As well as his gig at the Institute, Story is chairman of Suncorp Metway and Tabcorp. Last time I hopped into Commsec and checked the ten-year returns to shareholders in those two companies, they were averaging 3.5% and 3.8% per annum respectively; Suncorp has underperformed the market for seven out of the last ten financial years, and Tabcorp for five. This is in spite of the fact that both are in industries that should be no-brainers and benefited from strong brands (and in Tabcorp’s case a monopoly) built up when they were government-run.

If the experience of the early 1990s recession is any guide, it’s companies like this that mainly benefit from corporate failures elsewhere, which give them a chance to enlarge their market share cheaply and position themselves to benefit when things turn up, often confirming rather than challenging their practices in the process. The Australian corporate sector has plenty of big companies in similar positions; Brambles (average ten-year shareholder return -1.18 per cent), Telstra (-3.5 per cent) and Amcor (2.3 per cent) are three that immediately come to mind. Unfortunately, size does matter, especially when it comes to negotiating for finance, and there’s no sign of that changing any time soon.

MBA Blog