AFTER five hours of intense scrutiny and political sabre rattling during Australian Wool Innovation’s (AWI) dramatic examination at Senate estimates hearings earlier this week, the lingering question is what can or will happen now?
A stockpile of evidence and testimony was placed strategically on the public record when the embattled farm research and marketing agency fronted the Senate Rural and Regional Affairs and Transport Committee at Parliament House in Canberra, with up to 10 Senators sitting in on the session to fire-off their critical questions.
Rampaging politicians thoroughly and deliberately investigated how AWI is governed and constituted; especially the empowerment of board directors and the Chair, via a complex shareholder selection and voting processes involving a heap of proxies.
AWI’s tense appearance also raised vexed propositions concerning its operating culture amid accusations of bullying and harassment which were also dealt with and fended-off in a firm and forthright manner, with many points rejected.
Recent indiscretions by the Chair were also vigorously prodded and fleshed-out at this week’s Senate estimates grilling but only amplify pre-existing pressures and heightened political focus on AWI.
Chair Wal Merriman and CEO Stuart McCullough have appeared at recent estimates hearings to both answer tough questions on why abnormally high severance payments were made to staff members during a recent restructure process.
Escalating the political scrutiny this time around, the two AWI senior executives were joined on the front-line by AWI Group Manager, Corporate Affairs Peta Slack-Smith, WA based Director David Webster and Company Secretary and legal expert Jim Story.
While the examination was relentless and acute, and the media presence abnormally concentrated, fascinated and far reaching, AWI enjoyed the sympathetic presence of NSW Liberal Democratic Senator David Leyonhjelm who knows a thing or two about farming and agricultural levy-payer matters.
He believes, of all the Research and Development Corporations (RDCs), AWI has the most democratic election structure where wool growers are allocated votes according to the volume of levies paid – a point other politicians agree with.
But regardless, the pressing question now is how does this stream of current complaint and concern about AWI’s performance and the niggling estimates examination now translate into material changes, which can deliver positive benefits to all involved?
Federal Agriculture and Water Resources Minister Barnaby Joyce holds the most critical whip hand in determining how much money is passed on from Australian taxpayers, to AWI and other RDCs, via government scrutiny and approval processes, for farm industry RD&E and marketing programs.
This is an aspect of AWI’s unsettling antics that is causing the most widespread concern amongst the farm sector; not just wool producers.
The 15 rural RDCs receive about $252 million in government contributions per year or higher while AWI received more than $60m in woolgrower levy funds last financial year and $14.7m in taxpayer dollars.
After the estimates examination, Mr Joyce, also the Deputy Prime Minister, pointed to the obvious existing reform pathway for anyone disgruntled with AWI’s recent gaffes and controversies and seeking change at the top - that being the actual wool growers who get to vote for the embattled Chair and AWI’s other board directors.
A spokesperson for Mr Joyce said the Coalition government’s priority was to work with farmers and wool industry bodies like AWI to maximise the returns for woolgrowers, at the farm-gate.
But AWI is owned by more than 23,000 levy-payers registered as AWI shareholders and as such, is directly accountable to them, the spokesperson said, vote by vote.
“Wool growers will be able to put any questions they have to the AWI Board and Chief Executive at the Annual General Meeting on November 17,” Mr Joyce’s office confirmed.
“The AWI board must listen to the views and priorities of its woolgrower levy payers.
“All interested woolgrowers are encouraged to attend the AGM and have their say.”
While the AGM isn’t far away where any suggested governance changes can be raised and debated, an Extraordinary General Meeting is another avenue that can be triggered to try to invoke changes or pressure the Chair via a vote of no confidence.
Another point of accountability for AWI is its four-year Statutory Funding Agreement (SFA) with the federal government, which is negotiated with Mr Joyce’s office in ongoing talks, leading up to the final document being signed.
The SFA sets out the intimate legal terms, conditions, rights and responsibilities for AWI receiving government co-funding, with the last one signed in October 2016 that’s due to expire in 2020.
For those interested in examining it further, the Agreement is available to view on AWI’s website along with the company’s constitution and other critical corporate governance materials like its board charter and code of conduct and business ethics.
“The parties have entered into such funding contracts since 2001,” the current SFA says.
“While this Agreement recognises that responsibility for corporate governance including strategic and operational decisions resides with the Board and management of AWI, the Commonwealth has expectations that the AWI Board and management will have in place a framework to ensure good corporate governance.
“The Agreement also allows for the performance of the RDC to be reviewed by the Commonwealth and, in circumstances where issues are identified, the ability for appropriate responses to be developed.”
In other words, the federal government reserves the right to intervene any time and run the microscope over AWI and the current Chair, to examine any issues or alleged failings further, even if proposed constitutional reforms fail to pass voter approval, at the upcoming AGM.
The SFA also sets out ways to suspend or terminate the Agreement which includes a change in Commonwealth policy relating to the raising or spending of funds.
Again, if Mr Joyce’s patience is pushed any further, or others within political ranks aren’t entirely satisfied, and negative media reporting of the Australian wool industry continues, especially headlines in mainstream metropolitan outlets, it could ignite a disturbing change of government policy, impacting the purse strings of all 15 RDCs.
Action on apologies
In an opening statement at the hearing, Mr Merriman offered dual apologies for his recent indiscretions.
He admitted to swearing at an ABC journalist during an industry event in Adelaide, which breached AWI’s code of conduct and is now an internal matter that’s being dealt with.
Any potential disciplinary action will be discussed and dealt with at the next AWI board meeting and no doubt further questions will be asked at the AGM too.
The AWI code of conduct sets out clear and serious consequences for any breaches.
“AWI may rely on non-compliance of this code to take disciplinary action against an AWI person - which may include the termination of employment or an engagement,” it says.
In the section on protecting AWI's reputation, the code of conduct says AWI people must not directly or indirectly, act in a manner which in any way damages, or may damage, the standing of AWI.
At the estimates hearing, Mr Merriman apologised for his now infamous role in observing a wool grower focus group session on genetics earlier this year, without the knowledge of participants, from behind a one-way mirror.
He admitted his actions had impacted AWI’s standing “to an extent” and breached the code - but also stressed he’d apologised in writing, to the focus group participants.
Ms McCullough has also written a letter to AWI shareholders explaining the issue, from the company’s point of view.
Mr Merriman said the incident didn’t meet AWI’s “wool grower test” and was “not one of our proudest moments” but actions have been taken to ensure it doesn’t happen again.
He added that his industry had “this wonderful thing called freedom” and growers would get to vote, when he’s next up for re-election – but that’s in coming years, not next month.
“Never before have meetings been held in a room with a one way mirror - this was all very strange to me, when I went to observe the process,” he said.
“It was my mistake not to insist to be in the room – I take responsibility of that.
“I should have said ‘no we don’t do it like this’ and I apologise for it.
“Those who know me know I do not hide.”
At the Senate hearing, Mr Merriman also tabled the relevant letters relating to the incidents into the hansard record, which are now available for further public scrutiny.
He said AWI had also acted on the concerns raised over the one-way-mirror issue with the CEO requesting an investigation into the matter, specifically focussing on the processes undertaken, which made key findings and recommendations.
The result of that investigation was delivered to AWI board in October which endorsed the findings and they then asked the CEO to address it and report back on an implementation process.
At the request of Victorian Nationals Senator Bridget McKenzie, Mr McCullough said the report into the matter would be tabled to the Senate Committee, again for the public record.
For swearing at an ABC reporter, Mr Merriman - who has been AWB boss for almost a decade - said he’d “like to apologise to wool growers and anyone else who was offended by the language I recently used when speaking to a journalist”.
“I understand it’s irrelevant, his behaviour, and that I was recorded unknowingly (but) the language I used was more fitting to a shearing shed,” he said.
“I know shearers - I have a great affinity with them - and that’s where I come from.
“Unfortunately I’m from the bush and I need a lot more polish to operate in these surroundings.
“It’s unfortunate that my intemperate comments have overshadowed the significant optimism and positive feedback on one of our key marketing activities.”
Bearing in mind he’s been Chair for such a long period of time, and dealt with media from time to time, one can only wonder how Mr Merriman can ever be polished so ensure he stays within the AWI code of conduct in future.
But regardless, Mr Merriman said at the hearing Australian woolgrower returns were “at the front of our every decision” and AWI was accountable.
“I confess I am direct in the way I speak – I am from the bush – I am far more comfortable with woolgrowers out in the paddock than I am here at Senate estimates,” he said.
“I apologise if my passion for the industry and AWI occasionally come across in a way that causes offence.”
As for AWI’s long-term critics who also represent wool growers.
WoolProducers Australia said Mr Merriman’s breach of the AWI code of conduct for swearing at a journalist was an operational matter for the board to consider and “we will wait to see what they determine”.
Ms Hall said WoolProducers have had “long-held concerns” over transparency and accountability measures in relation to some of AWI’s operations - including the way undirected proxy votes are used at board elections.
But asked if WoolProducers would submit any specific calls for changes at the AWI AGM next month or be calling for a vote of no confidence in the Chair, Ms Hall said her group’s board hadn’t considered it, at this stage; despite the gravity of recent events.
“It’s not listed to be spoken about,” she said.