Prominent Australian companies including retailer Harvey Norman and car dealership conglomerate Eagers Automotive are facing rising pressure to return JobKeeper payments to the government, with critics saying they are abusing the wage subsidy after posting large profits and paying dividends to shareholders.

Corporate Australia recently tied off its recent half-year reporting season, a period when public companies are obliged to reveal their financial performance for the last six months. Many sharemarket-listed businesses revealed the quantum of JobKeeper payments claimed over the period, with some pledging to repay the stipend after raking in better-than-expected profits.

However, a number of companies, including retailer Harvey Norman and Athletes Foot-owner Accent Group, opted to hang on to the subsidies and resisted calls to repay them. The decisions have been derided by many governance advocates.

Danielle Wood, economist and chief executive of Melbourne-based think tank The Grattan Institute, told The Age and The Sydney Morning Herald companies should be required to pay back JobKeeper when their actual performance deviated significantly from their initial forecasts when applying for the scheme last March.

“I don’t think it’s a great look for companies that were profitable during that period to be taking large subsidies from the government,” Ms Wood said. “If you didn’t need the wage subsidy, if your business went fine, there’s a question directors should be asking themselves on if it’s the right thing to do to pay it back, and what sort of message that sends to the general public.”

The government announced the $80 billion JobKeeper scheme in March last year, amid heightened fears about the impact of the COVID-19 pandemic on the economy. The program allows businesses to receive a $1500 a fortnight payment for each eligible employee, with the government effectively paying their wages until September. Businesses needed to demonstrate or forecast a 30 or 50 per cent decline in revenue to be eligible.

The scheme has been a critical lifeline for some businesses that have had to suspend their operations due to border closures and lockdowns including aviation giant Qantas, which reported a $1.1 billion loss for the first half of fiscal 2021, troubled casino operator Crown, and major cinemas and hotels operator Event Hospitality.

Some major companies including Cochlear, Domino’s, Super Retail Group, Nine (the owner of this masthead), Iluka and Adairs have also agreed to hand back some or all of their JobKeeper payments, with the total amount repaid topping $100 million.

However, this marks a tiny fraction of the total value of the scheme, with 99 per cent of the program allocated to private companies that do not receive the same level of public scrutiny as listed ones. A total of 3.8 million Australians across one million businesses had their employment supported by the scheme, according to the Australian Tax Office.

But many companies that applied for the subsidy after fearing a massive downturn in sales at the beginning of the pandemic instead experienced a change in fortunes. This was especially prevalent in the retail sector, where online shopping and significant stimulus prompted record consumer spending.

Many of these businesses have defended their positions by saying the subsidy acted as intended, preventing the sacking of thousands of staff. Others, such as Harvey Norman founder Gerry Harvey, said they would effectively repay JobKeeper through higher taxes on their inflated profits.

“Because we’re franchised, all our people earn very big money, so all the money our franchisees have earned they’ve got to pay 50 cents on the dollar in tax,” he said in January. “So we’ll be repaying it back in tax.”

Dividends paid by companies claiming JobKeeper were also often funnelled to key figures at those companies which own large amounts of shares. AP Eagers’ director and rich lister Nick Politis is set to receive around $17 million from the company’s dividend despite it recieving $130 million from the scheme.

A spokesperson for AP Eagers defended the company’s use of JobKeeper, saying it was passed directly on to employees and saved around 2000 jobs.

“It’s important to note that we halved our FY19 final dividend and elected not pay a 2020 half-year dividend, collectively representing at least $65m in dividend payments that were forgone by shareholders, many of whom rely on dividend income,” they said.

The use of the subsidy has drawn the ire of many governance experts. Vas Kolesnikoff, the Australian head of influential governance firm ISS, said the reticence of some companies to repay JobKeeper while simultaneously reporting record profits was “not a good look”.

“Directors need to have a close look at themselves and their company,” Mr Kolesnikoff said. “But I think a lot of boards are probably just counting on it all going away.”

That’s unlikely to happen, he believes, with companies likely to face questioning over their use or abuse of the scheme at their annual general meetings later this year.

“Shareholders want companies to make money, and to make it the right way,” he said. “We know investors are looking at these sorts of things.”

However, the issue is more nuanced than just if companies have repaid JobKeeper or not according to James Cook, the chief investment officer at investment fund U Ethical, who says the broader spectrum of actions taken by companies on JobKeeper should be considered when judging if the payments were used fairly.

“Going back to the onset of the pandemic lockdown and speculation over the economic impact when companies first applied for JobKeeper, it is worth considering how they might have utilised the funds, such as if they granted COVID leave for staff, did they increase protections for workers, did they retain staff?” he said.

The level at which company management “gamed the system” should also be taken into account, he said, where better than expected outcomes prompted executives to reward themselves through STI and remuneration increases, essentially funded from the JobKeeper package.

This is in contrast to examples of company directors acting in good faith to take salary cuts and ceasing bonuses for the year in a contribution to ensure staff wellbeing and certainty of employment.

“These are examples of strong corporate behaviour short of just paying it back,” he said.

All three agree the federal government should provide taxpayers with greater transparency over the financial performance of companies that claimed JobKeeper, a call echoed by Labor MP Andrew Leigh.

“The government should disclose the number of firms whose profits went up but they received JobKeeper. We should know how many firms forecast a downturn that never eventuated. We should know how many firms paid executive bonuses contrary to the tax office’s advice,” he said.

“Josh Frydenberg has all this data at his fingertips. To refuse this is to treat JobKeeper like its Liberal Party money rather than taxpayer money.”

On Monday, Mr Frydenberg said in order to force companies to pay back JobKeeper he would have to retrospectively change the program’s laws, something he was not willing to do.

“Businesses made decisions to receive JobKeeper and then, as a result, keep staff on, which has helped retain hundreds of thousands of jobs across the community,” he said. “JobKeeper has helped save jobs. That is what it was intended to do.”

This story was originally published in the Sydney Morning Herald and The Age. Read the original story here.

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