New AWI leader non-commital on need for cultural and governance change

Terry Sim, November 14, 2018

New AWI chair Colette Garnsey

NEW Australian Wool Innovation chair Colette Garnsey was this week deliberately non-committal on the need or otherwise for cultural and governance change at the research, development and marketing company.

Nor could she outline how AWI’s stance on the implementation of the 82 recommendations made in the recent Ernst&Young review of performance and governance would change with the resignation of former chairman Wal Merriman.

Despite the review highlighting a need for significant governance and cultural changes at AWI, Ms Garnsey this week chose instead to refer to AWI’s value to wool growers, leadership renewal and her consultative style.

Mr Merriman resigned as AWI chairman last week and the board appointed his preferred successor, Ms Garnsey, who said one of the company’s highest priorities was “responding to, and actioning, the 82 recommendations of the review of performance and governance commissioned by the Federal Government.”

When asked what values she brought to the AWI leadership and board, Ms Garnsey said she had quite a bit of experience in commercial decision-making because of her lengthy background in retail, including dealing with big brands and retailers in global markets and working in the supply chain across various geographies. This had given her experience in consumer insights and their importance in business decision-making.

She said the values of transparency, consultation and accountability to shareholders, “were all principles that I would like to be judged by.”

“I feel that in my corporate career I can be judged by them and I hope to live up to the highest standards.”

However, when asked whether she accepted or believed there was a need for cultural and governance change at AWI, Ms Garnsey said AWI has “delivered enormously for the wool growers of Australia.

“And I think that there has just been profound value creation out of the initiatives and the programs and the vision of this company over the last 10 years or so.”

When asked again to answer the question, Ms Garnsey said: “I think it is a good time for renewal and Wal felt that it was a very good time for new leadership.”

When asked again to specifically address the issue of governance and cultural change at AWI, Ms Garnsey said she was very excited about working with the AWI team to implement a new consultation model.

“I think my listening style and my consultative style will assist the company well as we go forward and we tread a new path.”

The EY review, in recommendation 1.14.5 said AWI must “exhibit a cultural change” to make the recommended changes successful.

“AWI needs to exhibit behaviours of good governance including accountability, transparency, integrity and stewardship.

“This should start with leadership agreement to the change, followed by staff education and training,” the ‘critical’ recommendation outlined.

However, even in AWI’s latest references to recommendation 1.14.5 in its implementation plan, there is no mention of leadership agreement to change, only references to the measurement of organisational culture in a recently conducted a global employee engagement survey and a commitment to conduct annual Pulse surveys of employee engagement.

No reason given for not forming the governance forum

Ms Garnsey could not answer why AWI had not formed a governance forum with industry, AWI and Department of Agriculture and Water Resources representation to oversee any review implementation changes by the deadline of 31 October. The governance forum’s establishment has been included in AWI’s review implementation plan as one of the 75 recommendation agreed to by the AWI board.

“I am familiar with that, but that is currently under discussion with the department,” she said.

Ms Garnsey referred Sheep Central to the department, which has already said AWI’s review implementation plan is “owned and authored by AWI.”

No commitment to implement all 82 review recommendations

Ms Garnsey also would not commit to implementing all of the review’s 82 recommendations and had to be asked twice if she believed all should be implemented.

“Our highest priority over the next weeks and months will be responding to and actioning those 82 recommendations of the review of performance.

“I believe that the recommendations that we can implement, should be implemented and I think that the recommendations that need shareholder deliberation, shareholder decision, need to be given to the shareholders.”

Ms Garnsey also could not outline whether the AWI board’s stance on implementation of the review recommendations would change with Mr Merriman’s resignation. She simply restated “actioning and responding to” the recommendations was the highest priority of herself, the board and the company.

Ms Garnsey said she stood by the AWI’s current “correct” assessment that five recommendations should go to shareholder, the board agreed with another two “in-principle” and 75 were agreed to by the AWI directors.

“The bulk of those recommendations are already underway, I think about 30 percent are complete and we’ve got a timeline that’s up on the website and shows the progress of all of those recommendations and then there are that handful that really need shareholder deliberation and shareholder input into.

“They’ve got to decide on it, it’s their company, it’s owned by the wool growers of Australia.”

On the possibility that the failure of the five recommendations to gain the required 75pc voter approval without a board approval maintaining the current board and governance structure status quo, Ms Garnsey simply said: “That would be the shareholders’ decision.”

“I can’t anticipate what might happen, all I can do is respect what the shareholders want – that’s my fiduciary duty.”

“I can only respect that what they decide and what they want is implemented.”

No concern that Mr Merriman will act as a ‘shadow chairman’

Ms Garnsey said she had no knowledge of AWI directors being supposedly lobbied by wool growers or being instrumental in Mr Merriman’s resignation.

“Wal convened an out of session board meeting for last Thursday and at that meeting late Thursday afternoon he announced that he had come to a decision — which he obviously had given an enormous amount of thought to over the preceding weeks and months — to step down as chairman.

“That was not something that I saw coming at all.”

On whether Mr Merriman’s resignation indicated he did not have the board’s confidence or support to continue as chairman, Ms Garnsey said: “No, I don’t think so, I think what you have is respect; the directors respected Wal’s decision.”

“He came to that decision, he has had a long and distinguished career and involvement in this industry, and time and time again he has proven that he will do what is in the best interests of wool growers,” she said.

“And he felt that it was time for new leadership.”

She was not concerned that Mr Merriman will act as a ‘shadow chairman’ while he remains on the board or that wool growers might perceive there would be no changes unless he leaves.

“Wal has said to me that he has confidence in me to tread … to take our own path.

“He wants renewal and he wants new leadership and he has said that he wants to see that,” she said.

“So I feel confident of his support as a director.”

Garnsey queries  reporting of Merriman’s technical insolvency claim

Ms Garnsey queried the quoting of Mr Merriman’s statement to a recent Senate Estimates hearing that if growers voted in a 1.5pc levy in the 2018 WoolPoll: “Stuart’s (AWI CEO Stuart McCullough) figures on that show that we’re technically insolvent in the first year of the WoolPoll event.”

Despite Mr Merriman’s statement also being recorded as such in parliamentary Hansard, Ms Garnsey said: “Wherever that has come from, I think that it might need to be checked.”

But she said if the WoolPoll result was for a 1.5pc levy for 2019-2022, AWI would “cut our cloth.”

“What I would say we would is regardless of what the outcome is, through that levy, we are committed to investing it efficiently and delivering results for wool growers.

“And whatever the outcome is, we will cut our cloth to ensure that we are able to do that,” she said.

“If you didn’t cut your cloth of course you could end up in a bad place, but we will cut our cloth and we will be efficient and we will be effective with those funds.”

On Mr McCullough’s recent statement that Australian wool grower bodies lobbying for a 1.5pc levy had damaged “brand wool” and were partially responsible for wool price drops, Ms Garnsey didn’t believe there was any one reason for prices going up or down.

“I would say there are multiple factors in price movements and I would say that confidence is a factor.”

Referring to a few letters of concern to the media from some Italian manufacturers about Australian industry debate on mulesing and levy voting, Ms Garnsey said they wanted to continue to see investment in “brand wool” in overseas markets to ensure wool prospers and profits are returned to growers.


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