Bills Digest no. 121 2005–06
Australian Broadcasting Corporation Amendment Bill 2006
WARNING:
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 consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Australian Broadcasting
Corporation Amendment Bill 2006
Date introduced: 29 March 2006
House: Senate
Portfolio: Communications, Information Technology
and the Arts
Commencement: Schedule 1 commences on the
later of: (a) 15 June 2006
(b) the day after Royal Assent
To amend the Australian Broadcasting Corporation Act 1983 (the
ABC Act) to remove the position of staff-elected Director from the Board
of the Australian Broadcasting Corporation (ABC).
The first staff-elected position on the governing body of the ABC was
introduced by the Whitlam Government without legislation in 1975, and
subsequently abolished by the Fraser Government. The current position
was created by an amendment to the ABC Act in 1986.(1)
Section 12 of the ABC Act requires that the ABC Board consist of:
(a) the Managing Director;
(b) the staff-elected Director; and
(c) not fewer than 5 nor more than 7 other Directors.
On 24 March 2006
Senator the Hon Helen Coonan, the Minister
for Communications, Information Technology and the Arts announced
that the staff-elected Director position on the ABC Board would be abolished.
The Minister stated that the change would improve corporate governance:
“As the staff-elected Director has been elected by staff
rather than appointed, there have been claims that the position creates
uncertainty about accountability.
“However, there is a clear legal requirement on the staff-elected
Director that means he or she has the same rights, duties and obligations
as the other Directors, including to act in the interests of the ABC
as a whole.
“The Government is of the view that there should be no
question about the constituency that ABC Directors are accountable to,”
Senator Coonan said.
“Therefore, to ensure the efficient functioning of the
ABC Board, the staff-elected position will be removed. This change is
in line with modern principles of corporate governance and will also
provide more consistency in governance arrangements for Australian Government
agencies.”(2)
The Minister also noted that the Special Broadcasting Service (SBS) did
not have a staff-elected position.
The Explanatory Memorandum provides the following rationale for the amendments:
The Bill addresses an ongoing tension relating to the
position of staff-elected Director. A potential conflict exists between
the duties of the staff-elected Director under paragraph 23(1)(a) of
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 via election by ABC staff. 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 as a whole where they are in conflict
The difficulties associated with such a position were
recognised in the June 2003 ‘Review of the Corporate Governance of Statutory
Authorities and Office Holders’ (the Uhrig Review) at pages 98 and 99.
That Review concluded: ‘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 issues by abolishing
the staff-elected Director position.(3)
The Coalition announced its intention to examine statutory authorities
and office holders in its 2001 election platform.(4) On 14 November 2002, the Prime Minister
the Hon. John Howard appointed Mr John
Uhrig AC to review the governance practices of statutory authorities and
office holders, particularly those agencies which impact on the business
community. The objective of the review was to identify issues concerning
existing governance arrangements and to provide policy options for Government
to gain the best from statutory authorities and office holders and their
accountability frameworks.(5)
The Prime Minister was provided with the Review
of the Corporate Governance of Statutory Authorities and Office Holders
in June 2003.(6) The Uhrig Report was released by the Minister
for Finance and Administration on 12 August 2004.
The Review concluded that there was no universally agreed definition
of corporate governance and suggested the following definition: ‘in general
terms, corporate governance encompasses the arrangements by which the
powers of those who implement the strategy and the direction of an organisation
are delegated and limited to ensure the organisation’s success, taking
into account the environment in which the organisation is operating.’(7)
The Report recommended that two templates be applied 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 are made clear.(8)
Uhrig recommended that the selection of the management template and financial
frameworks to be applied should be based on the governance characteristics
of a statutory authority.(9)
The Financial Management and Accountability Act 1997 (‘FMA Act’)
should be applied to statutory authorities where it is appropriate that
they be legally and financially part of the Commonwealth and do not need
to own assets. This includes Budget-funded authorities. The FMA Act imposes
some governance requirements including various management and reporting
responsibilities for the CEO (sections 44–46, 49 and 51), as well as allowing
the Minister to give guidelines to the CEO (s. 64).(10) Furthermore,
FMA Act provides an accountability framework for CEOs to manage agency
resources. Uhrig recommended that these organisations should be governed
by a CEO.
The Commonwealth Authorities and Companies Act 1997 (‘CAC Act’)
should be applied to statutory authorities where it is appropriate that
they be legally and financially separate from the Commonwealth. The CAC
Act also deals with governance issues; for example, it requires the head
of the board to report to the responsible Minister (sections 15-16), and
to ensure that the authority’s activities comply with government policies
(s.28).(11) Uhrig recommended that these organisations should
be governed by a board. The ABC is a Commonwealth Authority under the
CAC Act.
In general, agencies which exclusively manage Commonwealth appropriations
should be represented and governed by a CEO. A board structure is favoured
if there is a strong commercial focus to the organisation, or if the agency
is intergovernmental.
Of relevance here, the Uhrig Report dealt briefly in Chapter 6 with representational
appointments. These are appointments in which a board member represents,
for instance, other people, departments, entities and interests. The
review did not consider staff-elected representation specifically except
a brief consideration of departmental public servants sitting on boards
of other government agencies.(12) The Review did not support
representational appointments:
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.(13)
The ABC is a Commonwealth authority for the purposes of the CAC Act.(14)
The ABC is not the only CAC body with a staff-elected board member. Other
Commonwealth statutory organisations with staff elected positions on their
governing bodies include 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.
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.
This is, arguably, subject to one minor exception in subsection 17(1A)
of the ABC Act which deals with the disclosure of interests by board members.
It provides:
1A) Where a matter being considered or about to
be considered by the Board relates to the terms and conditions of employment
of employees, or to the terms and conditions on which a person performs
services for the Corporation pursuant to a contract, section 27F of
the Commonwealth Authorities and Companies Act 1997 does not
require the staff‑elected Director or the deputy of the staff‑elected
Director to disclose an interest that he or she has by reason of being
such an employee or performing services pursuant to the contract.
Whether staff representatives make a practice of prosecuting the interests
of staff is moot but it is clear that the legal duty of such board
members is not to their constituents but to the organisation more generally.
These duties are set out in the ABC Act and in the CAC Act.
The CAC Act sets out the duties of directors (which in the case of the
ABC, means the Board members(15)) such as reporting obligations.
It also imposes duties on officers generally (which includes directors.(16))
These include duties of care and diligence,(17) the duty to
act in good faith,(18) the duty not to misuse the officer’s
position(19) and the duty not to misuse information.(20)
The ABC Act sets out the duties of the Board of the ABC in particular.(21)
Currently, neither the CAC Act nor the ABC Act make a distinction between
the duties of the staff-elected Board member and the other members of
the ABC Board. 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 could be in breach
of their duties under the legislation as it currently stands.
One the issues examined by the Senate Environment, Communication, Information
and the Arts (ECITA) Committee inquiry into the Bill was unwillingness
of the current staff-elected director, Ms Ramona Koval, to sign certain
ABC protocols. The committee majority report
stated:
1.17 The potential for a lack of independence in the
role of the staff-elected director was apparent in an example of a staff-elected
director not signing the ABC Board Protocol. The protocol outlines the
governance arrangements of the Board, covering matters such as recognition
of rights and responsibilities of directors and expectations, as well
as rights and benefits accorded to directors.16 The protocol is viewed
as important for the effective operation of the board, particularly
in light of alleged leaks of confidential board information in 2004.
1.18 The staff-elected director defended her action
in not signing the protocol:
It was about independence. It was about having my decisions
and opinions subsumed to the opinions of the rest of the board so
that went to independence, which is an absolute core issue as far
as a director of a corporation is concerned. I did not want to be
in breach of the law, frankly.
1.19 However, this raises concerns about the ability
of staff-elected directors to uphold the interests of the ABC, and in
doing so, acting in a manner that places the interests of the ABC above
those of the staff who elected them.
This difference of opinion between the committee majority report and
that of Ms Koval (and the committee minority
report) appears to centre on what constitutes ‘independence’ in the context
of the ABC board. Ms Koval’s submission
to the inquiry put her view as follows:(22)
Some media reports have cited my inability to “sign up”
to ABC Board Protocols as evidence of conflict of interest or lack of
Board functionality.
In October 2002 I informed the Chairman of my unwillingness
to support a number of proposals in the Board Director’s Handbook, a
document which is not binding in law and which serves only as a gentleman’s
agreement. I assured the Chairman and the Board that I fully intended
to act in accordance with my legal obligations under the Corporations
Law and the ABC Act.
Among other problems, the document attempted to make
the actions of individual directors subject to approval by the chairman
or the majority of the Board. This confusion between members of Boards
of Directors and members of Cabinet is regrettable, and is contrary
to the requirement that Directors act at all times independently and
in good faith...
Generally, there is an expectation that members of a
Board of Directors will act collectively, just as members of Cabinet
are required to do. However, this is subject to the overriding duty
of each individual member of the Board to act in good faith in the Corporation’s
best interests. Consequently, it is not open to a Board majority to
enforce its view of good faith and best interests on any individual
member.
An individual director whose opinion differs from
that of the majority should act with discretion in broadcasting that
opinion. However, where important matters of principle are involved,
the director’s individual duty to the Corporation will outweigh his
or her collective duty to the Board. Under corporations law, there is
no requirement upon any such member to resign. Indeed to do so may be
to act contrary to the overriding duty to act in good faith and in the
best interests of the corporation concerned.
The rule concerning Cabinet solidarity has no application
in relation to Corporation directors. Any endeavour by a Board to impose
such a rule is illegitimate.
One version of the document required that I not participate
in “public (including media) discussions, interviews or articles relating
to ABC Board matters”. This could imply that as a Director I cannot
comment in public on any matter to do with the ABC at all, as a Board
matter is really anything to do with an organisation.
The deed acknowledged “the right of the Director to have
regard to the interests of ABC staff in his or her decision-making BUT
ONLY to the extent that it does not, in the opinion of the Board, conflict
with the interests of the Corporation as a whole. This would in principle
subjugate my rights to the control of others, and this was unacceptable.
It is clear that a Director must act bona fide in
the best interests of the Corporation. But that assessment is a matter
for the individual director, and is not determined by the opinion of
other directors. [emphasis added]
Whatever the expectations of those voting for the staff-elected board
member, the duties of such a person are to the organisation generally
just as it is for other Board members. It is worth noting, therefore,
that if there is a concern that staff-elected board members might prosecute
particular interests that must equally apply to the other Board members
who are appointed by the Government through the Governor-General.
The position of staff-elected Director was not the subject of any analysis
or recommendations in either the Mansfield
review(23) or the Report of the Senate Select Committee on
ABC Management and Operations.(24) The Report of the Senate
Environment, Communications, Information Technology and the Arts References
Committee strongly recommended the retention of the position.(25)
The ANAO Performance Audit on corporate governance in the ABC did not
examine the issue.(26)
In his submission to the Senate inquiry into this Bill (see below), Professor
Stephen Bartos, Director of the National Institute of
Governance and author of ‘Public Sector Governance – Australia’,(27)
made several observations about the reliance placed on the Uhrig Review
in justifying these amendments:(28)
- While the Uhrig Review did not support representational appointments
to governing boards, it was not specifically concerned with staff-elected
directors.
- The Review dealt only briefly with representational appointments
and, to the extent that it did, was concerned largely with departmental
representatives on boards.
- The comments about representational appointments in the Review did
not form part of the formal recommendations of the report. They were
part of a ‘series of “Better Practice” observations which are ‘an interesting
and valuable contribution to governance debates, and would have had
more force had the government formally adopted/amended/rejected the
better practice suggestions or referred them for wider debate’.
- However, the views on representational appointments noted in the
Uhrig report represent commonly accepted practice in Australian Corporate
Governance which does not favour such appointments.
- Nevertheless, representational appointments are still common in the
public sector most obviously in the case of rural industry representative
appointments in the Agriculture portfolio. There is an enormously wide
variety of representational appointments, including departmental, industry,
interest group, community, regional, age-group, staff and other representative
categories. Staff representatives are a minority among these categories,
but not unknown outside the ABC (for example, there are staff representatives
provided for in the governance arrangements for the Australian Film,
Television and Radio School
and the Australian National
University).
- ‘It is also arguable that departmental representatives on Boards
are in some cases effectively appointed so as to represent the interests
of staff; for example, the ex-officio appointment of serving members
of the Defence force to the Board of the Defence Housing Authority.’
- Although Anglo-American governance norms tend not to favour representational
appointments, this is not the universal position in all countries.
- ‘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.’
- ‘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.”
Responses to the decision by the current and former staff-elected representatives
were reported by Crikey as follows.
Ramona Koval, the current staff-elected
representative, sent this response to Crikey:
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.
The position of staff-elected director is important to
provide the Board with a working knowledge of the role and functions
of a public broadcaster, and, at times, as a balance to the practice
of party political stacking of the ABC board I have never breached confidentiality
in this role. I have simply raised concerns about the potential for
political interference.
The government's intervention in abolishing this position
while an Australian Electoral Commission election is underway, reveals
the urgency of its desire to control the organisation.
Kirsten Garrett, who was a staff representative
on the ABC board from 1996-2000, said the argument that the staff position
created an untenable conflict was unfounded:
This is just red raw politics with an extraordinary disregard
for the Australian people. If it succeeds, the Government will have
complete control of the ABC. The staff-elected director is already the
last independent voice on the board and the accountability argument
is a furphy.
During my time on the board I found that the staff-elected
director position was of great value because of the knowledge about
the ABC and its place in the wider community that the person holding
that position has. Many other directors were keen to hear the information
a staff-elected director could put before the board. The debates and
disagreements merely strengthened the board's decisions.
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.
This is about clearing away any impediment to further
weakening and dismembering the ABC and getting it ready for commercialisation.
The campaign in the media of the last two weeks shows that the ABC,
the media and the community are being softened up for this assault.
The Bill was referred to the ECITA Committee on 30
March 2006 for consideration. The Committee took 59 written
submissions and heard evidence at a hearing held in Canberra
on 13 April 2006.
The Committee reported on 2 May 2006. The majority report supported the Bill but minority
reports by the ALP, the Greens and the Democrats did not.
The Uhrig Review of governance in public sector agencies did not support
representational appointments to boards. However, it did not specifically
address staff-elected appointments nor did it give any attention to the
ABC. Representational appointments, including staff-elected representatives
continue to exist on the Boards of other agencies. Nevertheless, as a
general proposition, modern Anglo-American governance theory tends not
to support these kinds of appointments.
Item 2 of Schedule 1 amends section 12 of the ABC Act to remove
the requirement for a staff-elected Director.
Item 11 provides that any person who is the staff-elected Director
shall cease to be a member of the Board upon the commencement of the item.
Items 1,3,4,5,6,7,8,9 and 10 make amendments which are consequential
upon the removal of the requirement for a staff-elected director.
Endnotes
- Broadcasting
and Television Legislation Amendment Act 1986
- Minister for Comunications, Information Technology and the Arts,
Media Release, ‘Restructure of ABC Board’ (24
March 2006). See http://www.minister.dcita.gov.au/media/media_releases/restructure_of_abc_board
- Explanatory Memorandum, p. 1.
- R. Grant, ‘The Uhrig Review and the future of statutory authorities’,
Research Note no 50, Parliamentary Library, Canberra, 2004-05,
p. 2.
- J. Uhrig, Review of the corporate
governance of statutory authorities and office holders, June 2003
Commonwealth of Australia,
Canberra, http://www.finance.gov.au/governancestructures/docs/Uhrig_report.rtf
- J. Uhrig, loc. cit.
- ibid., p. 17.
- N. Minchin (Finance Minister), ‘Australian
Government Response to Uhrig Report’, Media Release 57/04, 12
August 2004, http://www.finance.gov.au/scripts/Media.asp?Table=MFA&Id=550
- ibid, p. 12, point 6.
- R. Grant, loc. cit.
- ibid.
- Uhrig, op cit. p. 99.
- Uhrig, op cit. p. 98.
- See http://www.finance.gov.au/finframework/docs/FMA_CACflipchart4April2006.pdf.
- Commonwealth Authorities and Companies Act, section 5; definition
of ‘director’
- Commonwealth Authorities and Companies Act, section 5; definition
of ‘officer’
- Commonwealth Authorities and Companies Act, section 22.
- Commonwealth Authorities and Companies Act, section 23.
- Commonwealth Authorities and Companies Act, section 24.
- Commonwealth Authorities and Companies Act, section 25.
- Australian Broadcasting Corporation Act 1983, section 8.
- Ramona Koval, Submission
43, Inquiry into Australian Broadcasting Corporation Amendment Bill
2006, Senate Environment, Communications and Information Technology
Legislation Committee,
10 April 2006, pp. 3–4.
- Bob Mansfield, The challenge
of a better ABC (January 1997).
- Report of the Senate Select Committee on ABC Management and Operations,
Our ABC (March 1995).
- Report of the Senate Environment, Communications, Information Technology
and the Arts References Committee, Above
Board? Methods of appointment to the ABC Board (September 2001),
paras.2.63-2.66.
- ANAO Performance Audit, Corporate Governance in the Australian
Broadcasting Corporation (Audit Report No.40, 2001-02).
- Stephen Bartos, Public Sector Governance
- Australia,
CCH. See http://www.cch.com.au/fe_ps_details.asp?product_id=4560&topic_code=7&category_code=92&bhcp=1
- Professor Stephen Bartos, Submission
2, Inquiry into Australian Broadcasting Corporation Amendment Bill
2006, Senate Environment, Communications and Information Technology
Legislation Committee,
April 2004 [sic].
Jonathan Chowns
Economics, Commerce and Industrial Relations Section
Kim Jackson
Social Policy Section
Fiona Childs
Politics & Public Administration Section
8 May 2006
Bills Digest Service
Information and Research Services
This paper has been prepared to support the work of the Australian Parliament
using information available at the time of production. The views expressed
do not reflect an official position of the Information and Research Service,
nor do they constitute professional legal opinion.
IRS staff are available to discuss the paper's contents
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ISSN 1328-8091
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