Senate scrutiny to unmask “extremely generous” payments to AWI nine

Senate scrutiny to unmask “extremely generous” payments to AWI nine


Farm Online News
AWI CEO Stuart McCullough and Chair Walter Merriman at recent Senate estimates hearings.

AWI CEO Stuart McCullough and Chair Walter Merriman at recent Senate estimates hearings.

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AUSTRALIAN Wool Innovation (AWI) will be asked to expose more hidden details of controversial settlement payments made to nine retrenched employees.

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AUSTRALIAN Wool Innovation (AWI) will be asked to expose more hidden details of controversial settlement payments made to nine retrenched employees, when the industry-levy-spending research and marketing agency again faces the Rural and Regional Affairs and Transport Committee.

Dissatisfied with AWI’s last appearance at recent Senate estimates hearings in Canberra, NSW Nationals Senator John “Wacka” Williams said he’d put a question on notice to AWI following his controversial, critical examination of the payouts.

At that public forum, AWI Chair Walter Merriman and CEO Stuart McCullough were hammered by Senator Williams over the payments made to two employees that the hard-nosed politician has alleged were overly excessive.

“I find it hard to understand why some senior staff, that AWI felt were no longer required in the business, and were paid salaries of $200,000-$300,000, ended up being paid almost a full year - 48 weeks - in redundancy and ex gratia payments,” he said.

“One person who worked for AWI for nine years received a $531,371 termination payout.

“That seems extremely generous to me.”

This week, Senator Williams said he would be taking AWI through the same issue in detail at the upcoming Senate estimates hearings in May because there were “more questions I’d like answered”.

“I’ve done a bit of research and in looking at the issue further, have actually asked AWI on notice for a summary of the nine ex gratia payments and nine redundancy payments – to the nine people – so we can see what sort of costs were put out there.,” he said.

“I’ve put a question to AWI saying you’ve made nine redundancies; please give us the details of the payouts for those nine people.

“We don’t want their names and we don’t care who they are – but it’s a case of finding out about the redundancies and taking it from there.”

Senator Williams said the issue was a simple case of transparency and accountability, to levy-paying wool growers, for the large termination payments made to unwanted employees, during AWI’s recent restructure process.

“Since the early 1990’s the wool growers have had the ass out of their pants and it has been a terrible industry to be in,” he said.

“But now it has come good, thank goodness, basically because of demand exceeding supply again and that’s why we’ve got record prices in the wool market.

“However, those wool growers have suffered enormously financially and I just think when you have one person, over 60-years old, who is on $310,000 per year plus super, that’s a very generous salary.

“And that’s 50 per cent more than I earn as a federal Senator and we always get complaints about politicians getting overpaid.

“To have an ex gratia payment of $97,000 is extremely generous, on behalf of the wool growers who’ve done it so tough.

“So I have trouble coming to terms with that and intend to raise that issue again at the next Senate estimates and no doubt (Queensland Nationals Senator and Committee Chair Barry O’Sullivan) will do the same.”

Senator Williams told the Senate estimates hearing earlier this month that when he left parliament in two years’ time at 64 years of age, he wouldn’t receive an ex gratia payment and would probably not get another job.

He told the AWI executives that he found the issue to be “amazing” because the wool industry had been through “hell” for a long time.

“I got 583c last week for crossbred fleece - that is good money, - but we remember the nineties and the period up to 2010 very much also,” he said.

“Those graziers who had to leave their land, they never got an ex gratia payment.

“You are using their money to give ex gratia payments - I think it is far too generous.”

Senator Williams said as a wool grower he saw the crash of 1991 during the period of the wool stockpile, at 4.5 million bales, and the “disaster since, which is probably why we went from 180 million sheep down to about 70 million today”.

“I think the wool growers would not be impressed with giving a generous ex gratia payment to someone who is on $200,000 a year and who is 50 years old, and to someone who is on $300,000 a year,” he said.

The lively Senate estimates hearing was paused while Committee members debated whether evidence should be presented in camera of the two large termination pay-outs, to avoid public identification of individuals.

Senator O’Sullivan said it was a “balancing act” about the privacy of the individual versus the Committee’s “imperative” to look and examine the workings of AWI to see integrity, transparency, value for money and value for investment.

Mr McCullough said, “We are getting into an area where we have agreements signed with employees who left the company”.

“I would hate to embarrass them or their families with statistics and figures being read out here,” he said.

“I think we have to be a bit careful with this particular topic.”

Mr Merriman said if Senator Williams called out the highest figure, “I know that the whole of our industry will know who that is”.

But Mr McCullough said, “Some of these people were single mothers with three kids”.

“There is a human element to the retrenchment of some of these people who are in their 60s or late 50s - they are unlikely to get another job,” he said.

AWI returned to the hearing following another break in proceedings where a document was tabled detailing the two termination payments where the individuals were referred to as “employee A” and “employee B” during further questioning.

Mr McCullough dismissed a suggestion the two ex gratia payments were a gift saying it was “a commercial decision”.

“Firstly, we discussed it with the board,” he said.

“Before I went into those negotiations, they gave me a tolerance as to what I could do with ex gratia and I worked within those tolerances.

“A whole range of things come into context with those ex gratia payments.

“Sometimes it has to do with their personal circumstances.

“Sometimes it has to do with their age.

“Sometimes you have to factor in how long they have served the company, what they have done for the company and their likelihood of employment after this particular retrenchment.”

Mr Merriman said growers funded AWI and voted the board in to run the business.

“In our opinion, that was a good commercial decision,” he said of the payouts.

Asked what the average annual profit of a woolgrower was, Mr McCullough said, “It is a hard figure to determine because every farm has a different cost structure”.

“Every balance sheet is structured differently,” he said.

“This is the figure we work on: when Chairman Merriman and myself took over, we had a $2 billion industry and now we have a $3 billion industry,” he said.

SA Labor Senator Alex Gallacher also led a hard line of questioning on whether the ex gratia payment was made despite AWI having no legal obligation to make it.

“Mr Merriman, you have said that it was a very good deal,” he said.

“You have no legal obligation to pay $97,000 to someone who has worked for you for six years, but you reckon that is a good deal, in addition to his redundancy, his notice period and five years of annual leave.

“How he got away with that I do not know.

“So why is it such a good deal to give someone $97,000 when you have no legal obligation?”

Mr Merriman said the CEO wanted to “look at the cost savings that we get out of this”.

“I think it was just a commercial business decision,” he said.

Asked to provide a “rough” estimate of the overall business cost of AWI’s restructure, Mr McCullough said it was about $1.5 million.

He also said “no” when asked if AWI had consulted with woolgrower representative organisations, such as WoolProducers Australia, on the restructure and the reasons for it.

Mr McCullough said some of the retrenched people had worked at AWI for 40 years and some had grandfathered in contracts from companies like the International Wool Secretariat.

“It is not as simple as just saying that the employee started last year and are on a modern contract - that is very straightforward,” he said.

“Every one of these was slightly different.

“We have that ledger.

“We provided it to the department and we can provide it to you on notice.”

Mr McCullough told the hearing nine employees were retrenched in the restructure process; timed after a WoolPoll in 2015 and before the new AWI strategic plan.

“We are in the process of writing a new strategy document - that kicked off on July 1, 2016,” he said.

“So there is a window of opportunity there after you finish WoolPoll and before you embark on the next strategic period where you can make some human resource changes that you think can better deliver the strategic intent that is about to roll out.

“I had a number of staff who had got to a level where they were hitting a glass ceiling of where they could go in the company.

“It was to make some space for some of that younger talent that we have scattered around the world.”

Mr McCullough said AWI hadn’t replaced its chief marketing officer after the positon was retrenched, and the same for its head of on-farm research.

“Someone internally has come into that role - I have moved that off to Hong Kong,” he said.

“We had on-farm research based in Australia, 9000 kilometres away from our nearest customer.

“So I wanted to get that business unit to Hong Kong where it is right next to our nearest customers.

“We also had off-farm research staff scattered around the world.

“I think that is the appropriate thing to do to have them working with retailers and brands around the world to develop products with them.

“The marketing staff is the same.

“Our wool sells in the Northern Hemisphere.

“It does not sell in Australia.

“All of our product is sold in the Northern Hemisphere each year.

“It is appropriate that we have our product development and our marketing resources on the doorstep of where our partners are, whether they be manufacturing partners or brand partners.”

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