The benevolent market manipulator

Martin Lawrence says he has a simple goal: “make the markets work better.”

The 35-year-old cofounder of Melbourne-based Ownership Matters says if markets work better then it “leads to better outcomes” for every Australian.

“I’m a member of a superannuation fund,” says the bespeckled Lawrence, who hardly seems to need coffee to get going in the morning, “if markets work better it will lead to better outcomes for everyone, not necessarily corporate intermediaries, the investment banks and our ourselves.”

For Lawrence that entails exploding myths around markets that are untroubled by evidence, he says. The US Sarbanes-Oxley law that set new standards for US public company boards, management and accounting firms was blamed for driving companies to list their stock in London rather than New York.

Yet Lawrence says a company has to pay just 3 per cent of the money it raises in an IPO to an investment bank in London as opposed to 6 per cent if they list on Wall Street, according to a 2007 study.

Another untested assertion is that Australian rules of insolvency around director liability have caused directors to put companies into administration quicker than was perhaps justified. Lawrence says there is no evidence for that. Securities lenders have wanted to be exempt from reporting their substantial shareholdings arguing such reporting was “too burdensome,” says Lawrence. But he reckons that their arguments are simply based on the desire to “not want to disclose things”. 

Ownership Matters was founded in 2011 by Lawrence, Dean Paatsch, Simon Connal and Marty Chung who all worked at ISS Governance Services whose origins date back to a firm co-founded by Paatsch, Proxy Australia.

The firm’s name is a not-so-gentle reminder to fund managers that as shareholders their ownership does truly matter as they are like members of parliament, able to approve or quash company resolutions on pay, takeovers, investments, capital raising and board appointments.

Ownership Matters has 30 clients, superannuation and private fund management companies. It will not disclose its earnings.

Australia’s corporate governance market is somewhat unique, says Lawrence. It is overly focused on compliance. Regulations are such that non-dilutive capital raisings have to disclose more than dilutive ones, he says.

“This gives investment banks and other intermediaries enormous influence,” says Lawrence. Related party transaction reporting and approval in Australia is inferior to Hong Kong and Singapore. 

A “slow burning issue”, according to Lawrence, is director competence. On average a non-executive director of an S&P/ASX300 Index company is voted into their post with a 95 per cent approval rating.

“It is the safest electoral office in Australia,” says Lawrence. More than 75 per cent of Australian boards are made up of white men, he says.

“The track record of white men of a certain age is not so overwhelmingly good that it would not benefit from insight from other groups,” he says.