Board of Directors
As required under the Northern Australian Infrastructure Facility Act
2016 (NAIF Act), the Northern Australian Infrastructure Facility (NAIF) is
governed by a Board of Directors (board). This chapter discusses the role of
the NAIF board and the process and requirements for board appointments. It examines
the criticisms raised during the course of the inquiry about the experience and
expertise of NAIF board members, and the board's management and monitoring of
potential conflicts of interest. It also considers some of the suggestions made
to improve the board's effectiveness.
Role of the NAIF board
As NAIF is a corporate Commonwealth entity under the Public
Governance, Performance and Accountability Act 2013 (PGPA Act), the NAIF board
is independent from government. Pursuant to section 14 of the NAIF Act the functions
of the NAIF board are:
- to decide, within the scope of the Investment Mandate,
the strategies and policies to be followed by the Facility; and
- to ensure the proper, efficient and effective performance
of the Facility's functions; and
- any other functions conferred on the Board by this Act.
The principle role of the NAIF board is to make Investment Decisions. An
Investment Decision is defined by NAIF as a decision to offer, or not to offer,
a financing mechanism.
The process of making an Investment Decision is examined in Chapter 4 of this
The process for appointing NAIF board members is set out in the
NAIF Act. It specifies that the board will consist of a Chair and no less than
four and no more than six other members;
and that members of the board are to be appointed by written instrument by the
Minister, in this case, the Minister for Resources and Northern Australia, currently
Senator the Hon. Matthew Canavan.
Subsection 15(4) of the NAIF Act also sets out eligibility requirements
for appointments to the NAIF board, it explicitly states that:
(4) A person is not
eligible for appointment as a member unless the person has experience or
expertise in one or more of the following fields:
banking and finance;
- private equity or
investment by way of lending or provision of credit;
infrastructure planning and financing;
government funding programs or bodies;
financial accounting or auditing;
In 2016, the Department of Industry, Innovation and Science (the
department), supported the Minister in selecting the NAIF board members, by undertaking
a consultative process to identify appropriate candidates. This process
identified over 90 candidates. The department provided a list of candidates to the
Minister that included input from:
an executive search agency (conducted by Korn Ferry);
Queensland, Western Australia and the Northern Territory
the department's own research.
While the Minister has the final decision on the appointment of board
members, consistent with the Cabinet Handbook, the Minister's appointments were
referred to Cabinet for consideration, after which the Minister appointed the board
via written instrument.
At the time of writing, the NAIF board is led by Acting Chair,
Mr Khory McKormick from Queensland. NAIF's website states:
Mr McCormick is a legal consultant and practicing independent
neutral. He was previously a partner at a major Australia Law firm. He has over
35 years' experience across sectors of infrastructure, resource and energy,
public sector and private sector, engineering, construction, transportation and
other commercial activities.
Mr McCormick was appointed as the Acting Chair of the NAIF board
following the resignation of NAIF's inaugural Chair, Ms Sharon Warburton, on
30 April 2018.
At the time of writing, the other NAIF board members, also referred to
as Directors, are:
Mr Barry Coulter (Northern Territory)
Mr Justin Mannolini (Western Australia)
Mr Bill Shannon (Queensland)
Ms Karla Way-McPhail (Queensland).
These members represent the three Northern Australian jurisdictions and
bring together industry experiences as meets the criteria established in the
Dr Sally Pitkin was also appointed as a board member when NAIF was
established. However, on 31 July 2017, Dr Pitkin resigned from the NAIF board
when she was appointed as Chair of Super Retail Group. At the time of writing, Dr
Pitkin had not yet been replaced, however, the department noted in answers to
questions on notice in September 2017, that a process to appoint a replacement board
member had commenced.
Independence of the NAIF board
Submitters raised concerns that the decision to appoint board members is
the responsibility of only one Minister, in this instance, Minister Canavan.
In particular, the Australian Conservation Foundation expressed concern that
the Minister's vocal promotion of coal had 'compromised the NAIF board's
Although the Minister does not have the legal power to
unilaterally approve an application, it is possible for him to exert influence
over the board's decisions indirectly.
Similarly, Doctors for the Environment Australia commented:
Unfortunately, the Minister responsible for the NAIF has
already undermined the independence of the Board and its deliberations via his
sustained promotion of Adani and his public endorsement of their NAIF
To address this issue, submitters proposed that the NAIF board needed to
be independent from the Minister.
Lock the Gate Alliance explained:
We are calling for proper independence of the Board and the
process, so that it cannot be used as a political football and is not subject
to brazen political grandstanding of the type that has occurred with the Adani
Dr John Davison-Mowle, a private citizen, noted in his submission that
'there is no independent process' for the selection of board members.
Dr Davison-Mowle recommended that the board be 'appointed independently of the
Although the appointed NAIF board members have expertise in the relevant
fields, as required by the NAIF Act, submitters generally considered that the
NAIF board's effectiveness was hindered as a result of its composition.
Submitters concerns in this area focussed on the balance of the skills and
expertise of the NAIF board, pointing to a lack of diversity of experience,
styles and thoughts; as well as conflicts of interests, including ties to
specific industries on the board.
Lack of diversity of expertise
Submitters suggested that the individuals appointed to the board by the
Minister appeared to have considerable interests in the mining industry.
This was particularly concerning to submitters given that the NAIF board was,
at one time, considering providing a loan to the Adani Group for the
development of the Carmichael coal mine. This view was held by a range of individuals
Mr Thomas Swann, Researcher at The Australia Institute acknowledged that
the NAIF board had a 'diversity of experience', however, also noted that 'there
is certainly a strong bias towards resource extraction'.
Professor Thomas Clarke from the University of Technology Sydney also commented
that 'the board represents in the majority the entrenched interests of the
Professor Clarke pointed out that 'other important industries and sectors vital
to the regional economy's development, including agriculture, transport and
tourism, appear to have been relatively neglected'.
Dr Noel Preece, an environmental scientist, businessman, researcher and farmer,
agreed with this view, emphasising that:
The appointments seem to be all from the finance, legal,
mining and infrastructure sectors, several with strong links to mining and
mineral resources. There are no representatives of the tourism, indigenous or
environmental sectors and only limited representation from the agriculture
sector, which leaves a serious gap in the knowledge base on which risk
assessments and investment decisions are made.
Ms Shar Molloy, Director of the Environment Centre NT, similarly
We have concerns that
their backgrounds are strongly skewed towards fossil fuel and mining and
potentially have limited expertise in other areas that really need to play a
large part in the investment of northern Australia, particularly in regards to
renewable energy, agriculture and tourism.
In order to address the issue of expertise on the NAIF board, submitters
proposed that subsection 15(4) of the NAIF Act be amended to include experience
or expertise in a wider range of fields relevant to Northern Australia, such
as: in tourism, agriculture, renewable energy and environmental science.
Submitters considered that these industries ought to be represented on the NAIF
board due to their significant presence in Northern Australia.
Specifically, the Australian Conservation Foundation recommended that
the NAIF Act be amended to 'require the appointment of board members with
experience in agricultural, renewable, educational and environmental matters'.
Mr Swann from The Australia Institute agreed and emphasised the need for
the NAIF board to have expertise in environmental science:
...it seems to us, as
researchers on the issues to do with northern Australian development, that
environmental science, water and climate change are of particular concern and
particular concern from a financial point of view. If you're going to be
investing in this area, you need to be aware of these risks and considering
them closely. It is concerning that the NAIF Act does not list environmental
science or climate change expertise as areas of expertise that could be bases
for appointment to the board. It also does not require the minister to consider
a diversity of experience.
Ms Bess Murphy, Community Engagement Coordinator of the Cairns and Far
North Environment Centre also believed that expertise in environmental science
would be crucial to NAIF's decision making processes:
For us, we really
would like to see more environment and science representation on the board.
That is in the context of northern Australia being mostly unpopulated and
covered in natural areas. To us, it seems really quite important that that
would be a requirement—to have environment and science representation.
Ms Pip Close from Tourism Tropical North Queensland suggested that a
representative from the tourism industry on the NAIF board would be a welcome
addition as tourism is a key industry across all three jurisdictions of Northern
Ms Imogen Zethoven from the Australian Marine Conservation Society added
that not including tourism as a required field of expertise for eligibility as
a NAIF board member was an 'enormous oversight', especially given that the
tourism sector is a major employer in Northern Australia.
The Environmental Defenders' Office went so far as to suggest that the
NAIF Act be amended to reflect the legislative requirements for
appointments to the Clean Energy Finance Corporation's (CEFC) board, suggesting
that this would impose a 'higher threshold for Board members' balance of skills
and expertise and members' eligibility'.
Subsection 16(2) of the Clean Energy Finance Corporation Act 2012
(CEFC Act) specifies that a person is not eligible for appointment as a board
member unless the responsible Ministers are satisfied that the person has:
- substantial experience
or expertise; and
credibility and significant standing;
in at least one of the following
- banking and finance;
- venture capital, private
equity or investment by way of lending or provision of credit;
- energy technologies;
- government funding
programs or bodies;
- the environmental
- financial accounting;
The NAIF Act's eligibility requirements for appointments to the board do
not include the fields of 'energy technologies' or 'the environmental sector'
as relevant areas of experience or expertise.
Lack of Indigenous representation
Submitters raised concerns that the NAIF board did not have an
Indigenous member. This was viewed as an important consideration due to the
fact that a significant percentage of Northern Australia's population is
Indigenous and further, because a significant amount of land in Northern
Australia belongs to Indigenous groups.
In particular, Mr Shannon Burns, Policy Officer at the Cape York Land
Council commented that:
Indigenous representation on the board and we think that with
15 per cent of the population of northern Australia being Indigenous people,
and such a high level of land ownership and native title existing in northern
Australia, obviously the Indigenous interest is strong and that would suggest
that there could be Indigenous representation on the board.
Dr Noel Preece also highlighted the significance of the higher
Indigenous population noting that 'southern people' often do not recognise that
Indigenous people constitute a much higher percentage of the total population
in Northern Australia:
A very large proportion of northern Australian people are
Indigenous. That's often not recognised by southern people. In parts it's 80 to
90 per cent, sometimes even higher. Across northern Australia it's in the order
of 40 to 50 per cent, according to the region you're in. That's a really
important aspect. Most of those Indigenous people are disadvantaged, suffering
from poor conditions, poor health, lack of jobs and a lot of pressure on them
to perform, so to speak, by getting a job or creating a job. I think that needs
to be recognised also. That reflects on the constitution and construction of
the board of NAIF itself. There is no Aboriginal representation at all on the
The Environmental Defenders' Office also viewed the lack of Indigenous
representation on the NAIF board as an issue and recommended that the Act be
amended to require the NAIF board to have an Indigenous member. The
organisation also proposed that, alternatively, the NAIF Act might require the board
to include 'a person recognised by Aboriginal and Torres Strait Islander
communities as having skills, knowledge and experience working with Aboriginal
and Torres Strait Islander people on community engagement, community
development or other such relevant issues'.
Ms Bess Murphy also proposed that an Indigenous member be appointed to
the NAIF board as soon as possible:
I really find it
absolutely shocking—and I know that I speak for others when I say this—that
there is no Indigenous representation on the board. I think that is something
that should be rectified really, really soon.
Mr Joe Morrison, CEO of the Northern Land Council, noted that following
the Blue Mud Bay decision, Aboriginal people own half of the Northern Territory
land mass and 85 per cent of the coastline. Mr Morrison, explained to the
committee that, in his view, Indigenous people wanted to see their lands and
waters developed in ways that are culturally and environmentally appropriate,
however, they had not often been included in decision making processes.
Further, Mr Morrison considered that:
...government policies that guide development in northern
Australia have neglected to recognise Aboriginal people as primary and
legitimate stakeholders by virtue of their land ownership and demography.
Mr Morrison believed that NAIF had a role to play in changing this
paradigm and assisting the residents of Northern Australia to 'attract foreign
investment for Indigenous development objectives'.
Understanding the state and
The Expert Review of the NAIF conducted by Tony Shepherd (Shepherd
review) noted that 'it may also be worthwhile appointing Board members that are
familiar to and with the State and Territory governments'. Mr Shepherd proposed
that this would provide assurance to the jurisdictions that the NAIF board
shared their priorities. The Shepherd review made the following recommendation
in relation to the NAIF board:
Strengthen the NAIF Board by the inclusion of an additional
Director who has successful project development experience in one of the States
and Territories and who understands the State and Territory perspective and is
Conflicts of interest
The NAIF board must adhere to Commonwealth legislation around conflicts
of interest as well as to a number of NAIF policies including the NAIF Board
Charter and its Conflict of Interest Policy (COI Policy).
Under Section 29 of the PGPA Act, NAIF board members have a duty to
disclose any material personal interest that relates to the affairs of the
(1) An official of a Commonwealth entity who has a material
personal interest that relates to the affairs of the entity must disclose
details of the interest.
Section 14 of the Public Governance and Performance Accountability
Rule 2014 prescribes that these interests must be disclosed orally or in writing
to each board member. The disclosure must include details of the nature and
extent of the interest and how the interest relates to the affairs of the
entity. Further, the disclosure must be made at a meeting of the members of the
board as soon as practicable after the official becomes aware of the interest,
and it must be recorded in the minutes of the meeting.
In relation to the disclosure of conflicts of interest by NAIF board
members, the COI Policy states:
NAIF's approach to
managing Director's Conflicts of Interest requires Directors to provide a
disclosure of non-portfolio shareholdings and other personal interests upon
joining the NAIF Board and to keep this disclosure updated by notifying NAIF's
Board Secretary of changes. The Board Secretary tables a summary of all
disclosed interests at each Board meeting. The Board Secretary takes into
account the disclosed interests when distributing Board papers prior to a
meeting to ensure that Directors are not provided with information on a matter where
they have a Conflict of Interest. Directors have a duty to disclose material
personal interests that relate to NAIF's affairs on an ongoing basis and must
absent themselves from Board discussions where they have a Conflict of
The COI Policy also notes that non-compliance with the above disclosure
provision may result in disciplinary action or termination of employment. The
responsible minister may remove any board member who does not comply with the
Potential conflicts of interest of NAIF board members have been raised
in many forums over the course of this inquiry, including at Senate Estimates
hearings since 2016, and in published media articles.
These concerns centred around board members' interests in the mining
industry and the conflicts of interest these ties raised in the context of the
potential Investment Decision to fund the Adani Group for the construction of a
railway line from the Carmichael coal mine to the Abbot Point port in
Specifically, submitters were angered by the possibility of board member
Ms Karla Way-McPhail, who has significant interests in the mining
industry, making an Investment Decision from which she would likely benefit.
The Australian Conservation Foundation noted that Ms Way-McPhail is the
CEO of two companies in the mining industries: Coal Train Australia, a coal
industry training company and Undamine Industries, a coal contracting company.
At a Senate Estimates hearing in June 2017, Ms Laurie Walker, NAIF's CEO,
informed the committee that board members were aware of their obligations in
relation to declarations of conflicts of interest stating:
have been declared by various directors. I have absolute confidence that those
board members have declared conflicts in compliance with the act and the
policy, which require disclosure of material personal interests. The NAIF does
not publicly disclose which directors have recused themselves, because we are
obliged under Privacy Act provisions to maintain that information as personal
information and not disclose it. Directorships are publicly disclosed. The
other reason that we do not disclose publicly which directors have recused
themselves is (1) that it is done as part of board deliberations, which are
commercial in confidence and (2) a conflict arising could disclose particular
projects that are before the board for deliberation. That would reveal
commercial in confidence.
Lack of disclosure
Despite the above statement from NAIF, a number of submitters to this
inquiry noted the lack of disclosure in relation to board members' conflicts of
interest, and raised concerns over the impartiality of the NAIF board and its
ability to make responsible investment decisions.
Submitters suggested that transparency around board members' conflicts
of interest should be mandatory given the large amount of public money that is
being loaned by NAIF.
Professor Thomas Clarke argued that there was 'no transparency
whatsoever in the NAIF's policies and practices that demonstrates managing perceived,
actual or potential conflicts of interests of its board members'. Professor
Indeed, in the
composition, processes and decisions of the NAIF board, conflicts of interests
are apparently compounded into normal business practice. This is not an
acceptable standard for public bodies in Australia, or for the disbursement of
Mr Swann from the Australia Institute acknowledged that given the nature
of the expertise required to become a NAIF board member, it was not unexpected
that some of the individuals appointed might have conflicts of interest. However,
Mr Swann also pointed out that the more troubling issue was how these potential
conflicts of interest were perceived and dealt with by NAIF:
that people who come from northern Australia, who have expertise in northern
Australia, might have conflicts of interest. What's really important is that
the NAIF deals with that and is seen to be dealing with that. It seems to me
curious that, having acknowledged that there are potential conflicts of
interest, the NAIF would not want to be seen to be dealing with them
Ms Shar Molloy from the Environment Centre NT also commented that the
perception of transparency and accountability of the NAIF board could be improved:
We are also concerned
about direct conflict of interest and believe that the reputation of the board
could actually be increased if there was an increase in transparency and any
conflicts of interest declared. Given the extent of taxpayers' money that is
involved here, then those potential conflicts of interest need to be treated
with the highest level of scrutiny.
However, Mr Simon Every, Head of Government and Stakeholder Relations at
the CEFC noted that NAIF's policy around conflicts of interest disclosure was
consistent with their own policy. That is, board members' interests are not
disclosed to the public. They are disclosed to the board and minuted; however,
these minutes are not publicly disclosed.
In its 2016–17 annual report, CEFC states the following about conflicts
of interest within its organisation:
The CEFC considers matters regarding potential conflicts and
related entity transactions in accordance with the CEFC Act and the PGPA Act.
Declarations by Board members of any material personal interests are a standing
agenda item at each Board meeting.
Executives and staff are also required to declare potential
personal conflicts of interest, and comply with a share trading policy which
prohibits share trading in entities with which the CEFC may be doing business
and/or may hold price sensitive information. The Audit and Risk Committee
reviews all related entity transactions which are disclosed in accordance with
the relevant accounting standards at Note 5.4 within the Financial Statements.
NAIF's 2016–17 annual report provided a similar statement in relation to
how it manages conflicts of interest:
In addition to statutory requirements under the PGPA Act,
NAIF manages conflicts of interest in accordance with its Conflicts of Interest
Policy. The Conflict of Interest Policy was first endorsed at the Board’s first
meeting in August 2016 and is available on the NAIF website.
Submitters proposed that one way of addressing the concerns raised in
relation NAIF board member's conflicts of interest, would be to require the
NAIF board to publicly disclose each member's conflicts of interest.
Mr Swann suggested that 'recusals [be] disclosed to provide confidence
that conflicts of interest...are managed by the board member not being involved
in a conversation or in the project assessment, it seems to be reasonable that,
for the purposes of demonstrating that these conflicts have been dealt with
adequately, those are disclosed'.
Mr Adam Thatcher, General Counsel of NAIF commented that:
I think recusals at
board meetings are very standard practice amongst all organisations. As
somebody might have raised earlier, the practice then refers potentially to
particular projects that might be under consideration. It reveals personal
information, under the Privacy Act, of that particular director. In my view,
it's best practice. In my long experience as a lawyer and working with a lot of
public companies and others, I have never seen recusals at board meetings publicly
disclosed to anyone.
NAIF noted in its submission to the committee that the Australian
National Audit Office (ANAO) Guide states that 'given the personal nature of a
declaration of private interest, entities must be conscious of privacy
arrangements and ensure that such documents are stored securely'. Further, NAIF
observed that this approach is 'broadly consistent with the approach taken by
Efic [Export Finance and Insurance Corporation]'.
Acknowledging that conflicts of interest are not disclosed due to board
members' privacy as well as the commercial-in-confidence implications for
projects being considered by the NAIF board, Mr Swann agreed that one way
around the confidentiality of disclosures could be to disclose only the number
of recusals that have been made. This would not require the individual who
recused themselves to be named publicly, nor to disclose why they recused
Composition of the NAIF board
The committee shares the concerns raised by stakeholders about the current
composition and lack of diversity of expertise of the NAIF board. While the
committee acknowledges that the appointed NAIF board members have expertise in
the relevant fields as required by the NAIF Act, the committee is of the view
that the NAIF board's effectiveness is hindered as a result of its current
The committee notes evidence received about the lack of experience and
expertise of NAIF board members in the areas of science and the tourism
industry. The committee also notes that the NAIF Act's eligibility requirements
for appointments to the board do not include experience or expertise in the
fields of 'energy technologies' or 'the environmental sector', as is provided
for in the CEFC Act. The committee considers that a balance of such skills and
expertise on the NAIF board would enhance the board's effectiveness and lead to
a more qualified and trusted NAIF.
The committee notes that a significant percentage of the population of Northern
Australia is Indigenous; and a significant amount of land in Northern Australia
belongs to Indigenous groups. In addition, the committee is cognisant of the
requirement in the Investment Mandate for projects to develop an Indigenous
Engagement Strategy. Therefore the committee considers it appropriate that the
NAIF Act be amended to require at least one board member of Aboriginal or
Torres Strait Islander heritage; as well as to expand the existing eligibility
criteria for NAIF board members to include experience in Indigenous development.
The committee recommends that the Northern Australia Infrastructure
Facility Act 2016 be amended to require at least one Board member of
Aboriginal or Torres Strait Islander heritage and expand the eligibility
criteria for Board appointments to include skills or expertise representative
of the Northern Australian economy, like experience in Indigenous development,
the sciences and the tourism industry.
Disclosure of conflicts of interest
The committee understands the concerns raised by stakeholders about the potential
conflicts of interest on the NAIF board. Board members' personal interests in specific
industries are troubling for the community and committee alike.
The committee acknowledges that conflicts of interest within a corporate
Commonwealth entity under the PGPA Act are generally not disclosed due to
concerns about board members' privacy. With specific regard to NAIF, the
committee also understands the potential commercial-in-confidence implications
for projects being considered by the NAIF board.
Notwithstanding the above, the committee believes that NAIF would
benefit from some level of disclosure of NAIF board members' conflicts of
interest. The committee is of the view that such disclosure would increase
transparency and give the public confidence in the decisions of the NAIF board.
While acknowledging the need for any disclosure to be limited to ensure the
privacy of board members is protected, the committee considers that following
an Investment Decision, NAIF should publish information on its website
regarding any conflicts of interest that were disclosed by NAIF board members
in relation to the relevant project. The committee believes that such
disclosure strikes the right balance between ensuring transparency and public
confidence, while maintaining the confidential nature of board deliberations.
The committee recommends that subsection 17(2) of the Northern Australia
Infrastructure Facility Investment Mandate Direction 2018 be amended to include
a requirement that within 30 days of an Investment Decision, the Northern
Australia Infrastructure Facility publish information on its website regarding
any conflicts of interest that were disclosed by Northern Australia
Infrastructure Facility board members in relation to the relevant project and
how they were managed.
Navigation: Previous Page | Contents | Next Page