Andrew Murray (WA, Australian Democrats) Share this | Hansard source

The first staff-elected position on the governing body of the ABC was introduced by the Whitlam government in 1975, 31 years ago, and was subsequently abolished by the Fraser government. Since 1986, under both coalition and Labor governments, the board of the ABC has included a director elected by the staff as legislated under the Australian Broadcasting Corporation Act 1983.

The staff-elected director is one of a maximum of nine directors. Up to seven members of the board are appointed by the government, and the managing director is appointed by the board. The staff-elected director is the only democratically elected position. All the others are appointments.

The Australian Broadcasting Corporation Amendment Bill 2006 proposes to abolish the staff-elected position. The Democrats believe that the decision to remove the staff-elected ABC board member is bad politics, bad public policy and bad corporate governance. It is bad politics because it exposes a nasty prejudice; it is bad public policy because an experienced staff member provides invaluable skills and insights to the board; and it is bad corporate governance because not only is that ABC board member the only appointment on merit through democratic election, but in Europe, and in many companies overseas, staff membership of boards is common because it is so useful.

As stated in the Labor, Greens and Democrats minority report on the bill, the Democrats believe that the bill will adversely impact on the performance of the ABC board and will further undermine public confidence in the independence of the ABC. The Minister for Finance and Administration, Senator Minchin, in his second reading speech on the bill, argued that:

The position of a staff-elected Director is not consistent with modern principles of corporate governance and a tension relating to the position on the ABC Board has existed for many years.

This tension is 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 and elected by them. The election method creates a risk that a staff-elected Director will be expected by the constituents who elect him or her to place the interests of staff ahead of the interests of the ABC where they are in conflict.

I venture to suggest that the minister knows very little about international corporate governance. If he did, he would know that staff-elected directors are not uncommon and are a useful feature of the way in which boards operate internationally.

As was noted in the joint minority report, while the method of appointment of the staff-elected director differs from that of other non-executive directors, the ABC Act is quite clear that the duties and responsibilities are the same for all directors. On the theory that the government is putting forward, a Liberal Party member appointed by the government will be beholden to the Liberal Party that appointed him. That is the argument it is offering regarding the election of a staff-elected director—that that staff-elected director is beholden to the staff that elected them. If that is so, the Liberal Party appointed member is beholden to the Liberal Party. I think that is a slur on some of those persons who have been appointed.

This recommendation comes from a government that has done nothing about the patronage in companies that applies when directors are elected. Full independence of a director is only possible when the method of appointment and election is objective, on merit and not subject to patronage, favour or inducements, and where objective, fair and consistent separation or contract ending mechanisms exist.

The board of a company is the central institution in the relationship between shareholders and the company, stakeholders generally and auditors specifically. It is self-evident that many boards, directors and companies operate to high standards, but it is the task of legislation to attend to those who do not and to appraise the public interest. Companies have such an effect on our society that serious weaknesses in Corporations Law should be attended to, and a major weakness lies in the director election processes, to which the government has paid absolutely no attention. Regrettably, the election of directors is often either deliberately or effectively rigged in favour of dominant shareholder interests. I am told that 52 per cent of ASX corporations have a single dominant shareholder and many of the rest have a few dominant shareholders.

Such dominant shareholders frequently control the boards of our companies through their voting power. That means that many and perhaps most directors are directly placed by or under the patronage of a dominant shareholder or shareholders, who will quite naturally seek to ensure that their interests are put first. This dominance and patronage over many directors is reinforced by company constitutions and board behaviour that allow or foster poor director election processes. We have got exactly the same problem with appointments by the government to these boards. It is a question of patronage and the real problem the government has with a staff-elected director is, of course, that that staff-elected director is not subject to their patronage.

The Bills Digest notes that neither the ABC Act nor the CAC Act require or give the imprimatur to staff-elected board members to favour the interests of their constituents. Whether staff representatives make a practice of prosecuting the interests of staff may be moot, but it is clear that the legal duty and the actual practice of such board members has not been to their constituents but to the organisation more generally. Those duties are set out in the ABC Act and the CAC Act.

The CAC Act sets out the duties of directors such as reporting obligations. It also imposes duties. These include duties of care and diligence, the duty to act in good faith, the duty not to misuse the officer’s position and the duty not to misuse information. No staff-elected director has ever contravened those duties because the boards would have taken action if they had done so and it would have been brought to the attention of the board.

The Bills Digest concludes that the statutory duty of a staff-elected representative is not to the staff specifically, any more than it is for the other board members. Therefore a staff-elected board member who places the interests of staff ahead of the interests of the ABC as a whole would be in breach of their duties under the legislation as it currently stands. The statutory duty of the staff-elected director was reconfirmed by a past director, a current director and a would-be future staff-elected director. The Bills Digest notes that former staff-elected director Kirsten Garrett, who was a staff representative on the ABC board from 1996-2000, said that the argument that the staff position created an untenable conflict was unfounded. She said:

Once he or she enters the boardroom, the staff-elected director is answerable to the charter of the ABC and the Australian community. You are informed by staff but you are in fact an executive director of the board and must behave as such, that is independently. The staff-elected director is accountable in exactly the same way as other directors.

Current staff-elected director Romana Koval said in her recent Staff-Elected Director’s Report no. 11:

Contrary to the Minister’s view, there has never been uncertainty about the accountability of the staff-elected director to the ABC Board. I am required to act in the best interests of the ABC, as are all other directors, and it’s a serious responsibility that I have carried out with passionate commitment

In an open letter to senators, the nominee for the staff-elected director position who has been elected by them, Quentin Dempster, had this to say:

The position of staff-elected director has prevailed since the creation of the corporation ... the primary purpose was to bring to the board table knowledge and expertise of broadcasting existing within the corporation’s creative program makers and staff …

                 …         …         …

The method of appointment by Electoral Commission ballot of all the corporation’s employees may imply a constituency but the Act clearly states the director appointed—

or elected—

by this method is bound by the Act’s clauses covering duties of directors.

As the joint minority report notes, a number of examples were cited where staff-elected directors argued against initiatives that would have directly benefited staff because they would have undermined the ABC’s independence. There is no evidence that the staff-elected director does not understand their legal responsibilities; there is no evidence that the person in this position has not acted in the best interests of the ABC; and there is no evidence that staff who elect the director have asked or expected the director to place the interests of staff ahead of the interests of the ABC. Some people have argued that there is evidence that government appointed board members have been behaving with the interests of the government in mind. I do not know if that is true or not, but it has been said.

Minister Minchin also noted in his second reading speech that abolishing this position is consistent with the findings of the Review of the corporate governance of statutory authorities and office holders, also known as the Uhrig review. I have read Mr Uhrig’s report and recommendations and I am not inclined to bow down to them as wisdom from the mount because they are hardly that. In reading his report, I think he has had a fairly channelled and very Australian view and he needs to widen it to look at global trends and how international corporate governance operates. International corporate governance is seeking to introduce more independence, not less, into directorships and board positions and to represent a wider range of interests. It is very common in many overseas corporations and entities for staff-elected directors or people who represent their constituency to be on boards. Mr Uhrig, despite his name, which I suspect might be of a German origin, has not attended to, for instance, the German precedents.

The minister said that the position of a staff-elected director is uncommon amongst Australian government agency boards. While the minister’s statement may be true, it does not then stand to reason that there should not be a staff-elected position or that Australia uses the best governance models. For companies in Europe and in many other countries, representatives of staff are commonly included on boards because the practice is so useful. Professor Stephen Bartos, director of the National Institute for Governance, who has a great deal of experience as a former senior executive within the Department of Finance and Administration, in his submission to the Senate inquiry into this bill noted that:

... staff-elected directors on a Board do represent an anomaly amongst Australian public and private sector boards in general governance terms—although ours is not a universally accepted governance model. In the CCH article cited earlier, I comment: ‘In Australia, the whole Anglo-American model of governance doesn’t favour representative positions on boards. However, it’s not the case around the world. There are other countries where representative positions are much more common ...’

This is a country where we are continually asked to look for international precedents on such things as tax, intellectual property and the way in which research and development is operated. We are a country that is trying to take the best of globalisation but, in this area, we remain steadfastly committed to a peculiarly narrow perspective.

As the Bills Digest to this bill notes, there are in fact other Commonwealth statutory organisations in Australia with staff-elected positions on their governing bodies, including the Australian National University, the Australian Institute of Health and Welfare and the Australian Film, Television and Radio School. Furthermore, many public bodies have a variety of other kinds of representational appointments, including departmental, industry, interest group, community and regional appointments.

Professor Bartos also observed:

In governance terms, the choice of model to be adopted for a public sector body should not be static or formulaic, but be driven by the objectives of the organisation concerned.

As was stated in the joint minority report, we believe that, given that the objectives of the ABC include the maintenance of independence, it is appropriate for a staff-elected director to sit alongside government appointed directors. Professor Bartos went on to say:

While there are both advantages and disadvantages of representative board positions, the final decision on an appropriate governance structure depends on where legislators see the ABC as situated in the broader map of the broadcasting industry. As I noted in my interview on the subject, if one sees the ABC “as operating in the same space as other television and radio stations, having a governance structure like them is probably rational and reasonable. If you conceive of the ABC as being somehow some sort of different community-based body, you’ll see having representative directors onboard as being more reasonable.”

The ABC is unique. The ABC is an important part of our democracy. It provides a lifeline to regional Australia, informed current affairs reporting, vital contributions to Australia’s culture and the provision of Australian content. Public funding means that the ABC does not have the same commercial pressures of other broadcasters, but it also has far greater constraints than other broadcasters because it is dependent on the government of the day for its funding.

The ABC is allowed to provide diverse programming and maintain its independence and journalistic integrity through its structure. The staff-elected director brings to the board the knowledge and expertise of broadcasting that exists within the corporation’s creative program makers, management and staff and the views of the Australian communities they work in.

The government has perversely claimed that an elected position is less accountable than an appointed one. This claim, however, is counterintuitive, because at present no other ABC board member, apart from the staff member, is democratically elected. That is in complete contrast to the major commercial media organisations. The other board appointments are made by the government of the day and are often made with partisan political criteria and patronage ideas in mind.

The interesting thing, of course, when you exercise patronage in appointing people is that you often find that the people surprise everybody and act in a way that is to their credit and contrary to the intention with which they were appointed. Many of those appointed under government patronage have actually turned out to be pretty good directors and have done rather well, as is shown by the Chairman of the ABC, who has not turned out to be anybody’s puppet.

There are no public advertisements for ABC board positions, no objective panels for selection and no published criteria for board selection. These are all weaknesses with the appointment process. Consequently, even the best ABC board members labour under the slur of being fellow travellers of the government of the day and of being fifth columnists trying to subvert the ABC charter of independence. Even where that is not true, that slur would be better countered by objective panels for selection and published criteria for board selection, which would allow people of merit to be on the board. At present, there is a widespread public perception that government appointments result in patronage to well remunerated positions. This perception can damage the reputation of these bodies, and indeed of the directors so appointed, as in the public eye they are seen as being controlled by persons who lack the appropriate independence and who have a political objective.

As I have noted many times in this chamber before and in the Democrats’s additional comments to the Senate committee report on this bill, this issue was extensively investigated by the Nolan committee appointed by the United Kingdom parliament, which in 1995 set out the following principles to guide and inform the making of such appointments: a minister should not be involved in an appointment where he or she has a financial or personal interest; ministers must act within the law, including the safeguards against discrimination on grounds of gender or race; all public appointments should be governed by the overriding principle of appointment on merit; except in limited circumstances, political affiliation should not be a criterion for appointment; selection on merit should take account of the need to appoint boards that include a balance of skills and backgrounds; the basis on which members are appointed and how they are expected to fulfil their roles should be explicit; and the range of skills and backgrounds that are sought should be clearly specified.

The United Kingdom government fully accepted the committee’s recommendations at the time and have maintained those principles and appointments. The Office of the Commissioner for Public Appointments in the UK was subsequently created, with a similar level of independence from the government as the Auditor-General, to provide an effective avenue of external scrutiny. The Democrats have used the Nolan committee’s recommendations in our persistent and long-term campaign for appointment-on-merit amendments in various items of legislation, because they are tried and tested. Meritorious appointments are the essence of accountability.

While some may appreciate the irony that, in a bill that proposes to remove the only democratically elected position to a board, the Democrats propose to move an appointment-on-merit amendment, even though we know that this government will reject for the 31st time at least—I suspect it is more—the idea of appointments on merit and the ideas on which the Nolan principles are pronounced. That is to their eternal discredit. They cannot even match up to the UK on this fundamental issue.

I am not sure what pushing this boat all the time makes me: stubborn and idealistic or someone who truly values government accountability and transparency. But I do hope that, one day, a future government may in fact bring these rules in.

In conclusion, as stated in the joint minority report, this bill comes after a decade where the ABC has been chronically underfunded and follows the appointment of a series of conservative members of the board to the ABC. The staff-elected position on the board is the sole remaining voice not directly appointed by the government and is the one position on the board that is beyond the government’s capacity to influence or control. It is no wonder that these control freaks are trying to remove it. The Democrats believe the ABC belongs to all Australians and the ABC board must contain people with a wide variety of experience and skills in broadcasting, journalism and communications to ensure that ‘Aunty’ can provide the range and depth of programming and the independence of views that its charter mandates.