Using the article below: Evaluate the article by selecting and applying Prositive accounting theory , citing at least one sc holarly sources...
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Using the article below:Evaluate the article by selecting and applying Prositive accounting theoryholarly sources

, citing at least one sc

a.    Summarise the article, sure to introduce points you will discuss in more depth in analysis.

b. Theory: Identify and describe your chosen theory using high quality and appropriate academic sources to support your discussion. Be sure to identify aspects of your theory that you will discuss in more depth in your analysis



Article

Businesses pay dividends and bonuses from the profits generated by JobKeeper By business reporter Gareth Hutchens Posted Sun 6 Sep 2020 at 7:29am


Some businesses are still collecting JobKeeper even though their profits are at prepandemic levels, or above, with shareholders and senior executives the main beneficiaries. (AAP: Dan Peled) It's impossible to forget how America's corporate leaders behaved during the global financial crisis.

After bringing the world's financial system to its knees, and accepting massive bailouts from the US government, executives from Wallstreet's biggest banks took the bailout money and paid themselves and their staff billions of dollars in bonuses. It was one of the defining historical features of the crisis. Fast forward to 2020, and with the coronavirus lockdowns causing another global recession, governments everywhere are again providing stimulus programs. But a defining feature of this year's crisis — in Australia, at least — is how businesses and their bosses across a range of industries have had a fantastic recession so far, and how much of their joy has been experienced quietly thanks to corporate Australia's lack of transparency. It doesn't mean things won't change, of course. Next year could turn out horribly for the business sector if the Federal Government's JobKeeper program is withdrawn too early. But history books will show how in the initial phase of the coronacession, a slew of Australia's businesses across a range of industries saw their profits surge, and chief executives take home large bonuses as usual. Last week, Bureau of Statistics data showed company profits soared by a record 15 per cent in the June quarter — despite record declines in economic activity, final demand, and hours worked. How many company directors, do you reckon, looked at the JobKeeper program earlier this year and concluded it was their fiduciary duty to claim as much Jobkeeper money as possible, regardless of genuine need? It may eventually come out how many businesses treated the program as an initiative to be exploited.

Indeed, JP Morgan analysts told their clients last week that the "free lunch" phase of JobKeeper was ending, as the Federal Government's changes to the program come into effect later this month. From September 28, businesses will be asked to reapply for JobKeeper, and to be eligible they'll have to show their turnover fell significantly in the September quarter. It will be the first time in six months that they've been asked to provide evidence for their need for ongoing support from the Government. "The free lunch enjoyed by certain pockets of the economy has come to an end," wrote JP Morgan analysts Tom Kennedy and Ben Jarman. "From here, the wage burden will increasingly shift back to firms and once again realign the profits outlook with the macro-economic environment." Which brings us back to the point about the lack of transparency in corporate Australia. Australian authorities haven't provided a public database of companies that are receiving g JobKeeper payments. Unlike in New Zealand. New Zealand's Government has a publicly searchable database — called "COVID-19 wage subsidies: Employer Search" — that allows New Zealanders to see which businesses have received wage subsidies, the number of employees for whom wage subsidy payments have been made, the amount of each wage subsidy paid, and the types of wage subsidies paid. The same website allows NZ employees to easily check if their boss included their name on the business's wage subsidy application form, and if they've been getting the whole wage subsidy payment they're entitled to. That level of transparency makes it much easier for analysts to know how NZ businesses are faring in the lockdowns and how wage subsidy payments are feeding through to bottom lines. Back in Australia, it's opacity-as-usual. If you want to educate yourself about the amount of JobKeeper money that's been sent to an Australian company, you have to check its financial reports. And this level of "transparency" only exists because our corporate regulator issued a guidance note in July telling companies to include some of that information in their financial reports. So, we must go to Qantas's latest financial report to learn it has received $267 million in JobKeeper payments since the start of the year. And that's it. There's scant information beyond that.

The report says the money is "benefiting the 25,000 employees who were stood down and subsidised wages for those working". In a separate document, Qantas says the majority of the money "was paid directly to employees on stand down and the rest used to subsidise wages of those still working." Now jump to New Zealand's searchable database. Type in "Air New Zealand" and see what it tells you immediately. As of September 3, Air New Zealand has received $NZ67.8 million in wage subsidy payments for 10,254 employees, $NZ36.9 million in wage subsidy extension payments for 7,983 employees, and $NZ8.7 million in resurgence wage subsidy payments for 7,611 employees. Why does this matter? Because when that basic level of information is made available in real-time, and in a public database, it's much easier for everyone to understand what's going on. Investors can't make sense of company accounts unless it's specifically disclosed, line by line, how much government assistance a company is receiving. If subsidies aren't disclosed clearly, they can be hidden in revenue. And they can be used to inflate profits and executive bonuses. Andrew Leigh, the shadow assistant treasurer, drew attention to that issue last week. In Federal Parliament, he claimed the JobKeeper scheme was being misused by some Australian firms who had channelled it to executive bonuses. "Accent Group received $13 million in JobKeeper and gave CEO Daniel Agostinelli a $1.2 million bonus," he claimed in Parliament. "IDP Education received $4 million in JobKeeper and gave CEO Andrew Barkla a $600,000 bonus. Last year, he was Australia's highest paid CEO, taking home $37 million. "Star Casino received $64 million in JobKeeper and gave CEO Matt Bekier an equity bonus worth $800,000," he said. He also criticised a phenomenon he called "DividendKeeper," saying some companies had diverted money for workers into shareholder payouts this year. He made it a moral issue. "If you're getting taxpayer subsidies the CEO should not be getting a bonus," he said. It's extremely likely we'll be hearing more, in the future, about what's really occurred during the "free lunch" phase of Australia's JobKeeper program. One fears it could undermine the public's faith in the program's integrity. Steven Hamilton, a visiting fellow at the Tax and Transfer Policy Institute at ANU, told the ABC he wasn't sure if one could draw a causal link between JobKeeper payments and CEO bonuses. But he said it was "completely inconceivable that some businesses would not have profited from JobKeeper". "And that's purely due to bad design," Mr Hamilton said. "JobKeeper didn't have to lock in support for businesses for six months no matter what. But it was a choice the Government made, and that choice cost a lot of money. "I think that's a problem. When we look back on the first phase of JobKeeper I think we're going to see a lot of businesses, like a lot of people, have done very well out of the whole thing. "However, it's important to note that the changes the Government's made for the second six months of the program have addressed some of these issues.

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