CEO Special Message: CPAs Alex Malley Sacked in a Sweetheart Deal with a Compliant Board

Prof Janek Ratnatunga, CEO, ICMA Australia

In what can only be described as a pyrrhic victory for CPA Rebel Members, CPAs CEO Alex Malley was sacked last night (23 June 2017); but walks out with a $4.9 million severance package. The scandal at CPA continues to surprise; and is a case of the lengths one can go with a compliant board that has been paid handsomely to carry out its CEO’s wishes. The twists and turns in this sorry saga will fill an entire case-study book on transparency, board independence and corporate scandals.

I have seen the farce at CPA unfolding over many years; since the Malley-Petty takeover. In silent protest, I resigned as a CPA in 2013. However, I had no idea of the magnitude of the scandal until Mr. Joe Aston from the Australian Financial Review started investigating in February-March of 2017; and Mr. Brett Stevenson, a CPA from Armidale, NSW started asking question of CPA. However, as a CEO of another body of Australian accountants, I held back from commenting on what was happening at CPA Australia. It was only when the Board approved a move to Singapore for its AGM, ostensibly to avoid being asked tough questions by “rebel” members, did I decide to speak up.

In the March-April issue of On Target titled “Who Governs the Governors? When Directors Become Dictators”, I explained that although the established conventional wisdom is that organisations like to see competitor organisations in trouble, especially if a product or service failure in the competitor may result in more market share for one’s own offerings; there are situations where the entire industry must ensure that all competing firms are kept in check, so that the actions of one does not tarnish the image of the others. Unfortunately, CA ANZ and IPA – the two other financial accounting professional organisations in Australia – kept silent on the issues unfolding at CPA Australia.

At the end of May; mainly due to constant pressure from Mr. Aston, Mr. Stevenson and angry CPA members over the secrecy that surrounded Board and CEO remunerations, Mr. Malley’s $1.8 million pay packet was revealed, as was the exorbitant (many say scandalous) fees pays to the Board. However, Mr. Malley defended his remuneration, saying his salary was deserved, as it was based on performance; mainly membership growth.

This ‘membership growth’ issue was tackled by me in the May-June issue of On Target titled “Fudging the ‘Skills Needed Numbers’ to Milk the Accounting Migration Cash-Cow”, in which I said membership growth is easy when a professional body lowers its standards. Just imagine the CEO of a medical profession having such a KPI and then lowering the standards of doctors to meet it!

I stated that many overseas qualified accountants, especially large numbers of such in Hong Kong and China, have been given automatic membership of CPA Australia, having been enticed to join by the possibility of migration into Australia. This issue was also covered by the Australian Financial Review in its June 6, 2017 issue, in a story titled “CPA Australia’s Alex Malley’s Deal: Join Me and Get a Free Visa Check. In this story, AFR reported that CPA Australia is waiving charges to assess foreign accountants’ skills for the skilled migration assessment required for their visa applications, if they agree to join CPA. Foreign accountants who ring a CPA hotline seeking information about Australian work visas were being told that CPA Australia will waive their assessment fee of $520 if they join CPA.

Membership fees range from $144 to $720 depending on each member’s level of education and practice. A top accountant from Sri Lanka, Dr. Maheswaran Sridaran was quoted by the AFR as saying that accountants overseas were joining CPA Australia because they thought it would help them get a visa even though they weren’t qualified to work in Australia.

Since being authorised as Migrant Assessment Authorities, CPA and IPA have significantly increased their overseas membership numbers by opening marketing offices in many countries in Asia and the Middle-East; and via signing Mutual Recognition Agreements (MRAs) with overseas professional bodies (most with less rigorous assessment standards); and giving the members of those bodies an Australian professional accountancy qualification without any further assessment in Australian Law and Taxation! Some of these CPAs have opened back office accounting operations in their own countries; especially India and China, and taking business away from home-grown accountants. That too, having never been assessed in Australian Law and Taxation, but hanging out a shingle that they are Australian CPAs!

Dr. Maheswaran said, “A Sri Lankan accounting qualification is not equivalent to an Australian accounting qualification. The tax and commercial laws are substantially different.” CPA Australia is holding an information seminar in Colombo on June 22 to sign up recruits. It promises to waive the $164 membership application fee for the day!

Mind you, CPA Australia is a professional accounting body that supposedly has “qualified accountants” as defined in s88B of the Corporations Act.

Another area of membership growth is the many Mutual Recognition Agreements that have been signed between CPA and Accounting bodies in many Asian countries. For example, members of Sri Lanka’s Institute of Certified Management Accountants (which ICMA Australia does not recognise even to give any credit exemptions in management accounting) can automatically become associate members of CPA Australia. To become full CPA members, all they have to complete an ‘Ethics’ and ‘Governance’ course (not Australian Law, Tax, and Accounting Standards – areas not covered in a Sri Lankan management accounting qualification). Dr. Maheswaran said that similar membership procedures are available for accountants from Nepal, Pakistan, Hong Kong, Singapore, Canada, Ireland, India, Malaysia and the Philippines.

In fact, the AFR reported one Chinese-born accountant saying that Chinese people in Australia are more likely to become CPAs rather than CAs because the qualifications are perceived to easier to obtain. The CPA knows this and targets them. “It is generally known the that CPA is aggressive with its membership drive.”

The above stories show how easy it is to meet ‘membership growth’ KPIs. Anyway, after the release of the excessive remuneration information, every day there was at least one (sometimes two or three) revelations/announcements about the ongoing sorry saga unfolding at by CPA Australia. It was difficult to keep up! The Top 10 revelations/ announcements are as follows:

1. On the very night the excessive salaries were revealed, CPA Chairman Prof. Tyrone Carlin, a long-time associate of Mr. Malley, resigns “in the spirit of renewal” after pocketing more than $184,000 for his short 4-month stint as chairman, plus an additional $70,000 for acting as a director of CPA’s fledgling loss-making financial advice subsidiary. Mr. Jim Dickson is made the new CPA Australia Chairman.
2. Independent Senator Nick Xenophon gives support to rebel CPA Australia members by introducing a Bill that closes a loophole that has allowed the accounting body’s leadership to keep members’ email contact details secret.
3. The NSW government threatens to deregister CPA Australia based on legal advice that it is no longer functioning as a professional standards body because it competes with its own members.
4. By June 16, more than half the 12-member board had quit CPA Australia over its direction under the high-profile Mr. Malley. There were only five directors on the board left, meaning that it fell below the minimum six directors required to make any decisions.
5. The Australian Securities and Investments Commission (ASIC) reveals it is investigating potential breaches of directors’ duties and the alleged misuse of members’ money at CPA Australia. During a Senate hearing, ASIC reveals that it first began investigating CPA back in late May, 2017, even before seven of the 12-member board resigned.
6. New CPA Australia chairman Mr. Jim Dickson announces the unilateral appointment of emergency director Mr. Tim Youngberry to keep the organisation running. CPA Australia rebel members claim the move is unconstitutional and warn that anything CPA decides now is illegal, and can be undone by the courts.
7. CPA Australia Chairman Mr. Dickson announces a “fiercely independent” three-person review of CPA, led by former Chief of the Defence Force Sir Angus Houston, former auditor-general Mr. Ian McPhee and an as-yet unnamed third member. Rebel members stated that the review will not be that independent as the two named were prominent admirers of embattled chief executive Mr. Malley. Both men have previously endorsed Mr. Malley’s autobiographical book, The Naked CEO, with Sir Angus writing Mr. Malley is a “leader that I deeply respect”.
8. The AFR reports that a government-backed legal protection scheme for Victorian members would not be replaced before the current arrangement expires in October.
9. CPA’s Board releases a statement late on Friday, June 23, 2017 confirming that Mr. Malley will walk away with termination benefits of $4.9 million; and that CPA’s Chief Operating Officer, Mr. Adam Awty has been appointed interim CEO while the Board conducts a search for Mr. Malley’s successor.

10. The CPA Board also announces that it is reopening applications for new directors, a process that closed on May 29 (the day before former president Tyrone Carlin resigned and board and executive remuneration was publicly revealed). As Prof. Petty is going to resign in October, eight new faces will sit around CPA’s Board table by October 1.

The current directors are Mr. Dickson, a 79-year-old former CPA employee; Mr. Graeme Wade, the Chairman of the National Basketball League (which is sponsored by CPA); Mr. Michele Dolin, a director of AMP Superannuation; Prof. Richard Petty, a professor of management at the Macquarie University Graduate School of Management in Hong Kong; and Ms. Sharon Portelli, a small business accountant. These five, along with emergency director Mr. Tim Youngberry make up the 50% voting block that made the decision to award Mr. Malley his (some say excessive) termination payout.

The legality of this payout will surely be challenged in the Courts by the CPA members. The interesting question is that if Mr. Malley had to go because of his excessive remuneration partially based on the dubious performance criteria of membership growth; then should any severance package include a component of this bonus, when clearly Mr. Malley is incapable of achieving this if he has been sacked?

Mr. Graeme Wade, and Prof. Richard Petty have also enjoyed excessive remunerations from CPA Australia, and are well-known close associates of Mr. Malley. Shouldn’t they, along with Mr Malley, have been stood down, until the both the ASIC investigation, and the “fiercely independent” three-person review of CPA is completed?

Clearly, “sacking” by the Board was a more lucrative outcome for Mr. Malley than resigning or being stood down. But then, what is the use of having friends in high places, unless they can ‘sack’ you with a severance pay of $4.9 million!!!

Usually such ‘golden parachutes’ are given to a company executive if they are dismissed as a result of a merger or takeover – not when their actions are under investigation by ASIC.

Obviously, we have not as yet come to the end of this story.


Professor Janek Ratnatunga, CMA, CGBA

CEO, ICMA Australia


The opinions in this article reflect those of the author and not necessarily that of the organisation or its executive.