An inquiry into Crown Resorts, tabled in New South Wales parliament on Tuesday, came to the damning conclusion that Crown was not fit to hold a licence for its new Sydney casino.
What’s more, the review found that even though James Packer did not have a direct seat on the board, his influence as the major shareholder was “disastrous” for the company.
The inquiry, which calls for reforms to casino regulations and an overhaul of the company’s board, comes after years of reports by media outlets alleging Crown Resorts had engaged in money-laundering, breached gambling laws and partnered with casino junket operators with links to organised crime groups.
Today, The Age reports that two representatives of James Packer have already resigned as Crown Resorts directors.
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Professor Ian Ramsay, director for the Centre of Corporate Law at Melbourne University, says the inquiry is a turning point for corporate governance in Australia and provides a cautionary lesson for companies both large and small.
“Clearly, so much was going wrong, including a lack of legal compliance and a very poor risk culture,” Ramsay tells SmartCompany.
“One of the questions you have to ask is: ‘Who is on your board?’”
Selecting a board
The inquiry conducted in-depth investigations into each of the board members and found that, as a whole, the board and some managers were not effectively carrying out their obligations.
Ramsay says an important function of any board is to make sure each member has the right skills and experience.
“It does show the vital importance of carefully selecting your directors in a way that goes beyond simply networks to ensure that people have the right skill sets,” Ramsay says.
The lesson here, according to Ramsay, is that directors must ensure they are up to the job as well as makes sure they are consistently diligent and respond appropriately to issues that arise.
“A more proactive board and a stronger management team would have dealt with the media’s allegations in a more effective way and realised the significance of a potential lack of compliance with anti-money laundering regulation,” he says.
The influence of shareholders
The inquiry, led by commissioner Patricia Bergin, a former NSW Supreme Court judge, was carried out over 18 months and was established to investigate the Barangaroo casino licence.
The inquiry found that Crown’s board was not sufficiently independent of James Packer, who is the major shareholder of Crown Resorts with a controlling 36% stake in the company.
“Clearly, the board didn’t have processes in place to manage that relationship with a major shareholder,” Ramsay says.
“In other words, they couldn’t resist what the major shareholder wanted.”