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Who's Responsibility?

Who’s responsibility is it to teach (and learn) Responsibility? The irresponsible (but increasingly commonly accepted) answer is: Somebody Else. One day, hopefully soon, I’ll find this person named Somebody Else. They have a huge load to carry, and must be so intuitively smart to have all the answers, that the experience will surely be like meeting God.

From teenage parties going out of control (no, it’s not “normal teenage behaviour” to destroy property and hurt people), to investors losing money, we want the upside of any benefit without the pain that comes with being on the receiving end. We want freedom, respect, authority, and rewards, but without the responsibility and accountability.

Last year, my son was doing a “Smart moves” class in school, kind of like “PE light”, when the child in front of him tripped over, and my son toppled over the top of him, mouth first into concrete. He chipped two front teeth in half, and looked like a poor smiling rendition of Dracula before having his teeth reconstructed. The saddest part of the whole episode was the number of parents whose early reaction was to ask if we were going to sue the school. The thought hadn’t crossed our mind as it was an accident, but obviously this is a common example of an opportunity to blame someone else. Maybe not such a Smart Move after all.

Role Responsibility

A friend of mine is a Partner in a well respected business that in essence sells hourly labour. Being hit by a slow down in the sector for several months, he held a Monday sales meeting. He pepped the Team up by committing that by pulling together and being pro-active, everything would be OK. However, as in every other professional Sales Team, he needed their reporting (specifically their Booking Calendars which account for every hour of the day and are the basis for charging customers) to be up to date continuously. He checked on the Friday, all looked good. Their invoicing is done on the following Monday, and came in at 2/3 of what he thought he had on only the previous working day. From “clients cancelled” to every other excuse under the sun (except, of course, anything they had control of), it wasn’t their fault. Had the basic reporting been done, the business could have reshuffled jobs and filled the voids. When 1/3 of the people now face the chopping block, lacking the maturity to deserve the freedom to manage their own time may now indeed teach these people what it means to take basic responsibility. A tough lesson indeed, but unfortunately they may still be in too much denial to make the connection to their own lack of accountability.

“Somebody Else” Pays

Billions and Trillions (one million million, expressed another way) now roll off the tongue much like millions did in the past. The Responsibility of managing finances is sometimes lost, and it seems so easy to find or lose a billion dollars, especially if you’re a Government, as it’s not money you had to work out how earn in the first place.

Looking at it from another perspective, we love to bash banks and big miners over their Billion dollar profits, portraying them as some cigar smoking stooge at a buffet table. The truth is that they are pretty much owned by everyday Australians, through our Super Funds. So let’s divide the numbers up a little, using Rio Tinto as an example. Despite all the hoo-ha about our Miners not contributing any Mining Tax, Rio Tinto paid $US11.625 Billion in Taxes and Royalties in 2012. 77% ($8.924 Billion) of it was paid in Australia. $6.72 billion of it went to the Federal Government. One could even be so bold as the ask what Government did to contribute to generating this income? As investors know, if a company goes belly up, it’s the investors who take all the risk, with the Government being guaranteed first payments, closely followed by employees. Rio Tinto’s Total Earnings for 2012 were $9.303 billion, about the same as the taxes paid. As a prudent business does, most of it was re-invested, with Share Holders only receiving Dividends equating to about 1/3 of the profit ($3.038 Billion). To generate this profit, the company had $117.573 billion in Total Assets. So, for all the risks involved in mining, the returns on Assets to the owners was 7.9%, about 3 percentage points higher than you can get in a savings account. To put Rio’s $8.924 billion Tax Contribution into perspective, Queensland’s total GST allocation from the Federal Government was $9.61 billion (19.9% of all GST collected). GST is a major income stream for the state. In other words, Rio Tinto pays about as much tax as 20% of all the GST collected in the whole country. Further, Rio Tinto directly employed over 20,000 people in Australia, plus contractors, who all presumably paid tax also. Seems like we forget that we should be cheering on business, not hindering it, because we all share in the spoils. Without profitable Mining, Australia stops.

And if you want my share tip, nearly irrespective of how well the big banks and miners run their businesses, their share prices won’t collapse. Why am I so sure? Well, our Government has guaranteed that $2 Billion in fresh Super fund money gets pumped into the share market every month, with nowhere else to go but through share index allocations etc to presumably safe Blue Chip companies. Just don’t ask me to pick the next rags to riches share, I’d hate to be Responsible if you lost money instead.

As always, onwards and upwards!

Fred Carlsson
General Manager

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