Wool grower concern growing over AWI review implementation plans

Terry Sim, November 2, 2018

Agriculture Minister David Littleproud

MINISTER for Agriculture and Water Resources David Littleproud has the Labor Party’s in-principle support for legislation to ensure Australian Wool Innovation implements all recommendations from its recent governance and performance review.

However, wool grower bodies and some growers are concerned the AWI board’s refusal to commit to all 82 recommendations by the EY review might mean a delay in legislation to deal with outstanding issues until after the caretaker period before the next Federal election early next year.

The next Federal election is expected to be held before early May next year, but governments generally avoid making major decisions during the caretaker period that runs for several weeks before a poll date. There are only eight joint Senate and House of Representatives sitting days left this year – November 26-29 and December 3-6.

AWI chief executive officer Stuart McCullough has proposed a three-year plan for review recommendation implementation, but WoolProducers Australia CEO Jo Hall said she is sure “with genuine intent it could be done a lot sooner.”

The AWI board has stated it agreed with 75 of the review’s 82 recommendations, two have its “in-principle” support and five issues are listed for shareholder consideration at a mooted extraordinary general meeting in March next year.

However, peak grower body WoolProducers Australia believes there was initially no compelling reason for an EGM, but would like the mooted meeting to be brought forward to early February. Mr Littleproud has requested the EGM be held in the first quarter of 2019. WPA’s request to AWI seeking further details on why an EGM was needed was ignored, Ms Hall said.

“There is no practical reason why it (the EGM) can’t be held in early February to implement the recommendations and improve AWI as soon as possible,” she said.

Mr Littleproud is currently considering his response to AWI’s revised implementation plan which has maintained its stance on five key recommendations to go to shareholders, despite the first version being slated as “short on detail and vague” by the minister. The minister has not commented on the re-submitted plan, but Ms Hall said a number of recommendations are not adequately addressed and “overall we are very disappointed.”

“The minister has made a number of public statements referring to his ability to take action if AWI were not complying with the intent of the recommendations and implementing them.”

She said AWI’s implementation of review recommendations “can only be called slow” and WPA was concerned that there appeared to be delays.

Mr Littleproud’s options to enforce AWI implementation of all review recommendations include legislation and changes to AWI’s Statutory Funding Agreement with the Federal Government, which is not due for renegotiation until 2020.

WPA would prefer AWI action, not government intervention

Ms Hall said the last thing WoolProducers wanted was government intervention.

“However, the recommendations were made to improve the operations and governance of AWI which is also a key priority of WoolProducers.

“I think the minister is being put in an incredibly hard position by AWI’s handling of the review and its subsequent implementation of recommendations.”

The seven recommendations which the AWI board has not completely committed to include changes to:

– remove a requirement for 100 signatures from AWI shareholders to nominate a director candidate and allowing any eligible shareholder to nominate another,

– institute a 10-year director term cap,

– enhance the definition of an independent director,

– increase the transparency of the chairman’s proxy voting intentions, and;

– improve the independence and structure of the board nomination committee membership and process.

AWI chief executive officer Stuart McCullough has claimed the five recommendations set for shareholders consideration would “change the DNA of the company” and the director cap change would “seriously affect” the board in the next 12 months if instigated.

The five key recommendation and those agreed to “in principle” by the board would implement constitutional and rule changes that would end the tenure of AWI chairman Wal Merriman and of fellow directors David Webster and Meredith Shiel, ensure Mr Merriman declared his voting intentions, give transparency to the board nomination process and improve director independence. The review found that AWI’s current selection process for its board nomination committee member selection was inappropriate, as the chair of the board has a substantial influence over the membership of the committee.

Ms Hall said AWI could implement nearly all 82 recommendations without shareholder approval, including inserting the 10-year director term cap in its board charter.

“If they do not implement the recommendations about board tenure and the board nomination committee process, the culture of AWI will not change – and that’s what needs to change.”

AWI is playing games – Keniry

New South Wales wool grower and former AWI director John Keniry said he was concerned that the legislative option for review implementation might be delayed until after the next Federal election.

“I think (the AWI directors) they are just thumbing their nose at the minister and there has been no commitment it seems from the board about what the EGM resolutions will be.

“They have just said it is too early to do it,” he said.

“They can do whatever they want (about the EGM date), they haven’t called the EGM yet.

“I just think they are playing games.”

Australian Wool Growers Association chairman Robert McBride said AWI’s delays in implementing key review recommendation is showing their disregard for the Senate and the Federal Government, which funds AWI to the tune of $14-$17million annually. He said the Senate and the government had stated very clearly what AWI needed to do “to get back on track,” but he was concerned federal funding of AWI might be cut through a loss of goodwill.

“All these recommendations should be implemented immediately or people should retire from the organisation and make room for people who will do what the government has asked them to do.”

“Through these delays, AWI is playing a very precarious games with these (matching Federal) funds to the detriment of the wool industry,” he said.

“The DNA of AWI needs to change and is clearly missing a few vital links in the chain at the moment, and that is the rapport that we have had with government and we must have.”

Western Australian grower David Thompson said AWI’s recent attendance in Senate Estimates showed they were “almost thumbing their noses at the very people who send them money through the SFA.”

Mr Thompson said it will be “almost impossible” to get the necessary 75pc voting approval to implement the five recommendations to be considered by AWI shareholders at an EGM, without a board endorsement. He is concerned that without change on the proxy issue before the EGM, the current system criticised by the EY review would be used to “guarantee those five don’t get through.”

“I can’t see how there would be any other way apart from legislation,” he said.

“I think there should be some sort of broader inquiry into the running of the company.”

He urged Mr Littleproud to take action “sooner than later.”

Labor’s Shadow Minister for Agriculture Joel Fitzgibbon said the EY report seems reasonable and sound. He said he agreed with Mr Littleproud’s stance on AWI and the review, in that all the recommendations should be “picked up (by AWI) as quickly as possible.”

When asked if he and the Labor Party were prepared to back Mr Littleproud on legislation to ensure AWI implemented all the review recommendations, he said “yes.”

“Subject to seeing the legislation, but in principle, yes.”

Mr McCullough was asked if the AWI board is committed to a March 2019 date for the EGM, or is this open to change and whether AWI might be trying to delay shareholder consideration of the outstanding review recommendations.


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  1. David Everist, November 7, 2018

    Your headline ‘Wool grower concern…’ is a beat-up. Wool growers I speak to are not at all concerned about AWI and its board members. In fact, they are very supportive of Wally Merriman and the AWI model particularly when compared the MLA leadership and its structure. The now closed WoolPoll could indicate a level of apathy in the wool industry or maybe it could be taken as a vote of confidence in the current policies of AWI and its leadership. Editor’s note: Thanks for your view and speculations David. I stand by the headline — grower and grower body concerns about AWI’s responses to the review recommendations are outlined in the story.

  2. Leanne Moore, November 3, 2018

    Yes Brad, totally agree. The other poignant point is…he’s willing to implement those recommendations, but neither he nor Joyce would bat an eye at the seven Senate recommendations to haul the cattle industry in to some fairness.

  3. Brad Bellinger, November 2, 2018

    I am a wool grower and am totally opposed to the policies of the fringe group that call themselves WoolProducers Australia. They are basically a political arm of the state farming organizations of which I proudly do not belong. The VFF and the NSW Farmers Association have already wrecked the wool industry once, when they pushed the floor price to 870 cents through their wool council in 1989. We must not let them do it again via destroying the democratic structure of AWI.
    The wool price is the only money that I have to maintain my Merino ewes through this drought. We have a chairman and directors of AWI with real skin in the game and I suggest that the Nationals and the Labor Party stay away from the wool industry. Wool, gold, coal and iron ore are the backbone of Australia, not a cash for comment accountancy firm or a Nationals or Labor Party that has sold us out so many times before.

  4. John Gunthorpe, November 2, 2018

    At Cathy McGowan’s dinner in Wangaratta this week, Minister Littleproud in his address to those attending stated unequivocally that he would not deny AWI shareholders their right to vote on those recommendations that impact their company’s constitution. Good governance demands that shareholders are provided with sufficient time to consider fully the matters impacting their company’s constitution. It is therefore beholding on the AWI board to move at a pace that achieves this outcome. This process must include an opportunity for both sides of the argument for change to be put in writing to all shareholders. With Christmas and January holidays during this period, it would seem ambitious for even the minister’s request for the EGM to be held in the first quarter of 2019. The AWI board has a fiduciary responsibility to their shareholders to move with caution with such significant proposed changes to their constitution. There is also the matter of the notice period required under the Corporations Act — 21 days is required for an EGM, but a longer period may be provided under their constitution. This is more likely to be the first half of next year, not the first quarter, if the directors of AWI are to meet their obligations with proper governance.

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