Australian CEOs given free rein because of lack of activism

Insider trading rules are stymieing shareholder activism in Australia, fostering a culture of bad management in listed companies and curbing growth, investor Mark Carnegie said.

Shareholders trying to shake up underperfoming boards struggle to build support among fund managers, who are prevented from buying or selling stock if they know a deal is planned but has not been announced, Carnegie said.

"The sorts of unofficial communications that happen in the US and England are unable to happen in Australia," said Carnegie, 52, whose advisory firm Carnegie, Wylie & Co was sold to Lazard in 2007. "You need to be very, very sure of your ground in terms of the number of shareholders who will vote with you before you start your campaign, and that's what people have found hard."

In the US, investors such as Carl Icahn and Kirk Kerkorian have used minority shareholdings to push for changes at companies including Apple and General Motors. The dearth of such activism in Australia had led to a lack of board accountability, contributing to investment capital being misspent, Carnegie said, pointing to wasteful spending in the country's natural gas export projects.

Australian companies would be more likely to spend wisely with shareholder activists on their case, said the managing director of MH Carnegie.

Carnegie sought to change Qantas Airways' strategic direction in 2012 alongside former airline executives.

That year, he also teamed up with Australia's richest woman Gina Rinehart in an attempt to influence Fairfax Media, publisher of the Sydney Morning Herald newspaper.