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ENVIRONMENT, COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS LEGISLATION COMMITTEE
(Senate-Thursday, 13 April 2006)
HENSCHKE, Mr Ian Martin
GARRETT, Ms Kirsten
KOVAL, Ms Ramona
CHAIR (Senator Eggleston)
DEMPSTER, Mr Quentin Earl
CASSIDY, Mr Darce
GREENWELL, Ms Jill
THOMSON, Mr Graeme
WARREN, Mr Christopher
BUETTEL, Mr Rohan
- Senator CONROY
Content WindowENVIRONMENT, COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS LEGISLATION COMMITTEE - 13/04/2006 - Australian Broadcasting Corporation Amendment Bill 2006
CHAIR —The Senate has resolved that an officer of a department of the Commonwealth or a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about how and when policies were adopted. Any claim that relies on a ground of commercial-in-confidence must be made by a minister and should be accompanied by a statement setting out the basis for the claim. Any final refusal to answer a question should also be by a minister. Do you wish to make an opening statement?
Mr Buettel —Yes, I do. The government has introduced legislation to abolish the position of the ABC staff-elected director to improve corporate governance arrangements for the ABC board. The position of staff-elected director was created formally in 1975 with the elected person appointed as a non-executive director. It was abolished in 1978 and reinstated in 1983 with legislation formalising the position passed in 1986 as part of the Broadcasting and Television Legislation Amendment Act 1986. The position of a staff-elected director is not common amongst Australian government agency boards. There are some other examples where it exists but these are mainly education or research institutions.
It is the government view that it is inconsistent with modern principles of corporate governance to include a staff-elected director position on a body like the ABC, a major business undertaking with an annual turnover of around $945 million per year. The other national broadcaster, SBS, does not have a director elected by its staff. The government is also of the view that there is a tension relating to the position on the ABC board manifested in the potential conflict that exists between the duties of the staff-elected director under the Commonwealth Authorities and Companies Act 1997 to act in good faith in the best interests of the ABC and the appointment of that director as a representative of ABC staff elected by them. The government believes that the election method creates a risk that a staff-elected director will be expected by the constituents who elected him or her to place the interests of staff ahead of the interests of the ABC where they are in conflict. In this regard, I note the statement of the Chairman of the ABC in response to the government’s announcement on 24 March 2006:
Inevitably there has been a tension between the expectations placed by others on their role and their established duties as directors of the corporation.
As noted in the minister’s second reading speech, this issue was recognised in the June 2003 Review of the corporate governance of statutory authorities and office holders, otherwise known as the Uhrig review. That review stated:
The review does not support representational appointments to governing boards as representational appointments can fail to produce independent and objective views. There is the potential for these appointments to be primarily concerned with the interests of those they represent, rather than the success of the entity they are responsible for governing.
The bill resolves these tensions by abolishing the staff-elected director position, and the bill is intended to give effect to the abolition of the staff-elected director position as close a possible to the expiry of the term of the current staff-elected director.
CHAIR —Thank you very much.
Senator WORTLEY —The minister’s second reading speech talks about a potential conflict that exists between the duties of the staff-elected director to act in the best interests of the ABC and representing the staff that elected them. Is the government aware of this causing any real problems in practice and does the government believe that any directors have failed to act in the best interests of the ABC?
Senator RONALDSON —I think this witness can answer policy questions; I do not know whether he can answer specific questions in relation to that.
Senator WORTLEY —Thank you for your assistance, Mr Ronaldson.
Senator RONALDSON —It is a pleasure, Senator.
Senator WORTLEY —I think the witness is well able to answer this question.
Mr Buettel —I will just make a couple of remarks in response. The government believes there is a tension between the staff-elected director’s method of appointment and the expectations placed on that director because he or she is elected. Earlier today, Mr Henschke referred to the tension between what staff expect of the staff-elected director and their duties as a director. As I noted in my opening statement, in response to the government’s announcement the Chairman of the ABC stated in relation to staff-elected directors:
Inevitably there has been a tension between the expectations placed by others on their role and their established duties as directors of a corporation.
As was noted in the Uhrig report, while it is possible to manage conflicts of interest, the preferred position is not to create circumstances where they arise. It may be the case that previous staff-elected directors have been able to successfully manage the tension—I am not in a position to comment on that—but the legislation will certainly avoid any possibility of such a situation arising in future.
Senator WORTLEY —I am somewhat amused by the use of the word ‘tension’ that we have had here today. I believe that one of the other witnesses talked about tension between other members of the board and the expectations placed on them from the people by whom they were appointed. There seems to be tension in all areas. Would you agree with that, Mr Ronaldson?
Senator RONALDSON —There is tension in the air, Senator!
Senator WORTLEY —Can you confirm that there are mechanisms to deal with the director who fails to act in the best interests of the ABC?
Mr Buettel —Yes. There is a provision in the Commonwealth Authorities and Companies Act which creates a civil penalty if they do not act in the best interests of the corporation. However, the purpose of the legislation is to remove the possibility of a conflict arising in the first place, in accordance with Uhrig’s recommendations.
Senator WORTLEY —Are you familiar with section 18 of the ABC Act that provides that the Governor-General can remove a director from office for misbehaviour and that there are also obligations to act in good faith and not to make improper use of information under the Commonwealth Authorities and Companies Act where civil and criminal penalties apply? Are these provisions not sufficient?
Mr Buettel —As I said, those provisions do operate in relation to directors but, as recommended by Uhrig, it is better not to create a situation where a potential conflict can arise in the first place.
Senator WORTLEY —Is there really conflict? We have not established that there is. As I said, the word ‘tension’ seems to be one that people have liked to use here today. The staff directors we had here this morning seemed quite clear that they were obliged to act in the interests of the ABC, not the staff. What evidence does the government have that staff-elected directors are conflicted?
Mr Buettel —I do not think the government is—
Senator RONALDSON —Again, I do not think this witness can answer these questions because they are potentially hypothetical.
Senator WORTLEY —Mr Ronaldson, I thought you wanted to get away at a certain—
Senator FIERRAVANTI-WELLS —It is actually Senator Ronaldson.
Senator RONALDSON —I go by a variety of names. Mister is one of them. They are a series of questions, because you prefaced your question with ‘while it has not been established that there is tension’, so anything after that, in my view, is purely hypothetical and this witness cannot answer it.
Senator WORTLEY —Is there really a conflict?
Mr Buettel —I do not think the issue really relates—
Senator RONALDSON —The ABC’s management and the chairman has said there is conflict—
Mr Buettel —Yes, the chairman said that there was a tension.
Senator RONALDSON —and the government is surely entitled to act on that.
Senator WORTLEY —If there is a conflict of interest, then there are already mechanisms in place that can address that conflict. Is that not the case?
Mr Buettel —As I was saying before, the issue is not really about what may or may not have happened in relation to individual directors in the past. The issue is one of what is best practice corporate governance for the ABC, and Uhrig has recommended that there should not be positions like this on government boards.
Senator WORTLEY —The government has relied heavily on the Uhrig report, but Mr Uhrig did not actually examine the governance arrangements at the ABC, did he?
Mr Buettel —In fact, in its discussion of the terms of reference, on page 1, the Uhrig report makes it clear:
A key task was to develop a broad template of governance principles that … might be extended to all statutory authorities …
Although the Uhrig review itself focused on particular agencies, its general principles are considered generally applicable and all statutory authorities are being considered in relation to them. The proposed change in the bill is consistent with the Uhrig report’s conclusions about representative appointments.
Senator WORTLEY —Uhrig’s terms of reference actually asked him to look at:
- Opportunities to improve the governance arrangements for statutory authorities and office holders, particularly those that have critical business relationships such as: the Australian Taxation Office, Australian Competition and Consumer Commission …
And so on—not the ABC.
Mr Buettel —Although Uhrig was not looking specifically at the ABC, the government has accepted that the general principles that came out of that report are generally applicable to statutory authorities across the Commonwealth. So the government is now looking at the full range of statutory authorities across all portfolios to see how they measure up to Uhrig principles.
Senator WORTLEY —When did the government receive the Uhrig review?
Mr Buettel —I think it was 2003.
Senator WORTLEY —Did the government take this policy to reform the ABC board to the last election?
Senator RONALDSON —Again, that is not a matter within this officer’s domain.
Senator WORTLEY —It is a specific question. Did the government take the policy to abolish the position of the staff elected director of the ABC board to the last election?
CHAIR —This is an officer of the department. That is a question you should direct to the minister.
Senator WORTLEY —The officer of the department does not have that information?
CHAIR —I do not think it is his business to get into a political issue.
Mr Buettel —Not that I am aware of.
Senator WORTLEY —How long has the government been considering this change, do you know?
Mr Buettel —I think, following Uhrig, there has been a substantial process put in place for all government departments to look at all the statutory authorities within their particular portfolios. So the process of reviewing and considering statutory authorities has been going on for some time, and because it is such a big exercise it has involved considering agencies seriatim. They were not all looked at at the one time.
Senator WORTLEY —Would you say that since the government received the Uhrig review, since 2003—
Senator RONALDSON —Mr Chairman—
Senator WORTLEY —Excuse me, Senator Ronaldson. It is a simple question which I am sure—
Mr Buettel —The short answer is: I am not aware at this precise moment.
Senator WORTLEY —When you say it has been going on for some time, how long is some time?
CHAIR —He has just said he does not know, Senator.
Senator WORTLEY —Is it six months, 12 months, 18 months, two years?
Senator RONALDSON —This officer, Mr Chairman, cannot possibly know what ministers or others—
Senator WORTLEY —Senator Ronaldson, I would just like the witness to respond to the question.
CHAIR —Senator Wortley, you seem to be asking a whole of government question. This officer represents DCITA.
Senator WORTLEY —And I am sure DCITA have the information as to how long the government have been considering this change.
Senator FIERRAVANTI-WELLS —As far as DCITA is concerned, I think you need to qualify that.
Senator WORTLEY —Yes, the department. How long have you been looking at these changes? Just an approximation will do.
Mr Buettel —About 12 months.
Senator WORTLEY —I am really struggling to reconcile this with Minister Coonan’s comments, when she told us at the estimates hearing in May this year that she did not have the abolition of the staff-elected director position under active consideration.
Mr Buettel —I think that at that time she did not.
Senator WORTLEY —We are aware of a Senate file list and that in 2004 DCITA created a file entitled: ABC/SBS governance—Uhrig review implementation—file No. 2004-005682.
Mr Buettel —That file was probably created at the start of the process. It would have been created when the Uhrig report first came to the department for consideration. We had to go through a substantial process of reviewing agencies in the light of Uhrig findings and that took a considerable period.
Senator RONALDSON —That is clearly a leaked document.
CHAIR —And that is a process of government and a process of the department and it is not necessarily public information. There are lots of—
Senator WORTLEY —Regarding the fact that this file exists, wouldn’t that indicate that the government was actually considering these changes before the election?
CHAIR —You would have to understand the distinction between government and the department, and I am not sure that these questions are—
Senator WORTLEY —I cannot see the minister here, so I am asking the department.
CHAIR —The minister is not here and therefore you cannot ask the questions.
0Senator Ronaldson interjecting—
Senator WORTLEY —What was that, Senator Ronaldson: the minister was not invited?
Senator RONALDSON —No, I said the minister is not required to be here.
Senator WORTLEY —I thought you said she was not invited.
CHAIR —Let us get back to the matter before us. You were asking about the process of departments and I am not sure that is a question you can ask.
Senator WORTLEY —I will move on. Can you describe the current process of appointing the other non-executive directors to the ABC board? How does the government go about making these appointments?
CHAIR —Again, they are cabinet appointments and, no doubt, recommendations go to the cabinet. But that is a cabinet matter and it is—
Senator WORTLEY —Are the vacancies advertised? Are there independent selection criteria? Who decides on the candidates to be considered?
CHAIR —Again, that is a cabinet-level decision.
Senator WORTLEY —How do you get on this list? Do you actually put it into hat? Do people nominate? How does one get onto this list?
CHAIR —That is a government level, ministerial question. I do not think it is appropriate.
Senator RONALDSON —You have appropriate skills which will add to the ABC board.
Senator WORTLEY —Sorry, Senator Ronaldson, I missed the point you were trying to make.
Senator RONALDSON —I said you are appointed on the basis—
Senator WORTLEY —Are we going to get the answers? I am just wondering—
Mr Buettel —Obviously, I cannot talk about particular cases, but—
Senator WORTLEY —So we cannot know—
Mr Buettel —appointment practices will vary in individual cases. From time to time, the department is asked to identify possible appointments to particular bodies. Often a minister will have particular appointees in mind for a particular position and does not seek advice. It does tend to vary from case to case. But there are standard government processes that are gone through in relation to appointments: having to go to cabinet and a formal minute being done for the Governor-General to recommend the appointment.
Senator WORTLEY —Some of the previous witnesses have used the word ‘opaque’. Would you think that is an appropriate word to use to describe the appointment process?
Senator RONALDSON —You cannot possibly comment on that.
CHAIR —Again, it is a political question that you are asking. It is not the role of an officer of a department to comment on a question like that. You should confine yourself to questions about the matter that this committee is here to inquire into.
Senator WORTLEY —Okay, we will move on. Has the government given any consideration to introducing an approach based on the Nolan rules in the UK? Did the department look at that approach as part of its review?
CHAIR —Confine yourself to the department rather than the government.
Senator WORTLEY —Did the department look at this approach as part of its review of ABC governance practice? I assume the department is the proper organisation that actually looks into these things?
CHAIR —They do, but departments carry out many inquiries on many matters which are not always adopted.
Senator WORTLEY —Mr Buettel, do you have the answer to that?
Mr Buettel —Perhaps I will comment on the Nolan rules, particularly since a number of the submissions suggested that the ABC’s board appointment process should be changed to that resembling the method used for appointing governors of the BBC involving the Nolan rules. The Nolan rules are a method of board appointment based on recommendations of the Committee on Standards in Public Life—the Nolan committee. Under the rules, appointments are made on the basis of recommendations provided by an independent advisory panel in accordance with a code of practice. The two most recent appointments to the BBC chairmanship, Mr Gavyn Davies and Mr Michael Grade, were recommended to the UK government by a panel chosen by the Department of Culture, Media and Sport consistent with the code of practice laid down by the Office of the Commissioner for Public Appointments. The OCPA, which was established in the UK in November 1995 in response to the Nolan committee report, based its code of practice on seven principles of public life.
If the argument to implement something like the Nolan rules relates to avoiding the appointment of board members who are too closely associated with a political party, a Nolan rules type process would not necessarily deal with that issue. The classic example of that occurred in September 2001, when Mr Gavyn Davies was appointed Chairman of the BBC under the Nolan rules. Mr Davies was a Labour Party member and long-time ministerial adviser to Labour governments in the United Kingdom. The appointment was criticised by the UK opposition at the time as calling into question the BBC’s political impartiality.
Senator WORTLEY —Given that the government did not take the proposed changes to the ABC board to the federal election—specifically the abolition of the staff elected director, the only truly transparent position on that board—why did the government decide that the extra director’s position, the staff elected position, was unnecessary?
CHAIR —That is a political question that should be directed to the minister.
Senator WORTLEY —The bill has the effect of reducing the maximum size of the board from nine to eight. Is that correct?
Mr Buettel —Correct.
Senator WORTLEY —So the position will be lost.
Mr Buettel —The position is being abolished, yes.
Senator WORTLEY —There are two vacancies on the board at the moment. How long have they been open?
Senator RONALDSON —That is totally unrelated to the terms of this inquiry.
Senator WORTLEY —It is to do with positions on the board. We are losing one position, the staff elected position, and now we are talking about two positions on the board that have been open for some time.
CHAIR —That is a political matter again. It is up to the government to appoint people to those positions.
Senator WORTLEY —I would like to ask the department: if the government is interested in improving the ABC’s governance, why has it taken so long to make these appointments?
CHAIR —That is a question you should asked the minister, not the department.
Senator WORTLEY —Are they expected to be made soon?
CHAIR —That is a question that you should ask the minister. You can do that during estimates, not to an official in this inquiry. I suggest you confine yourself to the subject matter of this inquiry.
Senator WORTLEY —So the department does not have any authorisation to answer any of these questions?
CHAIR —This is not an estimates hearing. This is an inquiry into the staff position and you must not wander across the border into political questions.
Senator WORTLEY —I will hand over to another senator, but I may have other questions.
CHAIR —Senator Siewert?
Senator SIEWERT —Senator Wortley has asked my questions.
CHAIR —That is what happens sometimes in these matters.
Senator WORTLEY —I would have thought we could have gotten some answers.
CHAIR —I think you really do have to understand that political questions have to go to a minister and you can ask departmental officials questions about matters relevant to the inquiry but not questions which have political overtones.
Senator WORTLEY —I would have assumed that the department has the information, unless, of course, it is all very secret and it is something that we—
CHAIR —Do you have any more questions? Otherwise we will conclude.
Senator WORTLEY —I will leave it there.
CHAIR —I believe Senator Ronaldson wanted to table a document.
Senator RONALDSON —This morning I was referring to a document, which was from Ms Koval’s 12th letter to staff, I believe. I seek to table it.
CHAIR —Do senators wish to have a look at this document?
Senator SIEWERT —Yes.
Senator WORTLEY —Yes.
CHAIR —Are we happy for the document to be tabled? There being no objection, it is so ordered. We thank Mr Buettel for appearing. With that I conclude this inquiry. I thank all concerned for their assistance today.
Committee adjourned at 3.05 pm