FBE Research magazine July13

research Edition 1, 2013

China’s generation of little emperors

Gambling Industry Insights

The fall of unions

Five fatal flaws of the Gonski Report

Trading on the

dark side

A community of world class researchers

Collaboration heralds start of a new era

Academic research of a world class nature is a hallmark of the Faculty of Business and Economics.

The recently announced collaboration between the Faculty of Business and Economics and Melbourne Business School heralds an exciting future for our two outstanding entities.

T

he University of Melbourne is a leading research-based institution, as consistently indicated by the Australian Excellence in Research for Australia (ERA) rankings and leading international rankings and accreditations. The Faculty of Business and Economics’ strategic focus is to foster a community of world class researchers to conduct research and provide research training that firmly establishes a global top 25 ranking in each of its disciplines. Be it in accountancy, actuarial studies, economics, finance, leadership, management, marketing or social policy, our staff engage in research that drives a deeper understanding of the challenges and issues that confront economies and societies worldwide.

The quality of the faculty’s research outcomes is evident by an increasing number of publications in the premier journals listed in Thompson Reuters (ISI) Web of Knowledge, and those featuring on the Financial Times journal ranking list. In 2013, the QS World Rankings highlighted the faculty’s disciplines as global leaders with accounting and finance ranked 7th best in the world and economics and econometrics ranked 20th, both first in Australia. The Faculty of Business and Economics is also home to Australia’s longest standing social and economic research institute, the Melbourne Institute. In a 2012 ATN/Go8 EIA Impact Trial, research conducted in the Melbourne Institute was recognised for its outstanding impact on socio-economic policy.

Within this magazine you will find examples of research excellence across all of our disciplines as well as an example of research-led engagement with industry, we hope you enjoy.

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

Authorised by: Dean, Faculty of Business and Economics. CRICOS Provider code: 00116. Intellectual Property: For further information refer to Statutes and Regulations. Copyright: The University of Melbourne 2013. Copyright in this publication is owned by the University and no part of it may be reproduced without the permission of the University. Disclaimer: The information in this publication was correct at the time of printing. The University of Melbourne reserves the right to make changes as appropriate. As details may change, you are encouraged to visit the University’s website or contact the University of Melbourne Information Centre to obtain the latest information.

The collaboration brings together our complementary strengths in research, teaching and industry relationships to create the maximum positive impact on business and community.

Melbourne now has one unified school offering true excellence at every level of a business and economics education from undergraduate and graduate to post-experience and executive education.

The FBE and Melbourne Business School offer new inspiration to individuals and organisations facing these turbulent times: a global hub in business and economics education.

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RESEARCH

4 A community of world class researchers

Insights into research at the Faculty 6 Insights into Chinese companies’ overseas listings

Insights from the inaugural James Riady Chair 7 China’s One-Child Policy creates a generation of ‘little emperors’ 8 The magic bean

The influence of industry standards on market creation 10 Snake eyes: the duty of care of the gambling industry

What is the legal duty of care of the gambling industry to their patrons?

12 Trading on the dark side of the market

The increasing phenomenon of dark trading 14 The fall of unions and rise of collective bargaining

Collective bargaining has helped increase pay packets for workers 16 Australia’s major projects fail due to dysfunctional teams 17 Five fatal flaws of the Gonski Report industry engagement

18 ‘Project Noah’ – driving efficiency across Australia’s industry

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SUPPORTING

World Class

‘As a researcher I am interested in causality, in finding out how things work in order to truly inform.’

Canadian academic, Professor John Haisken-DeNew is Associate Dean Research of the Faculty of Business and Economics and spearheads the faculty’s research agenda.

number of years as an after aeconomics academic in Canada, Professor Haisken-DeNew moved to Europe and Germany in particular. He would spend 22 years in Germany, picking up an Economics Doctorate focussing on Migration Economics at the University of Munich, and eventually accepting a full Chair in Competition Theory and Policy (Economics) at the Ruhr University in Bochum. In 2011 he joined the University of Melbourne, taking up a position with the Melbourne Institute, Australia’s leading economic and social research institute.

This academic experience in both Canada and Europe has given him a unique insight into the supportive structures that allow the Faculty of Business and Economics and the University of Melbourne to maintain their leading rankings in research and teaching (see box) in Australia and the world.

“An incredible attractiveness of working in research at the University of Melbourne is that there is much more focus given to research and research productivity than what I experienced in Europe. There is so much more research support in general and that is all the way up the line, from PHD students in research training, to junior researchers and Associate and full Professors.”

Yet Professor Haisken-DeNew asserts that it is not just the material support or facilities that attract researchers to the faculty, “The main reason for doing research here is the people who you will be working with, those people just down the hall from you are world leaders in their fields. We have academics here that have been instrumental in establishing the

academic basis for the Carbon Tax, who have influenced many of Australia’s social welfare reforms and who have broken new ground on insights in economics, finance, accounting, management and marketing. If you choose to undertake research here, these are your colleagues, these are the people who you can be your sounding board and will provide invaluable comments on your research.”

This world class research community extends not just across the faculty or the university, but spreads across the globe, a prevailing characteristic that struck Professor Haisken-DeNew. “One thing I found very striking here compared to my experience in Europe is the number and quality of researchers that are visiting on a regular basis. World class scholars come here from across the globe.

There is such a large open and accessible network that reaches across the world from this faculty. It simply doesn’t happen at every university.’

strategy that encourages and accelerates interdisciplinary cooperation.

“If there is not a common thread that is flowing through the entire research agenda of the university then is going to be difficult for synergies to be realised. It makes sense to categorise these things to show the interdisciplinary linkages between say business and economics and engineering in order to tackle the truly big research questions. A lack of a common theme will result in decentralised, ineffective, individual units that are not talking to each other. This strategy provides the forum to allow units to talk and collaborate together.”

The University of Melbourne has just rolled into its 160th year while the Faculty of Business and Economics is approaching its ninetieth birthday. Throughout this time the University and the Faculty have pioneered world class research in Australia, Professor Haisken-DeNew is confident that the determination towards ensuring this world leading research continues is as resolute as ever.

At the University of Melbourne, research is guided by the overarching ‘Grand Challenges’ strategy. The research priorities “We see ourselves clearly at the forefront of the University have been refocused of research in Australia and we are to address better the major challenges putting resources behind that. We place facing the world and to increase its global a heavy focus on quality and incentivise research competitiveness. A striking feature quality. To be number one once is the of this strategy is to build precincts in objective of many institutions, ours is to dedicated disciplines across the campus. remain consistently number one.

Precincts that bring like-minded In this Faculty, the support, researchers from Melbourne The determination and research and partner organisations University talent exists interlinked together to collaborate in across all departments, of Melbourne is addressing fundamental which, as the old German the no. 1 Australian research questions that saying goes, allows us ‘to university and will help address these dance at many weddings no. 28 globally ‘Grand Challenges’. It is a all at the same time’.”

(The Times Higher Education World University Rankings 2012-2013)

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Research

The University of Melbourne is the first and only Australian university to rank in the top 100 for Business and Economics Academic Ranking of World Universities, Shanghai Jiao Tong University 2012

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Research

TO LIST OR NOT TO LIST? A unique study has revealed key considerations that must be taken into account before Chinese companies decide to place their companies on international stock exchanges.

By Eoin Hahessy

Lu, Professor Jane the Riady Chair in Asian Business and Economics, has co-authored a study which, examined 90 Chinese companies listed on the Hong Kong, Singapore, U.S. (NYSE and Nasdaq) and U.K. stock exchanges.

It found that Chinese companies with high discretion slack resources, or high amount of underutilised and hidden spare energies performed better during the Initial Public Offering (IPO) than those companies who had low discretion slack resources.

An example of high discretion slack is a company’s cash reserve on hand, which is one of the most liquid forms of asset available to the company. Low discretion slack includes debt and spare capacity.

The evidence from these listings demonstrated that only high discretion slack has a positive effect on operating performance, measured by ROA, ROS, EBITDA, while low discretion slack has either no effect, or negative effects on measures of operating performance.

Since the listing of Tsingdao Beer on the Hong Kong Stock Exchange in July 1993, there has been a flood of overseas listings of Chinese firms. Motivated by the need for further growth and to exploit opportunities in the global market, Chinese firms have started to list their stocks in overseas markets in ever increasing numbers.

“How can firms benefit from overseas listing? Will listing on a stock exchange outside a firm’s home country increase its operating performance? These are some of the questions that are the most important ones for managers to answer when they consider whether to list their company’s shares overseas,” highlighted Professor Lu.

Operating performance of the 90 Chinese companies was the focus of study, with it being measured by different indicators, including return on assets (ROA), return on sales (ROS), asset turnover, EBITDA growth, “Listing corporate stock on foreign and sales growth. In particular, the trends exchanges and trading stocks in foreign of changes in profitability, efficiency, sales markets can raise capital to expand and leverage from one year before the operations, but a company’s existing listing to three years after the listing, resources determine the extent to which such expansion opportunity indicating the changes in operating is utilised,” Professor Lu Since performances surrounding explained. the listing of overseas IPO events.

Tsingdao Beer on the Hong Kong Stock Exchange in July 1993, there has been a flood of overseas listings of Chinese firms

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Professor Jane Lu is the inaugural holder of the James Riady Chair in Asian Business and Economics. The James Riady Chair in Asian Business and Economics is funded through a generous donation by Dr James Riady, an alumnus of the Faculty of Business and Economics, with the objective of supporting teaching and research that drives a deeper understanding of doing business in the Asian region.

Research

China’s One-Child Policy creating a generation of ‘Little Emperors’

©Jeffrey Aaronson/Still Media

China’s contentious one-child policy has produced a generation of untrusting and over-sensitive “Little Emperors”, research from the Department of Economics has found. Eoin Hahessy reports. the Chinese Government IN 1979, banned couples from having more than one child as a means of combating runaway population growth.

“We found that individuals who grew up as single children as a result of China’s one-child policy are significantly less trusting, less trustworthy, more risk-averse, less competitive, more pessimistic, and less conscientious,” said Associate Professor Nisvan Erkal from the Department of Economics within the Faculty.

“Only children normally come about as a result of their parents’ decision not to have another baby, but for the Chinese this decision was made for them.

“This unique situation allows us to analyse

the traits of these children regardless of their family background, and compare them with other only children.”

other economic decisions – to measure participants levels of trust, risk-taking and competitiveness.

The study ‘Little Emperors: Behavioral Impacts of China’s One-Child Policy‘ was published in the prestigious Science journal, and is based on research by Associate Professor Erkal, Professors Lisa Cameron and Lata Gangadharan (Monash University) and Professor Xin Meng (ANU).

Personality surveys also revealed only children who grew up after the one-child policy was implemented were commonly less optimistic, more sensitive or nervous, and less conscientious.

The researchers recruited about 400 Beijing residents who were born just before and immediately after the implementation of the one-child policy.

“We did analyse other factors that might have explained this shift, including the participant’s age, marital status and growing exposure to capitalism,” Associate Professor Erkal said.

They used a series of ‘economic games’ – in which participants exchange or invest small amounts of money, or make various

“But we found that being born before or after the one-child policy best explains our observations.”

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Research

The

On average Australians consume 250 cups of coffee each year

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Magic Beans The influence of industry standards on market creation How can an industry standard drive the success of niches within established markets? Research in the Department of Management and Marketing is examining the specialty coffee industry to find out.

Danielle Roller reports.

“despite Melbourne’s self-proclaimed reputation as a city of coffee connoisseurs, we are mostly just drinking flavoured milk. The coffee most cafes are serving is often a blend of bad quality or old beans, essentially the wine drinking equivalent of a cask of Coolabah” says Professor Simon Bell. Professor Bell is studying a sector that is attempting to transform the coffee industry in Melbourne to one where the appreciation of coffee beans resembles the reverence devoted to grapes within the wine industry.

“In the same way you know what variety of grape your wine is made from and which wine regions you favour, it is possible to have an appreciation for one variety of coffee bean, and a preference for one coffee growing region over another,” outlines Professor Bell.

“Currently one of the only ways consumers can judge a coffee is whether or not it has the ‘Fairtrade’ seal of approval,” Professor Bell says. “Fairtrade carries a high level of moral authority, it ensures that accredited farmers meet minimum social, economic and environmental requirements in order to receive a price for their coffee slightly above the commodity price. But Fairtrade is a comment on the ethical issues of coffee purchase and has nothing to do with the quality of the bean. Fairtrade coffee can be good, but this is often a happy accident.”

Working with Dr Paul Tracey of the Judge Business School at Cambridge University, Professor Bell is investigating their theory that success in setting a standard by

which an industry is judged or accredited can be the difference between whether a new market niche succeeds or fails.

After oil, coffee is the most widely traded commodity in the world by volume

do they change the way consumers think about what is fair and what is good?”

Depending on the outcomes 2013 MoneyWeek In particular their research is of the research, Professor examining a different ranking Bell believes the findings may system that emerged in 1999, have the capacity to influence known as The Cup of Excellence. This other types of social behaviour, an consortium sources the finest beans in endeavour Professor Bell refers to the world, puts them up for auction and as “macromarketing”. There may be generally nets the producers much higher implications of this research for increasing prices than those that have the Fairtrade consumer adoption of sustainable stamp. Although these Cup of Excellence products, safer driving behaviour, or beans are not technically Fairtrade, they reduced drinking, gambling and other are in fact fairly traded, with the added forms of problem behaviour. advantage of being much higher quality, “This research will look at how you can with a traceable, transparent background. change the criteria by which people make The problem for this speciality coffee decisions. At the moment, there are many industry, who subscribe to good quality people for whom the Fairtrade stamp is coffee at a fairly traded price, is that coffee the only consideration, and that is certainly consumers are not generally aware of one, legitimate criteria by which to judge the existence of other accrediting bodies, the coffee you drink. We want to know and can only judge on the criteria or what it will take to build an alternative accreditation system that they know, standard.” such as Fairtrade.

So whether it’s selecting your morning “What we are looking at is how a new coffee, choosing a green laundry detergent market within an established industry or sticking to the speed limit, the insights gains legitimacy and, more specifically, into consumer behaviour to emerge from how an accreditation body for that this research have significant potential to new market is able to gain respect guide those with the aims of changing or and kudos when it is using completely influencing that behaviour. different criteria,” states Professor Bell.

Professor Simon Bell is Director of “Most research focuses on how markets Executive Education for the Faculty themselves grow, mature and decline, but of Business and Economics and tends to overlook how the accrediting teaches marketing to undergraduate, institutions that underpin markets establish their own legitimacy. In other words, how graduate and executive audiences.

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Research

NAKE EYES the duty of care of the gambling industry

Gambling is a popular pastime in Australia and while most people approach it responsibly for others it can lead to enormous financial and social damage. The prevalence of problem gambling and the rapid growth of the gambling industry both in Australia and online raises the issue of the legal duty of care owed by the gambling industry to their patrons. One expert in the Department of Accounting is following this issue closely. Rees Quilford reports.

than 80 per cent of Australians participated in some form of gambling activity on an annual basis and more than 40 per cent gambled on a regular basis according to a recent report by the Productivity Commission.

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this issue. She has undertaken a detailed examination of how Australian gambling law compares with the rest of the world in its approach to duty of care in the gambling industry, as well as the handling of self-identified problem gamblers and pathological gamblers.

With gambling being such a popular practice in Australia it is no surprise that the industry to support it is extensive. Current estimates suggest the industry accounts for 1.5 per cent of GDP and employs more than 100,000 people across 7,000 businesses.

Hinchliffe says that there has been much debate around the duty of care owed by gambling venues to their patrons, “Casinos across the world have been sued for negligence because they breached an alleged duty of care to patrons.

The question of course is what duty do gambling venues in fact owe their patrons?”

Despite its popularity the adverse effects of problem gambling is a concern. Around 70 per cent of people surveyed in the Productivity Commission report believed that gambling did more harm than good and 92 per cent said that they did not want to see further expansion of gaming machines.

In 2010 it was estimated that that approximately 130,000 Australians, or about one per cent of the adult population, had severe problems with gambling. It was also estimated that a further 160,000 adults had moderate problems. Taken together, ‘problem gamblers’ represented over 290,000 people, or 2.1 per cent of Australian adults.

Given those numbers it is unsurprising that the obligations and responsibilities of gambling providers is subject to scrutiny.

The duty of care owed by gambling entities to their patrons is a hotly contested issue.

Sarah Hinchliffe, an expert in the field of gambling law, international and comparative intellectual property, disability law and international taxation is exploring

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The response by policymakers in Australia and across the world has been to encourage, and in some cases, compel gaming entities to develop and implement procedures that allow gamblers to selfexclude themselves.

Opinions about the purpose and effectiveness of self-exclusion policies are mixed according to Hinchliffe. Many argue that the burden of self-exclusion should sit with the gambler alone. The contrary position advocates for liability on behalf of the gaming provider if they are found negligent in enforcing self-exclusion. This debate is played out in courts across the globe when casinos and other gaming entities have been sued for negligence.

Despite having a population of just close to 23 million. Australia has the highest gambling rate in the world. In 2008/09 Aussies lost about $10.4 billion on the pokies.

Melbourne Institute

“Casinos across the world have been sued for negligence because they breached an alleged duty of care to patrons. The question of course is what duty do gambling venues in fact owe their patrons?”

According to Hinchliffe most cases of litigation by self-excluded gamblers are unsuccessful, “Often compulsive or problem gamblers have been unsuccessful in their pursuit to establish an action in negligence against a gambling provider such as a casino. A compulsive gambler will generally not proceed past summary proceedings to discuss the complaint,” she says.

This trend has held true here in Australia, “It is difficult for a problem gambler to establish an action under the tort of common law negligence let alone breach of statutory duty, or unconscionable conduct under the Competition and Consumer Act,” says Hinchliffe.

“Generally, it is understood that no duty of care is owed to problem gamblers to prevent them from suffering gambling loss. In this sense, court decisions clearly support a finding that gambling providers do not owe a duty to exclude a compulsive gambler, other than in an ‘extraordinary case’ or possibly where a provider acted intentionally or recklessly” she says.

This position differs from the accepted understanding relating to the provision of alcohol, “The results in gambling cases are in stark contrast to cases involving actions by patrons against venues licensed to serve alcohol who have suffered damage associated with intoxication” she says.

Research

According to Hinchliffe the findings of a case against the Ontario Lottery Gaming Corporation in 2007 has the potential for far-reaching consequences in relation to duty of care in the gambling industry.

Hinchliffe says quite different regulatory environments exist internationally. A Gambling Act was introduced in the United Kingdom in 2005. It requires licensed gaming entities to take measures concerning the problem of compulsive gambling. Provinces in Canada with casinos have also introduced self-exclusion programs.

According to Hinchliffe the findings of a case against the Ontario Lottery Gaming Corporation in 2007 has the potential for far-reaching consequences in relation to duty of care in the gambling industry.

The finding suggested that a duty of care is owed by gaming providers to compulsive gamblers.

“This is contrary to other common law jurisdictions that have concluded that selfexclusion shields the operator except for intentional misfeasance or extraordinary circumstances. It may open the floodgates to problem gamblers in certain circumstances,” she says.

Countries in the European Union adopt a varied approach to the imposition of duty of care and monitoring of self-excluded gamblers. “In France, for example, self-excluded gamblers are placed on national databases of gambling addicts, but cases also indicate difficulty in a problem gambler successfully bringing an action under the tort of negligence against a gambling provider,” Hinchliffe explains. Meanwhile gambling providers in Netherlands and Switzerland are subject

to more onerous restriction, “This includes identification and monitoring patrons who are compulsive or problem gamblers.”

So, what can be learnt from the different approaches adopted overseas? The Australian Productivity Commission report recommended that governments enhance the capacity of gamblers to obtain judicial redress against gambling providers that behaved in an “egregious” manner. It suggested that this could involve a new statutory duty of care that would apply in circumstances where a venue-based provider has behaved in specified ways that would clearly contribute to harm in certain circumstances.

Hinchliffe says that the structure of the Australian legal system presents a challenge. “While state and territory governments are, arguably, pre-eminent in gambling policy, variety can stem from poor coordination between jurisdictions.

It is evident from the cases litigated so far that the process of courts identifying and refining all the circumstances under which gamblers are able to seek redress using traditional causes of action is likely to involve lengthy periods of legal uncertainty.”

Enhancing compliance and complaints handling arrangements, particularly strengthening penalties and disciplines for serious breaches, is an option Hinchliffe says could be implemented in lieu of introducing a statutory cause of action.

Hinchliffe’s research also encompasses addictive behaviours and online gambling.

According to Hinchliffe, the rise of online gaming presents a whole range of new issues for legislators and policymakers in regard to notions of duty of care, “The internet is not a jurisdiction. Establishing a duty of care for traditional gaming entities like casinos has proven very difficult across the globe. It is nearly impossible online.”

“Just because an online gaming company is operating here in Australia doesn’t mean that they are subject to Australian laws and jurisdictions. They could be based in Russia or Asia. Policing duty of care in relation to online gaming is a very difficult task,” she says.

Hinchliffe’s research is providing insight not only in the online frontier but also on recent moves to classify compulsive behaviour such as problem gambling as a disability.

This would have far-reaching ramifications for the gambling industry as it would bring about the involvement of international bodies such as the Organisation for Economic Cooperation and Development (OECD) and the World Health Organization (WHO). The debate on the duty of care of the gambling industry is shifting to an entirely new playing field.

Sarah Hinchcliffe teaches Taxation for Business Decision Making to Bachelor of Commerce students in the Department of Accounting.

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Research

Trading on the

dark side The rapid increase of ‘dark trading’ in the Australian stock market has caused regulators to sit up and take note. Research conducted by Professor Carole Comerton-Forde, in the Department of Finance, has informed the Australian Security and Investment Commission’s (ASIC) new regulations governing dark trade. Fiona Lawry reports.

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The meaningful impact rules will bring down the level of dark trading and improve overall fairness

refers to a trade dark trading that occurs without pretrade transparency in relation to stock, price and quantity. Trades done ‘in the dark’ are hidden from the public and other brokers before and during the trade and the details of the trade are reported only once it is complete. By contrast a lit exchange is where all bid and ask orders can be seen and all of the demand and supply is visible to traders.

Dark pools were originally created to allow traders to anonymously execute large-scale share transactions that would normally cause big price movements and short-term price volatility on public markets. These types of trades are known as ‘block trades’. Currently in Australia a block trade is legally defined as a trade over A$1m (likely to be an institutional trade), however at the end of May 2013 new regulations devised by ASIC will come into place and change the definition of a block to range from A$200 000 up to A$1m.

Dark trading is an increasing phenomenon in Australia and accounted for between 14 and 22 percent of all trade between 2008 and October 2011. In the US it accounted for almost 37 percent of trading by January 2013 (Rosenblatt Securities).

With dark trading on the rise and trading technology becoming more automated and innovative, increasingly smaller trades are being traded in the dark, which would not have happened previously under the manual system. While dark trading can be beneficial for market quality, the increase in dark trading below block size has caused regulators to question whether some dark trading is hindering price discovery and liquidity.

The ASIC report (331) − Dark liquidity and high frequency trading − published in March 2013 states: “There are concerns about the changing nature of dark liquidity and its impact on optimal price formation.

There are also questions about the fairness of dark venues for investors, with concerns that they are not regulated as markets and ‘free ride’ on the pricing and information set on exchange markets.”

Comerton-Forde comments, “What’s happened, as the market has become more automated and more dark pools have been launched, is that a lot of dark orders are being sliced up into smaller sizes.” Given that dark trading was established to limit short-term price volatility on large trades it is “unclear why these smaller trades should be conducted in the dark”, and regulators are beginning to look more closely.

In July 2012, ASIC established two internal taskforces to undertake thematic reviews of the issues related to dark liquidity and high frequency trading (HFT). The purpose of the Dark Liquidity taskforce is to promote market integrity by appropriately regulating dark pools, ensuring participants act in the best interests of clients and taking appropriate action for misconduct occurring in the dark.

It also seeks to uphold market quality by delivering efficient price information and ensuring investors are well informed about how their orders are executed and have confidence in the integrity of the market.

Comerton-Forde’s has been consulting to ASIC and her research with Talis Putnins, Chancellor’s Postdoctoral Research Fellow at UTS Business School, has informed the taskforce findings.

The Australian Securities Exchange

operates a dark pool and there are 19 crossing systems operated by 15 brokerage firms. In total there are about 90 brokerage firms operating in Australia.

Comerton-Forde explains that “dark pools take in orders in the same way as an exchange would − the broker takes the order and inputs it into a system, the order should also be dark to the broker so that they cannot observe the order flow (stock, price, quantity).” Orders are matched using price and time for example, “if there are two orders at the same price then the order that came to the market first gets to trade first (order flow).” There are variations on this practice, at the discretion of the broker, where priority is given to particular types of clients or bigger orders and currently there is no legal obligation to report on how a dark pool operates.

ASIC’s March report proposes a number of changes to the way dark trading is carried out. These include new Market Integrity Rules regarding transparency, monitoring, systems and controls, fairness and conflict management. Under these rules brokers must have transparent procedures about their operation, order types, fees and monthly turnover. They must also make disclosures to users about users’ obligations, publish courseof-sales reports, examine orders and trades in the dark for misconduct and report any instances to ASIC. ASIC proposes to enhance conflicts of interest obligations and prevent direct cash payments for order flow.

Comerton-Forde sees these changes as important to ensure the quality of the market, “I think the meaningful price impact rules will have a big impact and bring down the level of dark trading and improve the overall fairness of the market.”

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Research

The fall of unions and rise of collective bargaining The Australian labour market has experienced a significant rise in the use of collective bargaining, unionised members are taking home a bulkier pay packet but the unions have not been setting the agenda.

By Eoin Hahessy

and Rise of Enterprise THE Rise Bargaining in Australia 19912001 examines the major institutional changes in the Australian labour market during this twenty year period and found the growth of non-unionised collective agreements to be the salient feature governing work relations.

“Everyone thought that with the decline in union membership, which has been evident since the 1970s, you would see a huge drop off in the number of agreements the come through the system, but in fact what we have seen is there has been a dramatic increase in the number of agreements made,” co-author of the

AAP image/Joe Castro

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research Professor Peter Gahan, of the Department of Management and Marketing explained.

“Unions have essentially been side stepped.

What we have seen is a substantial rise in non-union agreement making. This is a significant shift. There has been less bargaining and more management decision making dominating the way terms and conditions are made with the work force.”

Institutional changes in the Australian labour market created significant incentives for Australian employers to grasp the industrial relations reins and accelerate

this trend. In 1992 legislative changes were made which allowed for nonunion agreement making. In 1996 further changes were made that ensured individual agreements took precedent over collective agreements, but it was the Work Choices legislation of 2005-2006 that decapitated the ability of unions to prosecute agreements.

Unions have essentially been side stepped. What we have seen is a substantial rise in non –union agreement making

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AAP image/Joe Castro

“Work Choices had a structural effect, it weakened the capacity of unions to prosecute collective agreements. It undermined their ability to go into a workplace to recruit members to deal with industrial grievances and prosecute wage claims,” outlined Professor Gahan.

“It seemed that under Work Choices many employers got a taste for blood and had experience of being able to displace unions and set the terms on which industrial relations was being conducted. They were able to reduce a range of labour costs that were previously enshrined in awards.

Then, when they once again faced a more normalised type of regulatory setting under the Fair Work Act, they found it harder to adjust and have continued to be more hostile to unions.”

Professor Gahan’s research has established that while unions have fallen from power, their members take home a bulkier pay packet, and in recent years this packet has got larger. “In the last five years the size of the wage premium associated

with unionised collective agreements has increased and unionised workers are earning a bigger premium compared with non-unionised workers. Ironically, as the role of unions in sectors is shrinking they are able to prosecute better wage outcomes for their members,” highlighted Professor Gahan.

post school qualifications. Indeed fewer managers have post school qualifications than non-managerial workers employed in skilled and technical occupations.

“While formal qualifications do not tell the whole story, they are a good indicator that Australian businesses generally have an issue with the quality of management.

The labour market and the regulations that govern it are regularly accused of inhibiting productivity across Australia’s economy.

However Professor Gahan asserts that deregulation or more flexible working arrangements are not likely to be the panacea to Australia’s productivity lethargy, instead he identifies another problem.

“If there is any big policy issue it is not about regulatory arrangements it is what government can do to enhance productivity – and one that will be the big determinant if we can meet the economic integration challenges of the Asian century – it will be undertaking a major review of the quality of management, and putting in place initiatives, such “Most Australian managers, especially as more practice-based working for themselves or in management and education, while unions small and medium enterprises, that will enable them to are not well trained. have fallen from take advantage of new power, their innovations and new “Data from the Australian members take home business opportunities Bureau of Statistics indicate a bulkier pay packet, in the Asian region in that a large proportion of and in recent years particular.”

Australian managers have no

this packet has got larger

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Research

Poor project governance leads to major project failure A survey of Australian chief executives and other senior managers lays the blame for failed major projects – such as big-ticket infrastructure items – on poor project governance. Elizabeth Lopez reports.

by Sydney new research consultancy Caravel Group and Melbourne Business School has found major project Governance Teams are dysfunctional, lack the skills and experience to govern major projects, exhibit poor corporate behaviour, are conflict-ridden and rarely have their performance measured or reviewed.

Caravel Group Director and CEO Paul Myers said the survey of approximately 100 public and private sector board, CEO and senior management-level project participants, across a range of industries, had yielded some stark assessments.

“We found that project success rates in Australia are on average 40-50 per cent.

When coupled with the time and cost overruns one can only wonder what the cost is to the GDP. Melbourne Business School Associate Professor Graeme Cocks said the survey challenged traditional explanations of where major projects came unstuck.

“Blame for failure has traditionally been laid at the door of the Project Management team. However, it appears that most of the fault actually lies with the Project Governance team”.

Project Management teams focus on creating the deliverables in accordance with the scope of work. They manage the people, money and resources and all other facets for delivery. The project Management team reports to the Project Governance Team.

‘stakeholders’ to secure buy-in, rather than people with proven ability to govern projects,” Associate Professor Cocks said.

“These people are often heavily conflicted and have no accountability for their Project Governance role.”

When measured against nine basic elements for successful Project Governance the respondents deliver an average score of only 24 per cent.

“The most glaring omission is lack of an approved Governance Plan – these were absent 87 per cent of the time,” Myers said. Teams also performed badly in ensuring zero conflicts of interest, adequate delegated financial authority, and understanding the difference between consultants, solution and project delivery SMEs.

Aside from monitoring progress and supporting the Project Management Team, the Project Governance Team should focus on the strategic intent of the project and delivery of the value promised in the business case. Project Governance therefore encompasses authority, accountability, stewardship, Australia’s leadership, direction and road network control.

“Too many Governance Teams are stacked with

“Our findings demonstrate that a major rethink and reform of Project Governance practices of 813,000km would in Australia is required,” Myers said. stretch twenty

times around the globe.

Infrastructure Australia

16 Faculty of Business and Economics

Research

Five fatal flaws that could undermine the Gonski Report

In Australia, data from the Longitudinal Survey of Australian Youth (LSAY) shows a 23 percentage pointgap in completion rates between low and high social economic status.

The Gonski Report rests on five faulty assumptions that could undermine its usefulness as a cornerstone of Australian education policy, a study from the Melbourne Institute has found. Eoin Hahessy reports.

‘What’s wrong with the THE study, Gonski Report: funding reform and student achievement’, found the Gonski Report was “significantly flawed” due to its reliance on the relationship between student achievement and resources as well as assumptions about the Schooling Resource Standard (SRS), the centralisation of school systems, international test rankings and private school financing.

Researchers from the Melbourne Institute and Ben Gurion University, Israel, compared the 2012 Gonski report with international research on education funding and structure.

Co-author of the research, Associate Professor Chris Ryan from the Melbourne Institute said while the Gonski Report declared that additional resources to schools would have a substantial impact on student achievement and improve their performance, additional resources

‘Explaining the SES School Completion Gap’, Melbourne Institute 2013 Working Paper

provided to Australian schools in recent decades had not resulted in improved student performance.

• Discussion over whether the standards and rankings favoured by the OECD are applicable to Australia; and

“International academic research in economics and education suggests the effect of additional resources on standardised test scores is, at best, small,” he said.

• Debate on whether there can be an objective, professional basis for determining the appropriate level of public funding of private schools.

Likewise, Associate Professor Ryan said the SRS used within the Gonski Report to determine the base funding level per student that all schools would receive was inherently flawed.

“The approach to determine the SRS did not consider the impact of student background on achievement, and as such can’t guarantee the student achievement targets will be met,” he said.

Other outcomes from the research include: • International evidence disputes the notion that a more centralised education system will function more efficiently;

”The Gonski Report offers many valuable insights for school reform but considering it is being used to chart Australia’s future course on education, it is imperative that fundamental weaknesses within its assertions about funding are illustrated,” said Associate Professor Ryan.

‘What’s wrong with the Gonski Report: funding reform and student achievement’ is the second release in the 2013 Melbourne Institute Policy Briefs Series.

The Policy Briefs Series examines current policy issues and provides an independent platform for public debate.

fbe.unimelb.edu.au 17

Industry Engagement

‘Project Noah’

Driving efficiency across Australia’s industry Management academics are working with industry is seeking to identify the factors that inhibit and influence the adoption of supply chain technology standards in Australia. Identifying these factors can assist in driving efficiency across four significant industry sectors in Australia’s economy. By Eoin Hahessy.

embarked Project Noah on its journey in 2010 as a joint research initiative between the Department of Management and Marketing in the Faculty of Business and Economics and GS1 Australia to gain a deeper understanding of the issues that affect the adoption of supply chain technology standards across four industry sectors in Australia: FMCG, healthcare, primary industry and automotive manufacturing. The research project is backed by a grant from the Federal Government’s Australian Research Council (ARC) Linkage program.

Thirty-five years ago, the GS1 System of bar coding and numbering administered

by GS1 Australia was created to help Australian business enterprises become more efficient. Today, GS1 Australia is at the forefront of eCommerce and supply chain management initiatives, helping businesses to enhance their efficiency and cost effectiveness by adopting GS1 global supply chain standards best practices, bar code and numbering standards, services and solutions. This, in turn, allows Australian organisations to adopt world’s best practice supply chain management techniques.

Beyond the use of unique product Peter Chambers, General Manager, identification, the adoption of new Operational Initiatives from GS1 Australia technologies in these sectors is patchy. outlined why they decided to embark on Studies show that 3.5 per cent of a research project with academics sales are lost due to information in the Faculty. ”We became 3.5% of inefficiencies, 30 per cent involved with the Faculty of of inventory records have sales are Business and Economics errors, and 60 per cent of as we knew the expertise lost due to all invoices have errors. existed there to help us

information inefficiencies and 60% of all invoices have errors

explore challenges within our industry.

Over the past three years, our experience in working together on this is highly beneficial. Industry and academia can now speak the same language to ensure the correct fit is formed at the beginning. The results of this project will assist in allowing efficiency to flow across four significant industry sectors in Australia’s economy.”

All four industry sectors covered by the project can benefit from adopting supply chain technologies. Improved quality control and reduced transportation costs for primary producers, improved coordination and reduced transportrelated carbon emissions for automotive manufacturing and fast moving consumer goods sectors are just some of the efficiency benefits that could be gained across industry sectors.

More specific benefits could arise in each industry sector. For example, in the healthcare sector, these technologies can reduce errors and assist in better delivery of healthcare services. This would result in improved health outcomes for Australians.

Similarly, regional and rural Australians would benefit if these technologies assist the rural sectors becoming more efficient and productive. These technologies can also assist the Australian automotive manufacturing sector to survive and prosper into the future by reducing waste at both firm and supply chain levels.

In the intricate decision making process that is involved in the adoption and implementation of complex supply chain technology measures, service expectations play a large part. The project team therefore decided to investigate member expectation on service quality.

“Since 2010 Project Noah has been teasing out the factors that inhibit the adoption of supply chain technologies and understanding these factors ensures blockages to improved efficiency in industry sectors can be removed,” underlined Professor Damien Power from the Department of Management and Marketing.

18 Faculty of Business and Economics

Industry Engagement

The latest stop-over on the Project Noah journey is the outcome of a recent member survey. This study is the first of a series of reports that will emerge from Project Noah in the year ahead.

The objective of the survey, conducted by the Faculty of Business and Economics and GS1 Australia between March 2011 and May 2012, was to discover how GS1 members rate the important aspects of GS1 Australia’s delivery of service quality.

The survey spanned a range of Australian industries, with over 50 per cent from food and grocery, general merchandise and liquor industries and 25 per cent from hardware, agricultural and healthcare industries.

In response to the results, the survey provides valuable feedback that can be used to further improve GS1 Australia’s offerings to members and provide them with the best service quality available.

“Project Noah and the survey is a highly beneficial project that allows us to judge pressure points within our service and to adjust our service so that our members can get the best possible solution for their business needs,” concludes Peter Chambers from GS1 Australia.

Respondent Industry breakdown Miscellaneous 13% Food and grocery 22% Printing and packaging 4%

Healthcare 7%

The objective of the survey was to discover how GS1 members rate the important aspects of GS1 Australia’s delivery of service quality.

Agribusiness 8%

Mining resources 1%

General merchandise 20%

Hardware 9% Meat and seafood 2%

Fresh produce 3%

Liquor 9%

Transport and logistics 2%

fbe.unimelb.edu.au 19

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