Bills Digest no. 132 2006–07
Primary Industries and Energy Research and Development
Amendment Bill 2007
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
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Industries and Energy Research and Development Amendment Bill
1 March 2007
House: House of Representatives
Portfolio: Agriculture, Fisheries and
Date of receiving the
The Primary Industries and Energy Research
and Development Act 1989 (PIERD Act) provides for the
establishment of rural Research and Development Corporations (RDCs)
and is the legislative basis for regulating their funding and
administration. The Bill makes a small number of important
amendments, designed to deliver an enhancement in the governance of
the 8 statutory rural Research and Development Corporations
(RDCs).(1) The key amendments contained in the Bill
- discontinuing the appointment of an Australian Government
Director to each RDC Board.
- providing for the expansion in the skill set for RDC Board
selection so as to include expertise in public administration.
- providing for an improvement in Board expertise, experience and
The amendments in the Bill respond to the
relevant findings of the
Review of the Corporate Governance of Statutory Authorities and
Office Holders (the Uhrig Review) conducted by Mr John
Uhrig AC in 2003. They also follow an internal review by the
Department of Agriculture, Fisheries and Forestry of the PIERD Act
s operational and reporting requirements. The aims of the internal
review were to:
- ascertain the appropriate and optimal balance between the
Minister s role, effective communications and accountability and
the role of the RDC boards.
- consider the interactions of the PIERD Act with the
Commonwealth Authorities and Companies Act 1997 (the CAC
Act), having specific regard to accountability and management
obligations imposed by the CAC Act.(3)
One of the key conclusions of the Minister s
assessment was that the Board template (recommended by the Uhrig
review) should be retained for each of the RDCs.
As part of its 2001 election platform, the
Coalition Government signalled its intention to examine the
efficacy of governance arrangements of statutory authorities and
In November 2002 the Government announced a
review of the governance practices of statutory authorities and
office holders, with special focus on those agencies which impact
on the business community. The Prime Minister, the Hon. John
Howard, appointed Mr John Uhrig, AC, to head the review. The
objective of the review was to examine and evaluate governance
arrangements and practices and provide policy options for
Government to get the best from statutory authorities and office
holders and their accountability frameworks .(4) In
doing so, the Government noted the impact that the performance of
statutory authorities and office holders has on business and the
overall health of the Australian economy. In particular, the review
was to focus on the areas where businesses have the right to expect
the highest levels of efficiency, fairness and transparency in
their dealings with government.
A key task was to develop a broad template of
governance principles that, subject to consideration by government,
might be extended to all statutory authorities and office holders.
As part of the process of developing a broad template, the review
was asked to consider the governance structures of a number of
statutory authorities and office holders with critical
relationships with business and to consider best practice corporate
governance structures in both the public and private
The Report recommended that two templates
should apply to ensure good governance of statutory authorities:
agencies should either be managed by a Chief Executive Officer
(CEO) or by a board structure. Both templates detail measures for
ensuring the boundaries of responsibilities are better understood
and the relationship between Australian government authorities,
Ministers and portfolio departments is made clear.(6)
However, as Uhrig explained, the purpose of the template is to
serve as a reference point for the development of governance
arrangements and so it is expressed as an ideal .(7)
that the selection of the management template and financial
frameworks to be applied should be based on the governance
characteristics of a statutory authority.(8)
Nearly all government bodies fall under the
Financial Management and Accountability Act 1997 (the FMA
Act) or the Commonwealth Authorities and Companies Act
1997 (the CAC Act).
The FMA Act focuses primarily on the
obligations and responsibilities of Chief Executives and the way
officials handle public money, public property and other resources
of the Commonwealth. The FMA Act applies to budget-funded
authorities managed by a CEO, and establishes various management
and reporting responsibilities for the CEO (s. 44 46, 49 and
51), as well as allowing the Minister to give guidelines to the CEO
(s. 64). Furthermore, the FMA Act provides an accountability
framework for CEOs to manage agency resources.
The CAC Act, on the other hand, requires
directors and officers to exercise their powers and duties in the
best interests of the body and for a proper purpose. Directors
duties apply to help ensure that prudent decisions are made on the
resources that, as a matter of law, the body holds in its own
right. The CAC Act applies to authorities that are corporate
entities managed by a board. It requires the head of the board to
report to the responsible Minister (s. 15 16), and to ensure that
the authority s activities comply with government policies (s. 28).
A board structure is favoured if there is a strong commercial focus
to the organisation, or if the agency is intergovernmental.
As at 31 January 2007, there were 94 FMA Act
agencies and 99 CAC Act agencies.(9) The Department of
Finance and Administration publication Governance
Arrangements for Australian Government Bodies (August
2005) provides further explanation on the FMA Act and CAC Act and a
comparison between the two pieces of legislation.
On the basis of the findings of the Uhrig
Review, Ministers and their Departments have been undertaking an
assessment of their portfolio agencies against the governance
templates.(10) The Minister for Finance and
Administration has assumed a coordinating role in these
reviews.(11) Thus, a number of similar Acts have been
passed by Parliament incorporating Uhrig Review
In the mid-1980s the then Minister
for Primary Industries and Energy, John Kerin, identified the need
for reforms to rural research and development (R&D). These
reforms were put into legislation which provided for the
establishment of 14 Rural Research and Development Corporations
(RDCs). The RDCs represent a unique partnership between the
Commonwealth Government and industry that generates widespread
benefits for the Australian economy. The reforms that took place in
the 1980s were the basis for the current governance
The significance of agricultural,
forestry, food and fisheries products to the Australian economy is
most usefully gauged by reference to more than one measure. One
useful indicator, however, is its contribution to Australian
exports, which is estimated to represent around 19 per cent of
Australian exports of goods and services.
The role that RDCs have the capacity
to play is therefore vital.
Research and development corporations (RDCs) and
companies are rural research funding agencies that invest in rural
R&D in the aim of achieving better productivity and the
delivery of high quality products which underpins the
competitiveness and profitability of Australia's agricultural, fish
and forestry industries. R&D and innovation also
support sustainability of primary production and the natural
The Explanatory Memorandum states that there
is no financial impact on the Commonwealth.
One of the main objects of the Bill is to
discontinue the appointment of a government director to each RDC
Board and Council. Amendments made under the following items
accordingly delete the various references to government
director and/or government member:
(items 1 6, 8, 10, 13 17, and 20 22).
Item 9 is consequential,
permitting the number of directors, as determined by the Minister,
to remain an odd number.
Section 24 of the PIERD Act deals with the
requirements for consultation that must be followed prior to
preparing or varying an R&D plan. Item 11
requires the RDC to also consult with the Minister in preparing or
varying a research and development plan.
Section 84 of the current PIERD Act states
The Executive Director must give written notice to
the Chairperson of all direct or indirect pecuniary interests that
the Executive Director has or acquires in any business or in any
body corporate carrying on any business.
Item 18 repeals section 84 so
as to eliminate a possible inconsistency with the CAC Act, and
leave no room for doubt that all directors on RDC boards, including
the Executive Director, are subject to the notification regime for
material personal interest in the CAC Act .(13)
Items 7, 12, 19 and 23 add a
new requirement for R&D Boards and Councils to report on the
impact their research activities have had on the relevant primary
industry (or class of industries).
Selection Committees perform an obvious and
important role in nominating appropriate persons as directors of
R&D Corporations, predominantly Commonwealth-funded R&D
Corporations or R&D Councils. Items 24 28 make
an explicit direction about the desirability of establishing
Selection Committees whose composition reflects a diversity of
expertise, experience and gender. In each case, the Minister or
Presiding Member is to point out to constituent organisations the
desirability of reflecting a diversity of expertise, experience and
gender among the nominees for Selection Committees.
Item 29 requires Selection
Committees to specify how their nominations will ensure that an
R&D Corporation or R&D Council collectively possesses
experience in board affairs, in addition to the existing
requirement for an appropriate balance of expertise.
The Uhrig Review found that the performance of
boards of statutory authorities was reduced by among other factors
insufficient diversity(14) among, and limitations in the
skills and experience of board directors. Uhrig drew attention to
the significance of and necessity for having board members with
appropriate characteristics, attributes and experience that would
benefit the board .(15) Items 30 32
contain amendments which respond to this recommendation by Uhrig
and the findings of the internal agency review, including the
addition of expertise in public administration to the list of
qualifications for nomination to a Board or Council.
Item 34 Inclusion of additional item
in Annual Reports of Selection Committees
As a further measure to secure greater
accountability, this item inserts a provision after subsection
14(1) requiring that the reports of a Selection Committee for a
financial year also include an assessment of the processes
undertaken by each Selection Committee to identify the widest
possible field of available candidates for nomination for
appointment to the Corporation.
Item 33 Transitional provisions for
Notwithstanding the amendments made to Part 4
of the PIERD Act, this item permits transition provisions to apply
to items 23-31. This means that the provisions which operated
immediately before the commencement of this item, will continue to
apply in relation to a written notice given by the Minister before
the commencement under section 123(1) or (2) as if these amendments
had not been made.
As already noted, this Bill is one of series
introduced by the government to make what it considers to be
relevant and appropriate reforms in response to the Uhrig Review
and corresponding internal agency reviews. However, it is unclear
as to whether these reforms will, in and of themselves, guarantee
the desired outcomes.
- Six of these RDCs
cover the cotton; fisheries; forest and wood products; grains;
grape and wine; and sugar industries. There is also a Rural
Industries RDC (covering smaller and emerging industries), and the
Land and Water Resources RDC.
Memorandum, p. 2.
- Senator the Hon. N.
Government Response to Uhrig Report, Media Release, 12 August
- J. A. Uhrig, AC,
Review of Corporate Governance of Statutory Authorities and Office
Holders, June 2003, p. 1.
- Senator the Hon. N.
Government Response to Uhrig Report, Media Release, 12 August
- Uhrig, op. cit., p.
- ibid, p. 12, point
- Department of
Finance and Administration, Chart of FMA Act and CAC Act agencies,
accessed on 1 May 2007.
- More than 160
Australian Government Agencies are being assessed against the Uhrig
Report principles and templates . Susan Ley, MP, Parliamentary
Secretary to the Minister for Agriculture, Fisheries and Forestry,
Second Reading Speech: Primary Industries and Energy Research and
Development Amendment Bill 2007 , House of Representatives,
Debates, 1 March 2007.
> Accessed 10 April 2007.
Memorandum, p. 4.
- It has been noted
that board diversity may avoid the development of group think
phenomenon by offering the prospect of a variety of differing
perspectives which act as error-correcting mechanisms in decision
making. Edwards, M & Clough, R, Corporate Governance and
Performance , Corporate Governance ARC projects, Issues Series,
Paper No.1, University of Canberra, Canberra, January 2005.
- Uhrig Report, op.
cit., p. 82.
4 May 2007
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