public confusion and mistrust of politicians. In response, Paul Kelly, political journalist and Editorat-Large for The Australian, recommended that the government rely more heavily on the media, which could play a far more purposeful role in enlisting support for reform. The consensus of the speakers and the audience at the conference was a clear need for reform, with general agreement that achieving meaningful economic and social reform is one of the biggest challenges facing state and federal governments today.

Her recommendation is “CIIIPRs”: comprehensive income, insurance and intergenerational equity products for retirement; products that will distribute income from current earnings and enable decumulation of capital. “CIIIPRs could offer insurance against aged-care costs, medical expenses and other shocks, not just longevity, and reduce buffer stock savings,” she said. “We are seeing accumulation of private lump sum savings, and we need to think about how to create intergenerational wealth transfers.”

Senator Penny Wong, Shadow Minister for Trade and Investment, Prof On Kit Tam, Professor of Finance, RMIT University and Mr Alan Oxley, Managing Director, ITS Global

Dr Jenny Gordon, Productivity Commission

ECONOMICS — Comment

THE NEXT RECESSION WE HAVE TO HAVE The only uncertainty surrounding an impending recession in Australia is when it will happen. How we prepare now will map the future of our economic sustainability. Stephen Walters

Australians have not suffered the ignominy of recession for more than two decades; not since Paul Keating’s infamous “recession we had to have” in the early 1990s. Good management combined with good fortune have allowed us to dodge economic bullets that otherwise could have tipped us into a prolonged downturn. Only the Netherlands has avoided recession for longer than Australia, thanks to its oilfuelled bonanza kicking in from 1969. Thinking through challenges now – and then acting without further delay – should help prepare us for the downturn that inevitably will come. As RBA Governor Glenn Stevens has said, the probability of recession in Australia is 100 per cent; only the timing is uncertain.

The post-mining investment boom hangover Australia is dealing with the aftermath of the greatest mining investment boom we have ever seen. In the eight years to 2012, more capital was used to expand capacity in mining in Australia than in any other country. The boom enabled a huge boost to our ability to export iron ore, coal and natural gas, but drove up costs and triggered multi-decade highs in the Australian dollar. This damaged sectors of the economy not linked to mining, such as manufacturing, which is shrinking as a share of GDP.

Stephen Walters

Now, with the investment boom over, the economy is struggling to adjust, despite the surge in export volumes. The Australian dollar has fallen in line with commodity prices, but parts of the economy still battle high costs and increased regulation. The economy is transitioning towards non-mining sources of growth, such as services, but many firms seem reluctant to invest, owing partly to low productivity, which has languished for years. Lower interest rates are helping, but the core problem – a lack of what Keynes described as ‘animal spirits’ – could take years to solve.

What reform agenda?

China’s transition to a service-based economy

A key impediment to a more orderly transition away from mining investment as the dominant source of growth is the lack of a tangible reform agenda. There is talk in government about tax reform, innovation, streamlining the federation, and even industrial relations changes but, thus far, little action. Indeed, the last enduring reform by the Commonwealth government was of the tax system in 2000, including the introduction of the GST. Changes to the industrial relations landscape have ebbed and flowed, with much earlier good work undone.

Sharemarket volatility in China, alongside weaker activity data, have fuelled concerns that China may suffer a hard landing. This looks unlikely given the huge policy stimulus delivered in recent months, but recent events distract from an important transition under way in China that will have profound implications for Australia.

Unprecedented political instability at federal and state level makes it difficult to prosecute a reform agenda. Hopefully, this uncertainty is behind us, but many firms are crying out for another wave of reform. Per-capita national income in Australia has been shrinking since the end of the mining investment boom. One way to turn this around is to lift productivity, which requires lasting reform, but this is difficult when growth in the economy is sluggish, and when political leadership is short-lived. Even with these headwinds, it is vital that governments kick-start a new agenda for reform.

Australian economy’s lower speed limit One reason for unexpectedly sluggish growth in the economy is that the nation’s potential growth rate – its speed limit – has fallen. As such, the economy cannot grow as quickly as before without generating inflation. Lower potential growth means compressed living standards and, most likely, a higher level of unemployment. With population growth capped by an ageing population, only faster productivity gains can lift potential growth. This reinforces the importance of a new government agenda for reform. But government cannot go it alone. The economy needs corporate Australia, alongside small and medium-sized businesses, which still employ the majority of Australians, to invest for the future and innovate. 29

China is transitioning away from being an industrial economy to more service-based activity. Services now make up a larger share of GDP than manufacturing, with a further shift likely. This is a natural extension of rising per-capita income. This will affect Australia because China is our largest buyer of commodities. China’s transition towards services could challenge this because consumers don’t buy shiploads of iron ore. Consumers do, however, demand more travel, education and healthcare, and we are well placed to provide these service exports. There is no doubt about it, Australia has enjoyed a golden era since the last recession in the early 1990s, but our run of good fortune may be coming to an end. We can no longer rely on others to drive growth in our economy and living standards. Without further delay, all of us – governments, firms and households – must seize control of our destiny and make the difficult choices necessary to boost the economy’s productive capacity. Only then will the latest troubling slide in our living standards be arrested. Stephen Walters is Chief Economist at the Australian Institue of Company Directors. He graduated from the University of Melbourne with a Master of Applied Finance in 2001.

CORPORATE GOVERNANCE — Research

Tessa Shaw

CORPORATE PAY, AND THE POWER TO MANIPULATE Powerful CEOs can manipulate performance targets to undermine corporate reforms designed to rein in excessive CEO compensation.

CEO pay has risen steeply over the past three decades, triggering media attention and outrage from shareholders and the public. Regulators responded by instituting reforms designed to improve the link between pay and performance. However, a team led by the University of Melbourne’s Margaret Abernethy has found that powerful CEOs, driven by increasing their own personal wealth rather than increasing value for the shareholders, can sabotage these reforms. In their paper, The Inﬂuence of CEO Power on Compensation Contract Design, Professor Abernethy and her accounting colleagues, Associate Professor Yu Flora Kuang and Associate Professor Bo Qin, investigated whether CEO power influences a firm’s decision to change its compensation system in response to regulatory and public pressure. In particular, they assessed whether CEO power influences the choice of performance measures as a form of camouflage to minimise the impact of these reforms on their wealth. They looked at a change in regulation in the UK that encouraged firms to implement performance-vested stock option (PVSO) plans. Based on large firms listed on the London Stock Exchange, they found that firms with powerful

CEOs attached less challenging targets in the initial PVSOs granted to their CEOs. Such firms also appeared to adopt PVSO plans early, and were more likely to do so when faced with public outrage over executive compensation. The results suggest that powerful CEOs attempt to appease public outrage by quickly adopting PVSOs, but that doing so does not appear to be an optimal strategy for increasing shareholder value.

Compensation reforms: Why and how? The pressure to reform CEO compensation stems from a steep rise in CEO pay over the last three decades, particularly the increase in performance-based pay. Traditionally, researchers have argued that the level of CEO compensation matches the demands for higher management skills and increased risks associated with CEO responsibilities when boards expect increasingly higher returns for the firm. In other words, shareholders shouldn’t be worried about these steep pay rises but accept that the use of incentive pay will encourage executives to work harder, which will in turn add value to the firm and the shareholders.

The public and regulators haven’t bought this argument and hence have called for changes in governance including the pressure to reduce what is often seen as excessive CEO pay. The UK was one of the first in the world to encourage firms to implement PVSO plans following recommendations from a national inquiry into the capabilities of corporations to self-regulate executive compensation. (Other countries, including the United States, have followed suit.) The recommendations for firms to implement PVSOs were not mandated, nor were the recommendations as to how vesting targets should be set. Thus it was possible for Professors Abernethy, Kuang and Qin to test their ideas. Their question was: Which firms adopted the recommendations and which didn’t? And why? They were able to explore the two choices that firms made: 1) the decision of when to adopt PVSOs, and 2) the choice of targets in these plans. PVSOs should make it more difficult for executives to benefit from their stock option compensation. However, powerful CEOs are able to manipulate when to adopt PVSO plans, as well as the choice of vesting targets included in the plans. So what do the researchers think is driving these choices? All firms experience public outrage when they grant excessive pay to their CEOs. But if a CEO has the power to influence their board’s decisions, it is possible that they could encourage the board to adopt PVSO regulation but set low PVSO targets that are easy to achieve. They protect their wealth and the reputation of the firm by engaging in “camouflage” – the public thinks the firm and the CEO are doing the right thing for shareholders and public outrage declines. And importantly, there is little effect on their personal wealth. The researchers argue that CEO power allows this to happen.

What makes a CEO powerful? CEO power increases when corporate governance is weak. To determine corporate governance, a few considerations must be taken into account.

• Membership: When a CEO is on numerous board

committees, there is a consolidation of decision-making rights, increasing the CEO’s power and ability to influence key decisions.

• Tenure: The ability of a CEO to influence company

decisions also likely increases the longer they have been in the CEO position. Power stems partly from expertise and partly from gaining support of directors and others within a firm. This takes time to develop, enabling long tenure CEOs to have more influence over board decisions.

• Board size: When a board is too large, its efficiency in

constraining managerial power and generating cohesive decisions is lowered.

Current trends The evidence presented in this study shows that managerial power has significant influence on performance targets and the timing of adopting PVSOs. Firms led by powerful CEOs tend to adopt PVSO plans earlier and attach less challenging performance targets to the adoption. Firms facing public outrage tend to increase target difficulties gradually over a longer timeframe, rather than setting out appropriately challenging targets in the initial uptake of PVSOs. Furthermore, firms led by powerful CEOs will halt the use of PVSOs after their adoptions and possibly switch to another type of compensation that can be more easily manipulated (such as performance-based shares) when the public becomes more experienced with PVSOs. The results suggest that although the media represents an important source of public scrutiny, powerful CEOs are able to obscure their influence over the design of their own compensation and satisfy external calls for compensation reforms without affecting their own wealth. As a result, the compensation design is not optimal. The team predicts that powerful managers have a stronger incentive to adopt PVSO plans earlier when confronted with public outrage. They also observed that a reduction in the negative publicity in the media after PVSO adoption is significantly larger for firms that adopt them earlier. But compared with later adopters and firms attaching more challenging targets, firms adopting earlier and those taking on easier targets tend to generate lower market return after the initial adoptions. So, firms are able to meet public concerns without providing economic improvements on firm value, and the media responds positively when it perceives improvements in compensation design, even if the measures may not necessarily be efficient.

Words of advice When a CEO is pursuing personal wealth to the detriment of creating firm value, and has enough power within a firm to camouflage decisions relating to their own pay, this undermines the intentions of the regulators and destroys value for the shareholders. These findings have implications for regulators seeking to influence corporate governance practices, by studying and advising on the effectiveness of reforms designed to improve the link between pay and performance. Professor Abernethy, Kuang and Qin’s study indicates that strong corporate governance as represented by the board is what matters in creating the appropriate incentives for behaviour that truly add value to the firm.

• Independent directors: The more independent directors

a board has, the less power a CEO has. Because independent directors lack economic bonds or prior employment experience with the firm, they are less vulnerable to conflicts of interest with corporate insiders or other board members.

• Ownership structure: Large owners can nominate board members, monitor managerial compensation plans, and influence board decisions. Ownership concentration therefore likely constrains CEO power. Similarly, institutional investors maintain substantial investment stakes and have fiduciary obligations to improve investment returns to their clients and, as a result, will play a more active role in scrutinising the behaviours of company executives.

Margaret Abernethy is a Professor of Accounting and former Dean of the Faculty of Business and Economics, at the University of Melbourne. She holds a research position as the Sir Douglas Copland Chair of Commerce and the Chair of Managerial Accounting. Yu (Flora) Kuang and Bo Qin are Associate Professors of Accounting at the University of Melbourne.

HEALTH & WELLBEING — Research

HIV TREATMENT:

AN ANTI-DEPRESSANT DRIVING ECONOMIC GROWTH

Victoria Baranov

Can a medical treatment affect the lives of people who do not have the disease? Research on the indirect effects of AIDS treatment in Malawi suggests that this is the case.

AIDS treatment has dramatically improved the lives of millions of people around the world living with HIV/AIDS. In a paper published in the December 2015 issue of the Journal of Health Economics, my co-authors and I argue that the benefits of AIDS treatment on the uninfected are also having immense impact. The benefits could be large enough to help the local economy, as even in settings with significant HIV prevalence, most people remain HIV-negative. And the implications are that the treatment may have substantial positive impacts on economic growth in the region. Without treatment, HIV infection eventually leads to the onset of AIDS, a condition where the body is no longer able to fight infections. What used to be a death sentence can now be treated as a chronic disease, like high blood pressure or diabetes. This is due to the development of a drug treatment known as ART, or anti-retroviral therapy. And thanks to a coordinated effort by international donors such as the Global Fund, this treatment has recently become widely available and accessible all over the world. In southern Africa, the region most severely affected by the epidemic, roughly 15 per cent of the adult population has HIV, and nearly everyone has known someone infected with or affected by

the virus. At the height of the epidemic, in the 1990s and early 2000s, there was virtually no treatment for the disease in sub-Saharan Africa. But by the mid-to-late 2000s, in what became one of the most significant recent public-health interventions, ART became widely available in many parts of the region. While studies have shown that ART has, unsurprisingly, improved the lives of HIV-positive individuals and their families, my research team, including Dr Daniel Bennett of the University of Chicago and Professor Hans-Peter Kohler of the University of Pennsylvania, discovered that the treatment also improves the wellbeing of HIVnegative people who don’t receive the medicine and who aren’t directly affected by the epidemic. Remarkably, people without the disease but who lived in communities where ART became available changed how they perceived their future – for the better. Individuals became measurably less worried about HIV and AIDS and more positive about the future. If the sheer availability of ART is impacting how people think about the future, might the effects be spilling over into economic activities like how much people are working and their productivity?

If the sheer availability of ART is impacting how people think about the future, might the effects be spilling over into economic activities like how much people are working and their productivity? Our sample, taken from the Malawi Longitudinal Study of Families and Health, comprised about 4000 men and women aged 25 and older in 120 rural villages. It’s a unique dataset because researchers have been returning to this community since the survey began in 1998. It is also broadly representative of rural Malawi and other similar sub-Saharan African regions. Using the longitudinal data, we studied several factors including distance to clinics offering ART. In settings such as these, most people travel by foot or bicycle, so clinic location is crucial to treatment adherence. We also asked about perceived mortality (whether participants believed they would die within one, five, or 10 years), as well as physical and mental health. For productivity, we measured time spent working on the farm, tending to the household, and other such activities. Through a 12-item questionnaire, we measured mental health areas such as depression and anxiety. 33

We found that the expansion of ART availability substantially reduces perceived mortality risk and improves mental health among HIV-negative people, even among those without HIV-positive relatives, friends or neighbours. It also leads HIV-negative people to work more, particularly in terms of maize production, an area for which daily cultivation time rose 11 per cent and daily production time rose 16 per cent. In sub-Saharan Africa, where populations experience widespread concern about HIV, these indirect ART effects are large enough to noticeably benefit the path of economic development. There are broader implications, too. If HIV/AIDS distorts behaviour in important, yet unexpected, ways, is it also possible that other new diseases, such as Ebola, may have broad consequences for areas where people believe themselves to be at risk? Victoria Baranov is a Lecturer of Economics at the Faculty of Business and Economics, the University of Melbourne.

DECISION MAKING AND MARKETS — Research

LOCKED OUT:

HOW THE GREAT AUSTRALIAN DREAM HIT REALITY Guay Lim and Sarantis Tsiaplias

With ever-growing numbers of Australians locked out of the housing market, research identifies three key factors that determine housing affordability. But what can we do about it?

Ratio of house price to household income

SYD

MELB

BNE

ADE

PERTH

7.00

Population: Population growth contributed significantly to house price appreciation across each of the capital cities over the period 2002 to 2007, fell sharply around the GFC, rose then fell again. A quick look at the impact of population growth on housing demand across the capital cities shows that the impact was greatest for Perth and Brisbane, particularly the former. Overall, changes in population growth appear to have induced significant volatility in the Perth housing market, resulting in sharp shifts in housing demand (and housing affordability) since 2007. In contrast, the recent impact of population growth has been relatively small for the remaining capital cities.

Currently, standard variable rates are close to record lows and have prompted sharp increases in house prices. Our research suggests that with interest rates below the threshold, sharp changes to house prices will increasingly be unrelated to fundamental factors such as demographic or employment conditions. However, spillover effects from price increases in Sydney and Melbourne to the other capital cities will also be smaller. In other words, the probability of a housing bubble is high, but may not be widespread. Low interest rates are therefore more likely to result in asymmetric (or two-speed) housing markets.

House price growth relative tohousehold income House price

DEC 95

Household disposable income House price

DEC 05

Household disposable income

5.00 4.00 3.00

Aug-14

Apr-12

Dec-09

Locked out of the housing market

Policy change now

The relative pace of house-price appreciation to income growth has been particularly pronounced in the last two years. Falls in housing affordability are especially onerous for lower to moderate-income households. With falling affordability, households in this group have a reduced capacity to access affordable housing, and additional financial stress stemming from their increased debt-service requirements. This latter pressure, in particular, is likely to be observed when interest rates start to normalise.

Three policy areas require closer scrutiny in order to improve housing affordability. First, is the policy governing the supply of land for housing development adequate? Second, are there tax-related policies that induce speculative real-estate activity? Third, what policies can be implemented to support the rental market? Clearly, more in-depth study is needed to disentangle the ‘cause and effect’ relationships between the demand for and the supply of housing, but a focus on these three areas is a step in the right direction.

With increasing numbers of households being locked out of the housing market, the proportion of renter households has increased in the last two decades. Consequently, the rental market is also not immune to developments in house prices, and rent levels have risen substantially in recent years as investors seek returns from their increasingly expensive assets. People in the 25 to 34-year-old bracket, in particular, have shifted towards renting rather than owning but are likely to find it increasingly difficult to either purchase or rent.

Guay Lim is a Professorial Research Fellow at the Melbourne Institute of Applied Economic and Social Research and an Adjunct Professor at the Department of Economics, the University of Melbourne. Sam Tsiaplias is a Senior Research Fellow at the Melbourne Institute of Applied Economic and Social Research, the University of Melbourne.

DEC 14

House price Household disposable income

Aug-07

Apr-05

Dec-02

2.00 Aug-00

Spillover effects: We find that a rise in the house-priceto-income ratio for Sydney causes a rise in the relevant ratio for the remaining capital cities (with the exception of Adelaide, which appears to be less integrated than the others). The impact of a price shock in Melbourne is similar to that of Sydney, although the magnitude of the impact on Sydney and Brisbane is smaller. In particular, Brisbane is clearly more susceptible to a shock emanating from Sydney, while Adelaide does not appear to be particularly receptive to either shock.

6.00

Apr-98

Our empirical research found three key determinants of housing affordability – population growth, interest rates, and spillover effects. These factors dominate the effects of employment and expectations.

Interest rates: Our empirical analysis shows that the relationship between house prices and interest rates is non-linear and that there is a critical threshold rate (about 6 per cent). When the standard variable mortgage rate rises above the threshold the effect is to discourage borrowing, dampen demand for housing and generally improve housing affordability. In contrast, when the mortgage rate falls below the threshold, investor activity increases dramatically, resulting in price feedbacks that statistically appear as explosive processes in the house price.

Dec-95

The Great Australian Dream of home ownership features prominently in economic and social discussion. In the mid’90s, house prices were typically about 2.5 times greater than household disposable income for each of the capital cities, except in Sydney where the ratio of house prices to disposable income was approximately 3.2. In recent years house price growth has exceeded household income growth for all capital cities. By 2005, Perth house prices had risen faster than any other major capital, with Perth surpassing Sydney as the least affordable city. House prices are now about 4.8 times greater than gross household disposable income (GHDI), with Sydney’s house prices closer to six times GHDI (rendering it the least affordable capital city).

HEALTH ECONOMICS — Comment

A LEANER BILL OF HEALTH

Anthony Scott

Complex, fractured, expensive… but micro-economic changes to our health system could boost value and save lives. Healthcare accounts for almost 10 per cent of Australia’s economy, and contributes directly to the population’s health and wellbeing, but micro-economic reform remains extremely difficult to implement in the sector. In part, this is because of well-known market failures in healthcare that make simple economic principles difficult to apply. But it is also because our health system is complex and fractured with no single level of government responsible, few “easy” political gains, and professional vested interests at play. There is much support for the health system, including Medicare, with relatively high average performance compared to other OECD countries. However, such a stance breeds complacency and inaction in the face of large health inequalities for the Indigenous population, very high out-of-pocket costs relative to other countries, long waiting times for public hospitals, and a lack of coordination and responsibility as different levels of government manage different parts of the system, all underpinned by complex public and private provision and funding. Much variation in clinical practice, costs and outcomes cannot be explained by patient characteristics alone. Research for the Department of Health and Human Services in Victoria, currently under way at the Melbourne Institute, looks at decisions surrounding the treatment of heart issues. We find that some cardiac procedures are being under-used in certain patient groups despite all participants requiring such treatment, and over-used in other patient groups where such procedures are not needed. Under-treatment of chronic disease such as diabetes, and at the same time overtreatment, for example, knee surgery and the overuse of antibiotics, as well as over-diagnosis such as prostate cancer screening, lead to waste and suggest a substantial inefficient allocation of resources. US research shows that up to 40 per cent of total healthcare expenditure fails to improve health. Despite increased awareness of this ‘low-value care’ which is ineffective or can harm patients, such procedures are still provided due to a mix of doctor and patient behavioural biases, lack of information, and inappropriate financial incentives. For the first time, through the international ‘Choosing Wisely’ campaign, medical colleges are producing lists of treatments that should be questioned by doctors and patients.

Promoting value through information, choice and competition Any flexible and adaptive market rests on information around cost, price and value. Patients and their families usually have little information to help them make informed choices, such as the value proposition of different providers and treatments. The internet provides information on treatment options, but is no substitute for a medical degree. Informed consumer choice is a key issue underpinning the role of competition. Competition can potentially drive better value, but little is known about its effects in healthcare. Through two Australian Research Council (ARC) grants, I am leading research into competition among doctors. Early results show that competition among general practitioners can lead to lower prices and higher rates of bulk billing. We are also examining the effects of competition on GP quality of care and specialist prices. Better information is also important for patients who rely on their GP’s recommendation of specialists, which may not be the best for the patient in terms of waiting times, location, quality and cost. Feedback on performance to providers, including public reporting, has been shown to be effective in changing behaviour but is far from routine. Overall progress in Australia is positive but slow, including the shared electronic health record and better use of linked administrative ‘big data’ and data analytics to harness information for patients and providers, as well as for independent research.

Promoting value through reform The current way funding is delivered to doctors (fee for service) and hospitals (activity-based funding) creates financial incentives that ignore quality of care, encourage high volume, and lead to cost shifting. ‘Value-based purchasing’ is being trialled and introduced in a number of countries. This includes pay for performance schemes for healthcare providers, where existing payment schemes are blended with payments for achieving certain levels or changes in quality of care. This may be combined with shared savings models where budgetary savings are shared with healthcare providers if a certain quality of care is achieved.

We recently reviewed evidence on the impact of such schemes, being introduced mainly in the US, but also trialled in the UK and other countries. Findings suggest they could work, though the evidence is mixed and not all applicable to Australia.

A way forward? Understanding the behaviour of healthcare providers, especially doctors, is fundamental in determining health outcomes, costs and access. As governments continue to alter incentive schemes and funding models at high cost but based on little evidence, the extent to which healthcare providers respond to financial incentives is vitally important. The Melbourne Institute’s MABEL (Medicine in Australia: Balancing Employment and Life) longitudinal panel survey of 10,000 doctors, funded by the National Health and Medical Research Council (NHMRC), is delivering unique insights about the influence of doctor decisions on access to care for patients. This has already led to a change in the targeting of incentives paid to GPs to encourage them to practise in remote and rural areas.

Ensuring that relative prices within the Medicare Benefits Schedule (MBS) and in activity-based funding (ABF) for hospitals are based on relative value, rather than historical precedent or relative cost, would be a major step forward. The MBS Review Taskforce is making such first steps, and the Independent Hospital Pricing Authority is considering adjusting the prices within ABF to reflect quality. Private health insurers are beginning to become more active purchasers – not paying private hospitals for mistakes and hospital-acquired diagnoses. However, the success of such changes remains unknown. Implementation requires careful design of funding mechanisms and independent evaluation requires much better access to data. Only then will we be able to assess whether such policies can lead to better national health, the more efficient allocation of resources, and more lives saved. Anthony Scott is a Professorial Fellow of Economics at the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne. Anthony leads the Health Economics Research Program and jointly coordinates the University of Melbourne Health Economics Group. @tony40scott

DECISION MAKING AND MARKETS — Research

TRADING IN THE DARK

The truth behind the hype The alleged misconduct by brokers in certain dark pools in the US isn’t about dark trading per se, says Comerton-Forde, but about the lack of transparency in the way brokers operate the dark pools. Dark pools operate under guidelines specific to that trading venue, which are not always transparent to users. For example, investors may send orders to a dark pool to avoid trading with high-frequency traders, unaware that these traders are also operating in the dark pool.

Niamh Cremins

Problems arose in the US because there were no rules mandating the disclosure of the rubric of each dark pool.

The market has always had lit and dark elements, which serve equally important and valuable roles, but technology has changed how the two interact.

Another concern, which receives significantly less public attention, is the level of dark trading activity in certain markets.

Extensive media coverage of dark trading in US equity markets has painted dark pools as shady, unscrupulous and bad for the market. But are the actions of a few distorting our perceptions of dark trading, which has always been part of a balanced equity market? Professor Carole Comerton-Forde, co-Deputy Head of Finance at the Faculty of Business and Economics, argues that dark pools play a legitimate and important role, delivering additional liquidity to the market. But, just like all markets, they need to be effectively regulated.

“One of the critical functions of a market is price discovery to enable investors to observe prices and understand what the price of the stock should be,” says Comerton-Forde. “Too much trading in the dark can harm price discovery.” This is particularly important with high levels of trading in small quantities, which research by Comerton-Forde and co-author Talis Putnins, published in the Journal of Financial Economics, found could be harmful to price discovery. By contrast, they found that large trades in the dark have no effect on price discovery.

Regulating the dark

So, what are dark pools? Dark pools are trading venues without any pre-trade transparency, allowing order flow to be submitted without being displayed in the market before the orders to buy and sell shares are matched. Dark pools were designed to allow institutions to trade large volumes without moving prices and undermining the traditional market function. “Anticipation of large order flows driven by large institutional investors can distort prices,” explains Comerton-Forde. “Dark pools allow these trades to be made without unnecessarily impacting price discovery.” The term ‘dark trading’ is relatively new – but its function is not. Historically, dark trading occurred in ‘the upstairs market’, where brokers would match large orders over the phone without any disclosure to the market. However, since the late 1990s technology has enabled automated dark trading, which means that brokers can offer dark trading for small as well as large trades. “In the past, orders had to be large to be worth the manual effort to trade in the upstairs market,” explains Comerton-Forde. “Firms may still have larger orders to trade, but new technology has made it more efficient to trade in smaller quantities.

Regulators in Australia and Canada have been more pro-active in regulating dark trading than those in the US. In order to reduce the level of dark trading, and to address the perceived unfairness of dark orders stepping ahead of lit orders at the same price, the Australian and Canadian regulators, ASIC and IIROC, introduced the price improvement rule, requiring that all small trades in the dark be executed at prices better than those displayed on the lit market. ASIC also introduced new rules to enhance the transparency of the operation of dark pools, mandating that pool operators publicly disclose details of order types allowed and investor access criteria. In addition, the dark pool where they were executed must now be reported three days after the trade. ASIC is able to monitor trading activity in dark pools in the same way it does for the lit exchange trades.

“A well-functioning market caters to the needs of different types of traders. Having lit and dark elements in the market enable investors to get their orders filled without large price impact, while at the same time ensuring there is adequate price discovery in the market. But it does add to market complexity.”

But how effective is dark trading regulation? ComertonForde and two co-authors from the University of Toronto, Katya Malinova and Andreas Park, examined the impact of the introduction of the price improvement rule in Canada. Before the rule change, the largest dark pool in Canada allowed retail order flow to be matched in the dark. “Electronic liquidity providers in that dark pool were making a market and matching all of the retail order flow that came into the pool,” says Comerton-Forde. The majority of retail order flow was going to this dark venue and electronic liquidity providers were earning most of the bid-ask spread. When the rule changed it was no longer profitable for the electronic liquidity providers to make markets in the dark because they could earn only half the spread. As a result, retail order flow was sent to the lit exchange market rather than the dark pool. “There was more liquidity on the cheapest lit exchange, order flow went up and the good thing was that the order flow was available to everyone, not just the electronic liquidity providers in the dark pool,” says Comerton-Forde. But, while order flow in the lit market increased, the retail brokers were now required to pay fees to send orders to the lit exchange, a cost they hadn’t incurred in the dark. The regulation gave rise to another issue. In the new lit environment, most retail order flow is going to a single venue offering the cheapest fees, so although the retail order flow is now lit, it is still segmented in a single market. “Markets work well when you have different types of order flow interacting,” explains Comerton-Forde. “The problem in Canada was not just about dark trading, but rather it was about retail order flow being segmented from other order flow.” Misunderstanding about dark trading, driven by the misconduct of a few and widespread sensationalist journalism, is damaging to the market. Regulation is needed, but regulators need to be aware that not all dark trading is the same, and they need to be cautious to ensure the issues they regulate address the core problem. Carole Comerton-Forde is Professor of Finance at the Faculty of Business and Economics, the University of Melbourne. She is also an economic consultant for the Australian Securities and Investments Commission.

HEALTH AND WELLBEING — Research

WHEN DELINQUENCY BECOMES A CAREER CHOICE AND WHAT WE CAN DO ABOUT IT Shannon Ward

New research supports the use of school-based intervention programs to reduce delinquency among teenage boys, decreasing their propensity to choose crime as an alternative career path to education. The net annual burden of crime worldwide is substantial. In the United States, for example, it is estimated to exceed $1 trillion, with a large part of this sum attributed to the cost of incarcerating close to 1.6 million people in prisons, and roughly 60,000 juvenile offenders in residential placement facilities. The burden of incarcerating so many extends beyond the financial costs of imprisonment, and includes decreased material and psychological wellbeing of the families of those imprisoned, as well as loss of productivity. In response to this significant social and economic issue, attention has increasingly turned to identifying the factors that lead to crime and incarceration. A low level of education is widely established as a predictor of criminal behaviour, with around two thirds of adult inmates having no high school diploma. Recent research demonstrates that this relationship is causal, with higher levels of education reducing the likelihood of crime and incarceration among adults. A second body of research documents a trajectory leading to adult crime in which the starting point is youth delinquency. Combined, these two bodies of research suggest that a youth’s decisions to engage in delinquency and to leave school are pivotal in determining his adult criminality. Until now, however, the impact of engaging in youth delinquency on school participation has been unclear. Research conducted with my University of Melbourne PhD supervisors, Professor Jenny Williams and Professor Jan van Ours, addresses this gap. Using data on males from the National Longitudinal Survey of Youth 1997 (NLSY97), a panel study of almost 9000 youths residing in the US, we find that engaging in delinquent behaviour has a detrimental effect on educational attainment. Our research accounts for two important empirical challenges. First, the existence of factors that influence both schooling and delinquency that are unobservable to the researcher; such as having a difficult family background, poor household environment, or a tendency towards impulsivity. And, second, causation in the opposite direction; specifically, delinquency’s impact on educational attainment should not be confused with the effect of poor educational attainment on delinquency.

We find evidence consistent with young males identifying criminality as an alternative, and potentially more lucrative, career path than education. Heightened involvement and experience in delinquency corresponds to an increase in the expected monetary return from crime relative to education, making education less attractive and leading to an early exit from school. This, in turn, is likely to increase the chances of incarceration as an adult. In the US, for example, the chance of being incarcerated for a male African-American high school dropout (aged between 20 and 24) is higher than their chance of being employed. Importantly, we find that while the effect of being delinquent has roughly half the magnitude of the effect of being arrested on an individual’s educational attainment, there are roughly twice as many in school who have been delinquent but not arrested, compared to the number arrested. The overall impact of delinquency on education is, therefore, at least as large as that of arrest. These findings provide important insights for policy development in addressing this social and economic issue. Specifically, there are a large group of delinquents who avoid arrest, but whose reduced level of educational attainment is as important as that of the group that have been arrested. To focus interventions solely on those who come to the attention of the criminal justice system would miss a large part of the vulnerable population. While delinquents who avoid arrest may remain undetected by law enforcement, they are likely to have come to the attention of their school teachers and principals. Interventions targeting this group may thus be most effectively implemented within schools. In the US, school-based intervention programs, such as Becoming a Man, a program aimed at improving the social-cognitive skills of disadvantaged male youths in grades 7–10 from high-crime Chicago neighborhoods, Functional Family Therapy, and the PATHS (Promoting Alternative Thinking Strategies) Curriculum, have had high levels of success. Given the huge costs associated with crime and incarceration both in the US and worldwide, there is much scope for effective schoolbased programs to reduce the costs associated with delinquency, low education levels, and adult crime, and to improve the life outcomes of boys who are at risk of a future that involves the criminal justice system. Shannon Ward is a PhD candidate in the Department of Economics at the University of Melbourne. Her research interests include applied microeconometrics, risky behaviour of youth, education, health, and labour economics.

FINANCE EDUCATION — Program profile

BNY Mellon contributed on key topics throughout the program, highlighting the links between the theory and empirical evidence presented in the modules and their own experience in markets. Filmed and edited by the University’s Learning Environments team led by Peter Mellow, the five-course specialisation includes:

• Foundations of Financial Analysis: Establishment of a

toolkit of business knowledge, including business language and the fundamentals of accounting and financial analysis.

• Global Capital Markets: Exposing students to the

context in which decisions are made, as well as how key markets operate and who the players are within these global markets.

• Corporate Financial Decision Making: Considering how

successful corporations make financial decisions and how these decisions impact upon firm value.

• Alternative Approaches to Valuation: Looking at

ACCESSIBLE EDUCATION DELIVERING INCREASED FINANCIAL LITERACY Niamh Cremins

The University of Melbourne’s new online corporate finance specialisation overcomes geographical, social and economic barriers to make quality business school education available to everyone. Massive open online courses, or MOOCs as they are commonly known, have opened up the world of education. A new online corporate finance specialisation, launched by the University of Melbourne in partnership with BNY Mellon, offers five publicly available finance courses to learners worldwide via Coursera. The Essentials of Corporate Finance Specialisation came into being in December 2014 following a tender process by BNY Mellon to find an academic partner who would deliver a set of courses to advance financial knowledge and decision making. Competing with submissions from leading international business schools, the University of Melbourne was chosen to develop the unique program and the first student enrolled on 1 June 2015. The suite of courses was designed by Professor Paul Kofman, Dean of the Faculty of Business and Economics, and Associate Professor Sean Pinder. Overcoming geographical, social and economic barriers to education, the program makes quality business school education available to everyone.

“We weren’t interested in simply rehashing what we cover in our existing finance programs – preaching to the converted,” says Associate Professor Pinder. “And we set the entry requirements with this in mind – basic knowledge in statistics and high-school algebra, familiarity with Excel and, most importantly, a natural curiosity about not only how markets operate, but also how participants in those markets make the decisions they do.” BNY Mellon’s 50,000 employees have access to specialisation through BNY Mellon University, which offers leadership, management and professional development courses, as well as risk and compliance training, for its globally distributed workforce. “Global economies and capital markets have become increasingly complex, interconnected and dynamic,” said David DeFilippo, Chief Learning Officer at BNY Mellon. “BNY Mellon University’s finance specialisation represents a unique opportunity to empower future financial services leaders through the convenience of an online, on-demand, globally accessible education platform.”

complex valuation and investment techniques used by investors worldwide.

Professor Kofman says online learning is a unique experience, and it doesn’t replace the physical classroom. “In a classroom environment you can read the room – if students are bored, they might need the motivation for the material highlighted again; perplexed, they may require additional exposition and explanation; or satisfied and needing to be asked a question to reinforce the concept,” he says. Neither are MOOCs necessarily used as a pathway to further education, although in some situations this can turn out to be the case. For many students they provide a time and cost-efficient way to develop skills that can be quickly applied in the business context. Since commencing in June 2015, the finance specialisation has engaged 131,234 students from 159 countries. “Importantly,” says Pinder, “over 40 per cent of students are from emerging economies, which reinforces for me how important such courses are in providing accessibility to students worldwide regardless of their circumstance, and the resultant increase in financial literacy can assist in driving the global economy.”

• Capstone Experience: Designed to pull together all

According to Pinder, institutions like the University of Melbourne have a wider obligation to society to provide a pathway to transformative education that isn’t reliant upon geographical, social or economic status. “MOOCs provide one such pathway and I am excited to see what comes next.”

Students enrolled in the courses have described the finance specialisation as ‘a mind opener’ and ‘a masterpiece’ with ‘one-of-a-kind peer assessment’. Another says, “You’ve made a rather difficult and intimidating topic easier to understand.”

Paul Kofman is Dean and Sidney Myer Chair of Commerce at the Faculty of Business and Economics, the University of Melbourne. Professor Kofman graduated from Erasmus University Rotterdam, the Netherlands, with a PhD in Economics.

Professor Kofman and Associate Professor Pinder ‘buddied up’ throughout the production phase – each attending the filming for the others’ lectures in order to pick up and correct any imprecisions on the spot. They quickly realised that a two-hour lecture would take only about 45 minutes to film uninterrupted and learned to adapt their delivery for the virtual audience.

Sean Pinder is an Associate Professor at the Faculty of Business and Economics, the University of Melbourne. Sean has been honoured with the Edward Brown Award for Teaching Excellence by the University of Melbourne.

aspects of the course through business simulation tasks where the student plays the role of an investment analyst located in Shanghai logging into a series of simulated web conferences with a colleague in Sydney and their manager in New York.

Paul Kofman and Sean Pinder discuss filming with Jamie Morris from learning environments.

“ Over 40 per cent of students are from emerging economies, which reinforces for me how important such courses are in providing accessibility to students worldwide regardless of their circumstance.” 43

University of Melbourne team present at the 2015 AUBCC in Sydney.

STUDENT ACTIVITY

The top four teams presented their recommendations to The Smith Family in front of a judging panel that included senior consultants, industry experts, and The Smith Family CEO Lisa O’Brien. It is this special focus on Australian businesses that differentiates AUBCC from other competitions.

University of Melbourne students compete globally through the International Case Competition program, with Faculty of Business and Economics students competing in Belgrade, Copenhagen, Bangkok, Florida, Vancouver and Oslo in recent years. In November it will be the University of Melbourne’s turn to host the Australian Undergraduate Business Case Competition. Typically, a case competition consists of two or three rounds conducted under strict time pressure. Preparation times vary between cases, and can be six, 12 or even 30 hours long, with teams concentrating intently to rehearse and perfect their presentations. Dean Lee, a member of the 2015 University of Melbourne team Iceberg Consulting, describes it as a concentrated peek into the world of consulting. “I definitely learnt a lot about my own weaknesses through the process,” says Lee. “We put ourselves through this trial of doing case after case and it’s exciting, but really challenging at the same time.”

Iceberg Consulting gained valuable insight into the business world, forged lasting business connections and friendships, and learned to work as a team with a single shared objective. They agree that AUBCC was one of the steepest learning curves they have experienced, but it is a challenge they would eagerly take on again. “The most enjoyable part of the experience at AUBCC was getting to meet and interact with other teams, which I wasn’t expecting,” says Spence. “We all share the experience, the ups and downs, the travel – it’s not just about the case and solving the problems.” Among the myriad skills developed, Lee’s biggest takeaway from the process was learning to adapt to a team scenario. “In the end, you learn how to self-reflect and adapt to get the most out of the team.”

“ We all share the experience, the ups and downs, the travel – it’s not just about the case and solving the problems.”

UNDERGRAD STUDENTS SOLVE GLOBAL BUSINESS CHALLENGES Textbook theory meets real-world business problems in the Australian Undergraduate Business Case Competition (AUBCC). Bachelor of Commerce student Laura Foo was at the most recent event, held in Sydney, to watch problems tackled, leadership lessons learned, and global networks hatched.

At one end of the foyer, huddled groups of suit jackets and blazers are waiting to present the business case they have been working on for the last 12 hours. They murmur, deep in concentration, and oblivious to the audible elation of the teams on the other side of the room. There are beaming smiles, excited air punches and laughter – a well-deserved but brief reprieve before the next round of competition. It is these infectious highs that make case competitions so unforgettable for the student competitors, and that make the blood, sweat and tears of preparation worth every moment.

Between presentations, teams get to know each other and form friendships at social days. Lee and his team mates, Jenny Luu, Edward Spence and Patrick Coleman, all Bachelor of Commerce students, placed an admirable second out of 16 teams in the 2015 AUBCC hosted by the University of New South Wales. The competing teams presented creative business solutions to cases including Telstra’s potential expansion into South East Asia and funding for The Smith Family’s Australian numeracy program. In providing solutions, many different facets of the business are analysed – from financials, to production methods, to marketing – and recommendations are made.

Students also get a quick lesson in leadership, learning how to leverage team members’ strengths in a highly pressurised situation. “I met so many like-minded people at AUBCC,” says Spence, “people who are driven, and want to challenge themselves in a way that isn’t mandatory for uni. People opt in to the experience. It’s completely different to anything else I’ve ever done at uni. That’s what makes it so great.” Laura Foo is Director of Marketing and Communications for the AUBCC 2016 event at the University of Melbourne, which will be held from November 27 to December 2. aubcc.com facebook.com/AUBCaseComp

Laura Foo (far right) discuss strategy for AUBCC 2016 with the Marketing and Communications team.

Case competitions are a unique opportunity for the brightest, most innovative young business minds from throughout the world to gather in one city. In just a week, they analyse and present solutions to real business problems amid gruelling competition, applying textbook theory to current business cases.

For Coleman, the training before the competition was the best part of the experience. “It gave us, as a team, an opportunity to bond, which ultimately benefits the way we work together, both during and post-case,” he says.

STUDENT INTERNSHIPS — Profile

“It’s like an explosion of knowledge.” Despite working long hours and being pushed out of their comfort zones, they faced the challenge head on and thrived. Final-year Bachelor of Commerce (BCom) student Xiaoyu Tian worked in the assurance division in the Chengdu office. “This job is all about teamwork,” says Tian. “We work together; have dinner together, even going to the gym together after work. People in the team are so friendly, and they are always there to help. All I need to do is ask and learn.” As a vital member of the team, Tian was working directly with a client across a range of projects. “Our client for this project is a huge listed group in China which has many subsidiaries with very diverse businesses – land development, urban construction and even internet financial service. To do this auditing project, we had to communicate closely with our clients and understand them, so not just me, but everyone in the team keeps updating and learning new things. It’s like an explosion of knowledge.” FeiFei Wu, a final-year Master of Management (Accounting) student, quickly adapted to the fast pace of ShineWing’s Hangzhou office. “The transition from theory to practice was a bit tough,” explains Wu. “Fortunately, both project manager and department manager taught me a lot and I picked things up quickly. It was exciting to learn new things every day.”

Tracey Skordos

Internships are a great opportunity to test assumptions about career choices and even help with academic planning.

INVESTING IN GLOBAL LEADERS

“The experience gave me lots of insights about my future career,” says Wu. “It is a great opportunity to find out if this type of job is really suitable for you.” Intern Ke Bai agrees; the internship was a great way to find out whether an auditing career is right for her. A student in the Master of Management (Accounting), Ke has decided to build on what she has learned and enrolled in the ‘Advanced auditing and assurance’ subject this semester.

University meets industry in a partnership to identify and accelerate future leaders.

As the world of work changes, with many arguing it will be unrecognisable in as little as 10 years, students must prepare to be part of a workforce that is uncertain. Educators not only have a responsibility to ensure that students gain the knowledge to excel in their field, but that they also learn soft skills such as business communication, resilience, agility and the ability to work across cultures. To facilitate this the Faculty of Business and Economics collaborates with industry to deliver co-curricular work experience allowing students to test the water and even throw themselves in at the deep end, confident that someone is there to help them swim. In 2011, the University of Melbourne and ShineWing, China’s largest domestic accounting firm, launched an internship program to give students the opportunity to work cross-border, advance their skills and build business connections. Driven by the vision of Mr Zhang Ke, chairman of ShineWing globally and vice-president of the Chinese Institute of Certified Public Accountants, two students travelled to Beijing in September that year. The ShineWing internship is now open

to up to 10 students across Beijing, Chengdu, Guangzhou and Shanghai, giving talented and aspiring accounting students a truly SinoAustralian experience and potential career path. Advocating for internships, Matthew Schofield, Partner at ShineWing Australia, echoes the famous words of former Chinese leader and revolutionary, Deng Xiaoping: “When our thousands of Chinese students abroad return home, you will see how China will transform itself”. According to the partners, global development at ShineWing will be driven by future generations of Chinese and Australian accounting students. The program fulfils a dual strategic purpose – providing opportunities for students to experience greater education and work experience and gaining access to the nation’s best bilingual accounting talent to accelerate the firm’s growth.

Ella Wei, the program’s first intern, was recruited by ShineWing and is now a consultant within the assurance division. “ShineWing’s internship program with the University of Melbourne has allowed us to provide Chinese students with greater employment prospects both in Australia and back home in China,” says Schofield. “Students often work in ShineWing client service teams, providing professional services to China’s big end of town. Internship programs will also increasingly be of great benefit to Australian corporates wishing to move and expand into China.” In February this year, four students returned from their two-month placements in Hangzhou, Chengdu, Qingdao and Beijing, having experienced the fastpaced work environment of peak audit season.

“China is a big, developing country with a lot of manufacturing companies,” she says. “I got the chance to visit the clients’ factories and see their work environment and to check their inventories and raw materials, which is very special because I would not have the chance to see those with my own eyes if I were not auditing the companies.” The Faculty of Business and Economics offers employers the opportunity to recruit the highest-calibre students studying across the areas of accounting, actuarial studies, economics, finance, management, marketing, supply chain management, human resources and international business. Our mission is to enable individuals and organisations to engage with the global leaders of the future. Image: Some of the 2016 student interns in the ShineWing program caught up on their return to Melbourne. Tracey Skordos and the Student Employability and Enrichment team foster strong and mutually beneficial partnerships with industry, government and not-for-profit organisations to deliver challenging and rigorous programs. They empower strategic, global thinkers who consistently step up to leadership roles, locally and internationally. The industry engagement program gives organisations access to these future leaders.

EVENT

Lauren Yee

CELEBRATING THE VALUE OF EDUCATION

MELBOURNE FOUNDATION FOR BUSINESS AND ECONOMICS DINNER 2016 The National Gallery of Victoria once again played host to the Melbourne Foundation for Business and Economics Annual Dinner, held on 3 March 2016. This was the sixth Foundation Dinner, with more than 650 guests in attendance, including a record 65 corporate sponsors. Tony Burgess (BCom 1980), Chair of the Foundation, set the tone for the evening in his welcome address. Before an audience brimming with some of Australia’s most influential business leaders, Mr Burgess emphasised the global impact of a Melbourne business and economics education and called the dinner a “celebration of the enduring value of education”. Professor Paul Kofman, Dean of the Faculty of Business and Economics, gave guests an insight into the scale and quality of the Faculty’s educational offering. With 6000 undergraduate students enrolled in the Bachelor of Commerce, and 3000 graduate students enrolled in masters programs, more than half of whom are international students, Professor Kofman told guests that the Faculty is “truly an international educator”.

“It is not surprising that our average graduate is not only academically excellent, he or she also speaks an Asian language in addition to English, has excellent cross-cultural understanding and is an all-round team player.” - Professor Paul Kofman, Dean, Faculty of Business and Economics

Mr John Fraser, Secretary to the Treasury, delivered the keynote address, presenting an historical overview of Treasury’s role in the Australian economy over the past 40 years and highlighting the importance of encouraging talented graduates to join Treasury. Contributing to the atmosphere of celebration was the announcement of the 2016 Alumni of Distinction Awards, recognising Business and Economics alumni for significant achievements in their chosen field. In accepting the award for Outstanding Achievement, Mr Peter Scanlon AO told those gathered that his education at the University of Melbourne was the “cornerstone” of his life and career. Ms Elizabeth Smith, third-year Bachelor of Commerce student and recipient of the Premier Fruits Group First in the Family Scholarship was the embodiment of the theme. She described how her scholarship enabled her to undertake exchange study in South Korea and Taiwan that in turn helped her gain first-hand experience of international marketing strategies, and how pursuing a degree had exposed her to the possibilities for her future that once seemed abstract. “You can be anything,” the marketing major quoted from an advertising campaign that had inspired her, but she clearly demonstrated that such a slogan could only become a reality through the combination of education and aspiration. The dinner raised more than $600,000 for the Foundation, further cementing the connections between the Faculty and the business community.

“ A foundational education in business and economics has always been a great international passport to leadership positions in business and in government.” – Tony Burgess, Chair, Melbourne Foundation for Business and Economics

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