A whistle-blowing senate for companies

Adapted from a letter in the Economist (July 18th '92).

To improve corporate governance, I have established in Australia a two-tiered board structure, with the supervisory board, or 'corporate senate', elected on the basis of one vote per shareholder instead of one vote per share. In this way, the senate can be appointed by small shareholders to blow the whistle on fraud, misrepresentation and any other self-indulgence of the directors or even major shareholders.

The three-person senate has no executive powers. It has powers to veto any board resolution which involves a conflict of interest, such as the level of directors' salaries and perks; and to nominate new directors; to brief the auditors; and to report independently to shareholders without the veto of the board.

By the use of faxes and telephones, the senate never has to meet. Senators do not obtain any fees, so their cost is negligible; but their power to blow the whistle, inhibit, stop and correct unethical behaviour and initiate changes in the composition of the board is extremely beneficial.

Shann Turnbull, GPO Box 4359, Sydney, NSW 2001, Australia (tel 612 233 5340).