Gordon Hagart: Thank you, I am delighted to be here.

MS: You are the relatively recently appointed chief executive of the Australian Council of Superannuation Investors (ACSI). That may not mean a lot to a lot of people, but it should because it represents a lot of people and it is the organisation that advises funds in the $1.6 trillion-dollar superannuation sector. It advises about listed companies and how to vote on environmental, social and governance risk. And that all sounds a bit of a mouthful but we will get through it presently. So, Gordon, can we begin please with an overview of ACSI, the role it plays and the role you see it playing?

GH: ACSI is a membership organisation. But it has quite a tight definition of who can actually be a member. The type of organisation that can be a member is an asset owner, in the parlance of the investment world, and that is the top of the investment food chain. That means super funds that look after the savings of real people.

A number of pension and sovereign wealth funds elsewhere in the world are also ACSI members. So these are really the custodians of the long-term wealth of a lot of people. What do we do for them? We help them with their investment program. They are doing a lot of things in order to get their money invested and have more money in the future than they have right now. But one element uniting the investors we advise is that there are some issues out there that can affect the value of the investments but that most people in the market systematically ignore.

They just don't bother analysing them and they don't bother thinking about them when it comes to valuing assets. And those issues are what we call ESG issues. ESG is environmental, social and governance issues. These tend to be quite difficult to analyse. They can be quite nebulous sometimes, and sometimes not – sometimes they are indeed very concrete and scientific, but they almost always play out over quite long-term horizons.

MS: For an evidence-based scientifically trained, rigorous guy like you, it is a difficult position to be in, isn't it, when your performance can be measured by what doesn't happen, rather than what does happen – in other words, the management of risk?

GH: Yes, that's right. Most of what we do is management of risk. It is disaster prevention and it is writing insurance policies, as it were. The trouble is with buying insurance is it is always painful, because you pay someone something; you pay a premium. And what benefits do you anticipate for that cost? Well, you only get the benefit when something bad happens or, in our case, if we prevent something bad from happening.

It is much easier when you are providing representations of value to clients and can point to things that have happened and say "look I tickled this person and they laughed and that is great, isn't it?".

In our case we're mainly talking about things that involve insurance, or checks and balances and controls and oversights and transparency. In other words, things that prevent the agents that investors have to use from doing things that are not in the best interests of those investors, essentially.

MS: What are the things you are preventing?

GH: First and foremost, running companies poorly – or other assets that our members are investing in, including buildings and forests and so on. Whenever you invest in an entity there is a whole bunch of possible pathways that the entity can follow. Some are good and some are bad. Part of whether or not you end up on a good path or a bad path is determined by those that manage that entity.

It is not the whole of the story. Obviously if you invest in a nickel company, the price of nickel has a big impact on how that investment performs. But the quality of management also has a big impact. And we want, unsurprisingly, good management. We want good non-executive management and good executive management for the entities in which our members invest. We also want to put in checks and controls to make sure that those agents are at least somewhat aligned with the principles that they notionally serve.

So we're trying to reduce agency costs that would come from not having those checks and balances, and crucially that would result from the owners not being present and not manifesting themselves. A lot of this is climatic. A lot of this is to say: "You know what, chair of company? You do have owners and they do exist and they are watching and they do care about certain things. But we're not trying to usurp your job or the CEO's job. We are not trying to tell you how to do your day job, but we are telling you that the things that you do should always be done to serve your owner and not serve yourself." So we are there to kind of be that guardian and put in those checks and balances and also to ask difficult questions around issues we believe are totally financially material but that most people in the market ignore most of the time.

That is why we have this ESG construct: environmental, social and governance issues. You want your companies to be well-governed and you want the management, the good management you have hopefully found, to think about the full spectrum of things that can create or destroy value for investors.

MS: That leads to a segue to a focus that I want to have in this interview, as you know, and governance I guess we can parcel with the notions of accountability and transparency. You have mentioned performance and chief executives. Keeping in mind that broader context of risk management across a whole lot of areas, including environmental, social and governance, let's look at CEO salaries. And I am not at all wanting to make this a CEO-bashing exercise. It is not. In fact, a great CEO can lead to great outcomes for small shareholders, and all shareholders.

But there is, I think, a widespread perception that CEO salaries, in particular, are unduly high. In the minds of some people, they are high to the point of being obscene. Post the GFC, as your work at ACSI has shown with its annual surveys, CEO salary growth has slowed a little and some incoming CEOs are getting less-lucrative packages than their predecessors. But the chief executives of Australia's leading companies are still getting about 70 times the national average salary.

And that is largely because bonuses have risen. So if you look at their entire salary package, it is 70 times the national average. Community disdain for such higher salaries is understandable. But is it fair and is it justified by the evidence? What is the evidence, the big picture, on CEO remuneration?

GH: Very simple questions there, Michael! Is it fair? I am going to park that one. But I will come back to it. That is a normative question. We tend to work mainly on the basis of policy and evidence and also, crucially, what we are trying to achieve in everything we do is a better result for the shareholder. We hope, and in fact we expect, that in many cases that will be aligned with the best interests of the community, but the motivation for our work is the return to the shareholder.

And let's not forget that that shareholder is a real person who is a member of the community. It is somebody who is working in any kind of industry, whether they are earning the lowest salary or the highest salary. In fact, the lowest paid worker in the economy and the CEOs, both of those individuals are compelled to contribute to superannuation in Australia, so we're working on behalf of both ends of the spectrum as investors.

We're also working on behalf of people who have worked their entire working life in Australia, and also for people who have come here to pick fruit for three months. In all those cases, there is a pool of money, a pool of capital that is looked after on behalf of those folks. Duties are owed to those people by the trustees of superannuation funds.

Now, we think we help those trustees to do a better job of executing those duties and we see that to be maximising the value and minimising the risk over the long term, and we think good governance is one of the pathways to that. You asked me about executive remuneration – that was all to say that we look at executive remuneration through the lens of shareholder value. How is remuneration a useful tool for maximising shareholder value?

Well, what is a salary? What is remuneration? It is a transfer of value from one entity to another in the expectation of a service. We want CEOs in this instance to render a good service, to do well, and you would expect, if they are good at their jobs, to have to pay a certain amount for that.

Moreover, a very classical human resources framework is that you want to attract good people, incentivise them to do something while they are working for you and if they are indeed good and they continue to show good qualities then you want to retain them. Remuneration has an impact on all of those things. Probably the most important part is the incentivisation.

MS: And that brings in a very important notion of time horizon, doesn't it?

GH: Absolutely. Well, it brings in the key question of what exactly are you trying to incentivise. For our part and on behalf of our members, we're trying to incentivise the creation of shareholder value over the long term. It's a very boring phrase; the long term is the crucial part.

That is because human beings do not stick around in jobs for very long and there are obviously concepts like the time value of money – getting a dollar today is better than getting a dollar tomorrow. That is why we obsess, in the remuneration space at least, with, crucially, the notion of structure.

When you're looking at remuneration, you can talk about the quantum; how much is it and is that fair, for instance? That is an interesting question. It is a difficult but interesting question. The other part you look at is the structure. And what do we mean by that? Well, we mean that to the extent that there is variable pay, a bonus or a long-term incentive scheme, what are the conditions that determine the payout of that scheme to an executive?

Are those conditions appropriate and good incentives as far as the shareholder is concerned, because it is the shareholder who is footing the bill, of course? So, we are really obsessed, first and foremost, with getting the right structures. A good structure for remuneration, to our minds, is one that is aligned to the interests of the shareholder, so that you are incentivising things that are good for you – the creation of value over the long term. We want one that rewards genuine attributable performance.

So again, coming back to that nickel company or that copper company, people talk about pay for performance and you want attributable performance, you want it to be something that the executive has done well. So if all that has happened is the price of nickel has doubled and the price of the share has doubled, that was not really as a result of the genius of the CEO; they probably should not be paid for that.

If you take two nickel companies side-by-side which have experienced the same spot price change but one has doubled in value and the other has quadrupled in value, because of the management skills of the latter, then probably there is some justification in that latter case of a reward through variable pay. Looking at variable pay, you want to pay for attributable performance, and you want it to be measured over the long term because sometimes what is good in the short term is not what is good in the long term for the entity and its shareholders.

MS: Is it happening? And I would like to bring in here notions associated with hedge fund investment and quarterly returns and that sort of thing. There are tensions within the investment community. There are those investors who are seeking short-term returns from CEOs and you are saying CEOs ought not to be focused on short-term things. How does all of that play out?

GH: Absolutely. It is kind of a contest of ideas and it is a contest of capital as well. The markets are heterogeneous places. There are all sorts of actors in there working for different purposes using different investment strategies and some of them can be very short term.

Some of them can be nanoseconds in length – quant-driven strategies will invest in and out of companies in fractions of a second, let alone a week or a month. So there are all sorts of different things going on there, and all sorts of different messages that boards and executives are getting from shareholders.

We're trying to say in a loud voice "listen, if you work on anyone's behalf, and hopefully you are working on somebody's behalf because it is not your money, if you choose one particular path please choose the pathway of the long-term investors, because they are the people who are the baseline of your ownership."

There is noise around that, there are people that come and go, but essentially there is a community of long-term investors – and in Australia the superannuation fund community is a huge part of that – that bought a long time ago a share of Australia Proprietary Limited and currently own that and will always own that. So we're saying to management: you should really think about that in the way you exercise your professional life, and think about placing the interest of those people above all others.

MS: Is that happening to your satisfaction? Is there a sufficiently long-term focus on the part of the agents, particularly boards and executives?

GH: We are never satisfied. There is always work to do. Australia, in a relative sense, comes out pretty well. I've had the good fortune of working in a few different markets on these issues. There are certainly worse offenders out there in terms of short-termism, a poor understanding of shareholder primacy, a poor separation of the non-executive and the executive, for instance.

MS: Sorry to interrupt you, but where are they? Is this because of structural things or cultural things or are there other reasons?

GH: There is a multitude of reasons. Some are philosophical. In Japan, for instance, the concept of shareholder primacy is not particularly well entrenched. Employee primacy is right up there; they have at least an equal role, if not a superior role, to other stakeholders. Germany has some of that flavour as well.

So some other economies and societies have chosen to organise themselves in different ways. But it seems like the shareholder primacy model is somewhat successful and is a good way to run a company or an economy. I believe in that model. My questions are not about the validity of the model, it's about the execution. It is that that is not happening well. People are not being true to that model.

On the corporate governance front, in the US – obviously an economy that is similar to ours in some respects, the legal framework and so on – shareholder rights are fewer. They are less well-enforced. Investors are less well-protected. That is really important for Australian superannuation funds as well, because the US tends to be one of the biggest destinations for Australian capital, certainly in the equities domain, but also in the private economy – real estate and infrastructure, and so on.

It is a huge destination in terms of where the money of Australians goes, and so if corporate governance is poor there, that is a risk factor. That is resulting in a worse investment outcome for Australians, as well. In the US they have some interesting phenomena that have grown up over time with the kind of deification, if you like, of the CEO. There is a pretty poor separation between the roles of the non-executive representing the owners and the role of the executive in terms of running the company and working to a plan.

You will often hear non-executives in US companies saying things like "I was on Larry Ellison's board" or "I was on Bill Gates' board". The reaction of an Australian shareholder would be to say "hang on, no – they were on your board". The chief executive works for the board and the board works for the owner. But often in the US it feels like it is the other way around.

MS: I want to come back to how does one best evaluate a CEO's worth and the associated relative and absolute returns. But you have gone to where I wanted to go anyway with the idea of the rock-star CEO. In the mid 1800s, Thomas Carlyle, an essayist from your country of origin, Scotland, wrote about the great man theory of history, which basically, as you know, attributes most important developments to heroic individuals. You mentioned Larry Ellison and Bill Gates and we could mention other CEOs like Steve Jobs, Jeff Immelt and others around whom cultures have grown…

GH: And cults, as well…

MS: Indeed, and cults as well. And I have long wondered about that. Do you see this notion at play in contemporary corporate history and CEO remuneration? Do you see, as Thomas Piketty has in Paris in recent times with a controversial book about the generation and perpetuation of wealth, a problem with the stratospheric rise of executive remuneration and something that has macro negative impacts – inequality of income and wealth? Are we perhaps enthralled by CEOs a little bit?

GH: I think it is a danger always. It is a trap that you can always fall into. It is nice to believe that there are brilliant people out there, and there are some. That's great. It is lovely to think of Michael Jordan being just like a superhuman basketball talent, and Tiger Woods in his heyday at golf. It is always nice to think about people who are phenomenal at what they do.

There are some very good chief executives out there in Australia for sure and elsewhere in the world. And it probably is rational for shareholders to pay above average for those chief executives because they can create a lot of value through their brilliance. I am inherently sceptical though about attributing all good things that happen to what an individual did.

There is always a lot of luck involved – and that comes into play in the investment world as well because big funds pick managers. You are always trying to say "well, hang on, the track record was good and was that because they were uniquely skilled and brilliant or was it luck?" And it is always a bit of both. How do you disentangle that? How do you do the attribution analysis?

You need to do an attribution analysis for chief executives. Likewise if they are bad; was it really their fault? So I think a lot of the attribution of skill and genius does not do that analysis properly and says well it must be 100 per cent skill and genius and no luck. There is a lot of bias in it. Nonetheless, there are good people out there. The other thing that is difficult when you are an investor investing in companies is you have always got to know what kind of game you are playing.

Are you playing a winner's game or a loser's game? Companies for the most part are playing winners' games. So, what is in the companies' minds? "I make a widget – I am in the widget game and I want my widget to be absolutely the best and the lowest cost and the highest margin and the greatest volume and greatest brand. And I am going to smash the competition; that is my project."

Therefore it is quite natural that the boards that run those companies look for brilliant individuals who are really good at winners' games and who are capable potentially of smashing the opposition. In investment, for the most part, you are playing a loser's game. You win by avoiding mistakes, by not losing, by not doing silly things. So it can be a bit of a culture clash.

MS: It's a loser's game investing in a winner's game.

GH: That's right. So that creates a bit of a difficult situation because individual companies that our members invest in will quite rationally say "we have found this great person and they are really good empirically and we should pay a lot for them because otherwise they will disappear off to the competition". Now, that is rational for them, running a single entity.

But we invest in multiple entities and there cannot be an infinite supply of those geniuses, and even if there was it's not rational to pay an infinite amount for them. It is a cost-benefit analysis. It may be worth paying over the odds, but at some point you do not get a positive net return.

And more often, the rational desire the company has to attract, incentivise and retain that individual and stop them from going to the competition, for the members we represent is not so rational because even in the worst-case scenario where you didn't pay them enough and there was a dollar more on offer on the other side of the street, and he went off to that. You know what? Chances are that our members own the company on the other side of the street as well so that genius will not be lost to our members' portfolios.

MS: You would be profoundly concerned were that the primary motivation, I think we would all agree. Do you think, having said all of that, investors and shareholders are getting good value for chief executives in Australia generally?

GH: I think that for the most part, especially for big companies at the big end of town, they are doing a pretty good job. There are certainly problems, and we work pretty hard to solve them, but we in Australia are blessed by having mostly extremely reasonable and constructive conversations about these issues.

Most big companies realise that the expectations of investors on remuneration and on any part of the corporate governance spectrum are both eminently reasonable and actually quite simple to satisfy. We're just saying things like we are happy for this person to make a pretty good living, a very good living in some cases, we just want their champagne cup to sit below ours in the fountain.

That means that they get paid when we – the owners – get paid. And there are a few circumstances where they are making an incredible amount of money but in fact the shareholders are losing money. So it is about the conditions for the release of the wealth, if you like. And that mostly happens, and we're seeing it, again, measured over a meaningful amount of time.

MS: Are boards then, in your view, sufficiently and appropriately prepared to whack a badly performing chief executive or a chief executive with a big snout as they are to appropriately reward a value creator?

GH: There is some form on that. It is inherently difficult because if you are the board that selected the snout, then there is kind of a disincentive to admitting you were wrong. But it does happen. It's difficult, but it does happen, and if you have the right structure, and if we're just talking about remuneration rather than the hire and fire decision, if the remuneration has been structured appropriately, if it is a good model, then they will get paid when they are doing well and they won't get paid when they are doing poorly.

So it is a combination of a sophisticated and logical system, but also having the wherewithal to admit when the system is not behaving as intended and to say "well, listen, the ultimate sanction is just to relieve this man or woman of his or her responsibilities". It does happen.

MS: Is it a problem therefore that the majority of directors are themselves highly-paid executives sitting on each other's boards?

GH: I do not think the majority are currently highly-paid executives. They may be former executives.

MS: Is it a club?

GH: It is a club, for sure, absolutely. But the club is becoming more diverse. But that particular journey is beginning from a pretty low base, and it is really important that that journey continues and accelerates.

MS: It needs to include, by the way, a much more diverse range of people at the gender level. There are far too few women in positions of corporate power in the country, is that not right?

GH: That's right. I think only about 17 per cent of top 200 company board seats are held by women. That is insane. It should be far higher than that and there are lots of reasons behind that. You classically hear from companies that it is a pipeline issue; "we don't have the mid-level female managers and they don't become the senior managers and therefore they don't have the skills to be non-executive directors down the line".

Now, there is some truth in that, for sure, however that's not sufficient. You do need to solve those problems upstream, if you like, and you also need to be a bit creative about thinking about what kind of person would make a good non-exec. Former chief executives do not have the monopoly on board skills.

And in fact, nor would you want them to have it, because, as in a portfolio, diversity is inherently valuable in dealing with an uncertain world. When strange things happen that you had not predicted, you want a range of opinions and eyes and ears around the table that can say "I remember something like this when I was a CEO", but you also want somebody who can say "I actually worked in the public service and we had a similar dilemma and conflict about ethics or a budget falling out" or whatever.

Or, you know what, "I just come from the real world and let me give you a real-world view". Or "I come from another country and we think about these things differently". That kind of diversity is inherently useful in managing difficult situations.

MS: While I have got you here, right now in the community is a consideration sparked by a Senate inquiry recommendation that there ought to be a royal commission into the Commonwealth Bank of Australia and into whether or not the corporate watchdog, ASIC, is well resourced and structured and empowered to deal with things that are a threat to the ability of consumers to be confident. Do you think we need to have such a royal commission, or some form of inquiry? Are you confident that things are as they ought to be?

GH: I'm going to dodge that direct question. I would say it does concern me, both in my professional life and as a member of this society, that it seems that the tendency is to take money away from the regulator, the watchdog. We are kind of a watchdog ourselves; we're kind of a private watchdog, if you like. We do that on behalf of owners.

ASIC has a crucial role there. If they cannot ensure the integrity of markets, that is a really bad thing for Australia. And it is funny, because deregulation is always, or often, presented as being about cutting red tape or freeing business to do what business does well. Unnecessary red tape is bad, and free businesses are good for creating value.

But you do need some rules and some checks and balances and protections, and even if they come at a cost, they have a huge benefit that far outweighs that cost and one should not see it otherwise. If you own a property and you are forced to buy some insurance against flooding, or you have an agent that runs that property and says, you know what, I am going to spend some money changing the roof every 20 years, yes that is a cost but it is a cost incurred for a very good reason.

If the result is that the Australian capital markets are perceived to be riskier places to be for investors from all over the world – and investment is the ultimate global game – then that is bad for Australia and that is bad for Australian companies as well, because that makes them riskier propositions. That puts their cost of capital up, and it makes them less attractive investments.

MS: Global game: broadly speaking, US executives are paid more than those in Europe, for example. How does Australian executive remuneration compare internationally? Are we getting good value at the global perspective level from our chief executives?

GH: There's an absolute part to that question and a relative part. Generally, any chief executive anywhere in the world who is running a big company is making a lot of money by any real person's yardstick. But there is actually within that then a relative story, and there is quite a lot of scatter or quite a lot of dispersion.

If you try to compare like with like, and you look at running a big bank: in Australia if you run ANZ you are taking home about $8 million a year or $10 million a year, all up. An equivalent institution in the United States is probably double that. In the Netherlands it is probably a lot less than that. Now, is there a good reason for that? Probably not – it probably should not be that different.

That also points to the fact that the argument often made about the mobility of executives and the lack of fidelity they have to their institutions is somewhat spurious. People often say "well, if we do not pay them this extra dollar or these extra millions of dollars then they will be off". And that actually does not happen all that much.

And if that was the only motivation for the individual in question they are maybe not the best person to be the long term steward of the company in any case. So maybe there is some pretty positive selection going on there. But yes, Australia kind of sits in the middle in terms of Western economies for the most part.

MS: I should ask you Gordon, by the way and while you're here, what is your package and how is it determined?

GH: What is the number?

MS: Well, you are a chief executive. You're not in a publicly listed company, but presumably there is a market for your services and I would be remiss in this context to not ask you. You may well say that that is a private thing, but I need to ask you.

GH: We try to be credible. We are out there asking for good governance of the entities in which members invest. We try to be well-governed ourselves as part of that transparency. So my salary will be published in our annual report at some point. I think it is a good salary for what I do. We're a not-for-profit organisation.

It was determined by the board that employed me after negotiation. There is no variable component to it; it is a fixed salary and that is it. I guess my variable component is do I keep the salary. That is, do I keep the job? And that is the way that it is motivated.

MS: You are on a three-year contract?

GH: No, I am on an ongoing contract.

MS: So you could lose your job at any time?

GH: I guess so, yes.

MS: For fault.

GH: Exactly.

MS: But you want us to wait until it is published in the annual report or would you like to tell me, in the interests of transparency? I don't care. I'm just asking the question I think I need to ask in this context.

GH: Yes, it's in the range of $200,000 to $300,000.

MS: OK; which is a bridge to your story personally. It is a fascinating story. You are a relatively young man. You came out of Scotland. You have a natural sciences background. And yet you're doing what you're doing. What the hell is going on?

GH: I wish I knew! Like most people, I am the "victim" of a lot of good luck. A bit of a circuitous pathway has led me to where I am right now. It makes sense in my head, but only because I am reverse-engineering the answer. I was a scientist by university training, undergraduate and Master's. I then went to become an investment banker in London, doing mergers and acquisitions, and I guess that already poses a question that that is a bit weird isn't it?

MS: Well, geophysics to that is already a leap.

GH: Yes, it sounds like a leap. As it happens, one day you are modelling earthquakes and there is a lot of uncertain information in that, but you're just staring at a spreadsheet all day basically, and the next day you're doing the same thing but you are modelling companies. You're looking backwards in time in one case and forwards in another, but it is still trying to get your head around quantitative information that is missing a lot of pieces.

I went into investment banking and found it interesting and personally challenging. It is very interesting because you get to see a lot of things. You get to see a kind of helicopter view on the economy, you get a lot of contact with very senior people even if you are quite junior yourself, it is exciting and it is well paid, of course, relative to almost all other sectors.

But I came to the conclusion that that was not what I wanted to expend all my time and emotion on for the rest of my life and I moved to the United Nations after a few years and I thought well I would like to work on environmental issues, social issues, issues of justice, human rights, environmental protection. But I should probably for my own sake try to leverage what I know and what I can do.

I came to the conclusion that there was maybe some interesting nexus between how companies perform and how investors perform and how those entities related to the natural environment and to society and how they were governed, what kind of wrapper went around them and controlled them. That seemed to me a pretty intuitive proposition and therefore I was surprised to find that there was very little work done in capital markets or in private corporations on that notion.

When people talked about environmental issues it was always in the context of doing the right thing ethically or morally – you know, be a good guy – rather than it is actually just an enlightened way to serve your shareholders.

MS: Well, we talked over lunch about this notion of enlightened self-interest, didn't we, and it cuts across everything we have talked about today. Can you explore that a little bit briefly, please?

GH: What we do at ACSI is often mistaken for ethical investment. It is actually not that at all. That is a very interesting strategy for investment, and I absolutely recognise that, but what we do is very classically driven by the desire to make as much money as possible for as little risk as possible.

All we're trying to do is acknowledge that the world is a complex place and that the time horizons that are meaningful for our members and their members – that is, real people and pensioners and superannuants – is much longer than the time horizon that the markets work on. So we're not trying to redefine capitalism, we're just saying "continue to try to serve shareholders, but just make a much better job of it".

The Economist put it once that it is not about being accountable to multiple masters, you're still only accountable to your owner but you account for multiple stakeholders. So, we do not do triple-bottom-line stuff. What we do is not try to engineer social goods or environmental goods for themselves, but we try to acknowledge that there is a link between all those issues and the financial performance of entities.

MS: And it boils down to enlightened self-interest – that is kind of where the longer term interests of economies, societies, individuals converge. And when we were on our way to lunch we were talking at the very start of this about the traditional, hackneyed dichotomous view of capitalism – labour versus capital. And the situation in which you find yourself in – that we all find ourselves in – is that labour owns a lot of capital. Can you just put that into context?

GH: My members right now for the most part are Australian super funds, although we have a few international pension funds. In all cases, there are just millions of real people who either currently or in the past have contributed part of their earnings into those funds. They have done that in expectation of a return. They have said "well, if I do that then I will get more money in the future and I can have a happy retirement and live my dreams or do whatever I want to do".

Those are all workers by definition, and even in our members we have some where the average balance is really quite big. Some of these would be high-net-worth individuals by standard definitions. And we have people with tiny balances. They are all workers. They are all crucially owed a duty of care by the fiduciaries that look after that money. We are trying to help those fiduciaries to do the best job they possibly can.

As you say, and you capture it perfectly, it's not a battle, not in terms of the work I do, between the paradigm of the worker against the paradigm of capital. The workers are the owners of these corporations. These corporations should serve their owners and should do that over the long term, and that is what we're trying to effect.

MS: Which is where I keep coming back to the notion of enlightened self-interest – it encapsulates the commonality of interests and the idea that there is no prosperous high-street without healthy backstreets.

GH: Absolutely. The economy grows on a substrate that is the environment and the community. If that substrate was completely unhealthy it would be unlikely over the long term that the economy itself would be healthy.

MS: We have gone so far over time, but I am really interested in talking with you. The final question, Gordon, to every guest in The Zone is what is the hardest thing you have ever had to do, at least that you're able to talk about here?

GH: I am delighted to divulge it. There is no contest. It was becoming a father, by a country mile. It is a constant emotional and physical challenge. My son is three and a half years old right now and a bundle of energy and fun and love. It is an amazing realisation. I probably should have thought about this as my wife was pregnant, as opposed to the minute my son appeared in my arms for the first time.

But all of a sudden you have this notion that every day that you live for the rest of your life you're responsible for that little bundle. And it's also very difficult because you do feel responsible for the entirety of that person's life, but the reality is that so many factors are out of your control – physical and emotional factors. And that is just terrifying.

MS: It is overpowering and it is also, from my experience, and that includes some full-time parenting which again I would encourage you towards if you head down that path, possibly the most engaging thing and ultimately the thing that makes more sense than anything else in a world. It can, too, be quite discombobulating. But there is something also quite compelling about it. So, I wish you very well with that and in the meantime, on my behalf and of the approximately 6,000,000 Australians who are relying on you and your colleagues to some extent, go well for all of us.

GH: Thank you very much, I have very much enjoyed it.