AUSTRALIAN Wool innovation has been allowed to avoid industry scrutiny of its plans to implement key governance changes, despite a clear recommendation by the independent Ernst & Young review.
AWI’s failure to establish a governance forum by October 31 this year with wool industry and Department of Agriculture and Water Resources representation is in direct contravention of ‘critical’ review recommendation 1.14.7.
This is despite AWI chief executive officer Stuart McCullough claiming at a Senate Estimates hearing last month that the research, development and marketing company had agreed “outright” to 75 of the review’s 82 recommendations, which would include 1.14.7.
Recommendation 1.14.7 states that that any deviation from the recommendations made in the EY review report should be approved through the proposed governance forum. AWI lists the ‘EY due date’ for recommendation 1.14.7 as 31 January 2019 on its the Review of Performance Implementation Portal or ROPIP.
Five other recommendations slated for a shareholder vote and two others agreed to in-principle by AWI make up the total of 82 recommendations that Minister for Agriculture and Water Resources David Littleproud has requested AWI fully implement.
Mr Littleproud today said he would be writing to AWI this week about its failure to set up the governance forum.
“AWI agreed to set up the governance forum by October 31 and sheep farmers have been telling me today how disappointed they are this hasn’t been set up yet, as am I.
“AWI should not disrespect the process or their levy payers,” he said.
“They entered this process and they should honour it.”
Mr Littleproud said he has had good discussions with Labor’s shadow minister for Agriculture Joel Fitzgibbon about a bi-partisan approach to AWI’s implementation and I’m confident we will continue to work to achieve that outcome.”
AWI’s failure to comply with the governance forum recommendation and intervention on AWI’s behalf by Mr Littleproud’s deputy, assistant Agriculture Minister Senator Richard Colbeck over a legal advice request at last month’s Senate Estimates hearing, has heightened industry concerns about AWI’s intent and the role played by the department in the review’s implementation.
At the same hearing, DAWR Agricultural Policy Division first assistant secretary Joann Wilkie said: “We want to have an ongoing conversation with AWI about how they’re planning to implement things to make sure that their implementation is consistent with the sentiment and the findings in the EY review.”
When Mr McCullough’s was asked why AWI had not formed the governance forum by the due date, his response was that “the forum was established with DAWR as a weekly monitoring group to monitor progress of the review and enable timely action to be taken as required.
“The group has met several times with the most recent meeting being last Thursday November 1, 2018.”
However, Sheep Central has confirmed that AWI has not contacted peak wool grower body WoolProducers Australia nor the Australian Wool Growers Association to establish the governance forum as recommended by the EY review. Nor has either body been involved in the weekly monitoring group. Mr McCullough has refused to discuss AWI’s response to the EY review with it’s own Industry Consultative Committee, instead referring members to the ROPIP.
Mr McCullough’s also said that at AWI’s six-monthly Statutory Funding Agreement meeting with DAWR on 27 August 2018 it was agreed that AWI and DAWR should continue to meet fortnightly “to discuss this ongoing progress with the implementation plan for the foreseeable future.
“AWI agrees that the implementation of the recommendations outlined in this plan must be timely and transparent and involve key stakeholders throughout the process.”
Mr McCullough said to assist all stakeholders monitor AWI’s progress on implementing the recommendations in the 2018 review of performance and governance, AWI has developed the ROPIP. The portal provides weekly updates on progress against each recommendation.
A DAWR spokesperson said the AWI board is independent of the department and is responsible for implementing the review recommendations.
“The department has met and heard from AWI about its response to the review’s recommendations.
“The department conveyed to AWI that if it is proposing to implement a review recommendation in a way that is different to that proposed by EY, then it would be prudent for AWI to explain this in its implementation plan and identify how the alternative approach meets the intent of the recommendation,” the spokesperson said.
“Importantly, the implementation plan is authored and owned by AWI; it has only been approved by the AWI board.”
WoolProducers Australia chief executive officer Jo Hall said as an agri-political lobby group, it was WPA’s job to contact the department and the Minister’s office regarding the governance forum issue.
“We find AWI’s response to this completely unacceptable and we simply do not believe that this can be regarded as one of the 75 recommendations that they deem as complete, as they have not even attempted to implement it; however, AWI is claiming it as complete,’ she said.
“The minister has not made any public comment on the latest implementation plan, but has made many public comments previously regarding his expectation that all 82 recommendations must be implemented or he will be left with little choice other than to use legislative powers.
“WPA fully supports the minister’s expectations.”
AWI has also been allowed by the department to abrogate the EY review’s timeline for recommendation implementation by adding an ‘actual date’ to the ‘EY due date’ on its ROPIP.
AWGA director and AWI Industry Consultative Committee member Martin Oppenheimer said AWGA was not contacted by AWI about the governance forum.
“They (AWI) are just treating us with total disrespect and disregard.
“They don’t want to know what we think, they haven’t shared information with us, they don’t want to consult with us,” he said.
“It really is an impossible situation.
“It’s just so clear that this AWI board does not want to make the changes necessary and I don’t know how we, the minister or anyone can expect that they are going to make the changes,” he said.
“They have made it absolutely clear so there has to be an intervention.
“I think this board has determined the future and unfortunately the way it is going, they are going to pull the house down.”
Ms Hall said AWI’s treatment of recommendation 1.14.7 is not the only issue WPA has with the AWI implementation plan.
“In terms of the recommendations being flagged by AWI as being put to shareholders, we do not believe that 1.9.1; 1.9.10 and 1.12.3 need to go to a vote and is contrary to EY’s recommendations as they are governance issues and not constitutional.
“Whilst AWI may believe they will change the ‘DNA’ of the company, it will be a change for the better to modernise the organisation and bring it’s governance into the 21st Century, which is no less than what woolgrower paying a compulsory levy to fund the organisation, deserve,” she said.
“There is also the issue that AWI agreed in Senate Estimates, after much debate with the RRAT Committee, that they would not proceed with putting recommendation 1.12.1 to shareholder vote; however, it remains in the implementation plan.”
A fiery exchange at the October 23 Senate Estimates hearing between Rural and Regional Affairs and Transport Committee chairman Barry O’Sullivan and Mr McCullough ended in a pre-lunch request for AWI’s legal advice on the EY review recommendations to be tabled. However, Senator Colbeck said it was not normally government practice “to share legal advice.”
His actions to prevent the release of the legal advice came on the same day that Mr Littleproud’s letter criticising AWI’s review recommendation plan was read at the hearing.
“So I’m going to take on notice, pending some advice on the public interest immunity claim, the tabling of the legal advice that you’ve been seeking,” Senator Colbeck said.
After lunch, Senator O’Sullivan withdrew his request for the legal advice from AWI.
“From a conversation I’ve had with them, I’m satisfied it doesn’t hold.
“As a signal, when it takes eight questions to actually qualify that a piece of legal advice exists, on a piece of paper, it will lead us every time to want to know what’s in it,” Senator O’Sullivan said.
“It might have been more useful—it’s a lesson for witnesses—to be up-front; I might not have even wanted it.
“But I will withdraw it, in the interests of not putting a lot of pain into the system,” he said.
Mr Colbeck’s office later issued a statement that “the legal advice in question has not been provided to the department, nor Minister Littleproud or Assistant Minister Colbeck.
“Questions relating to legal advice provided to AWI should be directed to AWI as it pertains to them.”
Mr McCullough told ABC Radio Country Hour presenter Warwick Long recently that legal advice on the five review recommendations slated for a shareholder vote “could change the DNA of the company.”
AWI has refused numerous requests from wool grower bodies and Sheep Central for the release of the legal advice it has received pertaining to the review recommendations.