Shame and confusion! All is on
the rout:
Fear frames disorder, and
disorder wounds
Where it should guard.
2 Henry VI, Act 5, scene 2.
The Indigenous Land and Sea Corporation (ILSC) recently
published on its FOI disclosure log an extensive cache of documents related to
the communications between the ILSC Board and its Directors and the Minister
over the past two years (link
here); [see FOI cache #19]. Running to 121 documents and 460 pages, not
always chronologically ordered, they are not a particularly accessible resource.
The documents portray a fascinating internal battle within
the Board over the future direction of the ILSC, and its subsidiary
corporations. A superficial and selective reading would concentrate solely on
the admittedly mesmerising cut and thrust between strong personalities and
their efforts to induce the minister to intervene in their favour. While the
personal political aspirations and motivations of the individuals involved are
inevitably key drivers of the events portrayed, such a reading would gloss over
the important underlying policy issues at stake for the ILSC, and also
Indigenous Business Australia (IBA).
The ILSC and IBA are arguably the two largest and most
important statutory corporations in the Indigenous Australians portfolio. Each
has formal independence from ministerial direction, have significant budgetary
independence, and are endowed with powers to operate commercial businesses.
These statutory attributes mean that it is extremely important that both
organisations are subject to proactive regulation by the Minister and the
Department of Finance (they are PGPA Act organisations), and that their
activities are transparent and accountable vis a vis First Nations communities.
While the ILSC and IBA are complementary in many respects,
they have fundamentally different histories and underlying mandates. In
particular, IBA was established to support and engage strategically on behalf
of First Nations communities in commercial and economic business activities,
whereas the ILSC was established in the wake of the passage of the Native Title
Act 1993 to provide some measure of compensation for the prior dispossession of
First Nations peoples. See my chapter ‘Unmet Potential’ in the recent monograph
edited by Rademaker and Rowse (2020) Indigenous Self-determination in
Australia (link
here) for a more detailed history of these two organisations.
Turning to the document cache released recently, at least five
separate but related issue threads can be discerned.
The first thread
relates generally to the issue of the quantum of debt carried by the ILSC
primarily due the purchase of the Ayers Rock Resort (ARR) and more particularly
to the NAIF loan for the upgrade of the Yulara airport servicing Voyages Ayers
Rock Resort (ARR). Voyages is a wholly owned subsidiary of the ILSC, and has a
problematic history since its acquisition in 2010 of ARR at an inflated
valuation (link
here and link
here). I have posted a separate analysis of the NAIF issue thread in this related
post (link
here). The issue of the ILSC’s ongoing debt management challenges,
particularly following the onset of the pandemic, is beyond the scope of this
post.
Second is the internal ILSC argument
over whether ILSC Directors should sit on subsidiary Boards. For well over ten
years, this has been the practice within the ILSC, the main objective being to
assure alignment between the ILSC and its various subsidiaries. The current
Chair sought to change this practice in May 2020 when seeking Board support for
a set of principles embedded within a wide-ranging proposal for a structural
transformation of ILSC operations (FOI document 78). The underlying
rationale for this proposal is not entirely clear, but it would seem to be both
a means of strengthening the Chair’s personal control over the operations of
the ILSC current subsidiaries, and into the future, reducing the level of
operational control by the Board over a key element of the Chair’s transformation
proposal.
A third issue thread (intertwined
with thread two) has been the unilateral approach adopted by the Chair on
various key policy issues, most notably his proposed transformation of the ILSC
structure, and the reaction engendered within the Board. This culminated in the
meeting of 7 May 2020, variously described by one Director as ‘really robust’, ‘heated’
and ‘quite fiery’, and by others as involving ‘constant berating’, ‘excessive
berating and bullying’, ‘aggressive badgering’ and so on (Thom review, p.24, FOI
document 99). The complainants argued that the meeting involved inappropriate
pressure on Board members by the Chair, where a set of policy principles
proposed by the Chair at short notice (including the subsidiary issue described
above) were considered. The Board split 4/3 to vote down the Chair’s proposals,
and passed a resolution of no confidence in him, before exiting the meeting and
removing the quorum. It is worth noting the background and experience of the disenchanted
Directors (for want of a better term). Roy Ah See is a former chair of the
Prime Minister’s Indigenous Advisory Council. Patricia Crossin is a former
longstanding NT Senator. Dr Donna Odegaard is Co-Chair of the Minister Wyatt’s
National Codesign Group considering an Indigenous voice (link
here) and a member of the Indigenous Reference Group on Northern
Development (link
here). Bruce Martin is a former member of the Prime Minister’s Advisory Council
and a member of the expert panel for Minister Ley’s Environment Review (link
here). The obvious point is that all of these Directors are experienced and
highly regarded individuals within government circles.
There followed a spate of letters to the Minister from the
Chair (FOI documents 56, 57A, 57B,58, 59, 63, 64)and the disenchanted
Directors (FOI documents 111,114, 117). The disenchanted Directors
sought to have the Minister take action to curb the Chair’s unilateralist
propensities and implicitly made the case to have him removed for misbehaviour
(one of the grounds for removing a Director under the ILSC legislation). The
Chair sought to have the Minister replace two Directors immediately and a third
later, in the process making a series of allegations regarding their conduct as
DIrectors (FOI documents 57A, 57B, 58, 69 and 71). The Minister
responded cautiously, initially by requesting the Chair to temporarily stand
aside to allow his Deputy to chair a meeting to progress necessary business,
including related to the ILSC’s internal budget. That meeting took place, a
second resolution of no confidence in the Chair was passed, and the
disenchanted Directors again removed the quorum. The following day, the Deputy
Chair resigned, apparently keen to distance himself from what had come to pass.
His letter of resignation (FOI document 104) is significant for its
understatement (‘…considering the recent events at the ILSC and my having
served on Boards dealing with Indigenous matters from over 25 years’). As well,
he reveals that there had been no contact from the Minister or his agency in
relation to the expiry of his original term, a matter that should be seen at
best as bad form, and given the circumstances, perhaps incompetence. ILSC Directors’
terms are ongoing until a replacement is appointed.
Following this second motion of no confidence, on 9 July
2020 Minister Wyatt appointed an independent investigator, Dr Vivienne Thom, to
review the situation. Dr Thom’s report (FOI document 99) was completed
on 25 August 2020, and provided to ILSC Directors on 12 October 2020. The
Minister sought responses by 4 November.
Dr Thom’s report goes a long way to disentangling the
issues, but she does not make findings that would require a minister to take
action. Nevertheless, it is clear from a close reading of the report that she
was not persuaded that the Chair’s policy approach was the best course for the
ILSC. She made ten recommendations, including a recommendation that the Board
should clarify and document the role and powers of the ILSC Chairperson in
relation to governance of ILSC subsidiaries (rec.3). In relation to the
Minister, her sole recommendation was:
The Minister could consider
using processes including public advertising or the use of executive search
processes independently of the ILSC Board to help ensure appointments are drawn
form the best possible field of candidates (recommendation 8).
The key point here is the focus on the quality of Board
appointments, including their capacity for collaborative contributions. There
is a very faint implication that the Minister responsible for the composition
of the current Board (Minister Scullion) did not ensure his appointments were
drawn from the best possible field of candidates. While unstated, it is widely
recognised in corporate governance circles that a core responsibility of the
Chairperson is to ensure that the Board develops a collaborative culture. This
is clearly not the case at the ILSC at present.
The fourth issue thread has
been the intense and heated battle within the Board over the role and effective
allegiance of the CEO, That is, does he /she report to the Board or the Chair? This
issue arose during the ILSC’s slow, convoluted and fraught process to fill the
position substantively after the previous CEO resigned 14 months ago. This led
to a (contested) Board decision to remove one acting CEO, Mr Bator, at the 7
May Board meeting, apparently because he was seen as working to the Chair’s
directions and not necessarily in accordance with the Board’s decisions. Mr
Bator had headed the ILSC Strategic Reform Unit that developed the Chair’s proposed
transformation agenda, and returned there after being stood down as CEO. As
time wore on, the documents indicate that the Minister became increasingly
exercised at the failure to appoint a substantive CEO. The position has
recently been filled when the Board recommended, and the Minister endorsed, the
appointment of Mr Joe Morrison (link
here). If the conflict within the Board is not resolved soon, Mr Morrison
may find himself in an increasingly untenable position.
Finally, a fifth less obvious but crucial thread
runs through the released FOI documents, namely, the extent to which relevant ministers
have exercised their regulatory oversight responsibilities (broadly defined) in
relation to a key portfolio agency. Thus, for example, Minister Scullion’s
Board appointments appear to have been designed to ensure the Board’s
acquiescence in his political agenda (see the NAIF post link
here). Even the appointment of Ms Patricia Crossin, a former Labor Senator
from the NT who lost her preselection in acrimonious circumstances appears designed
to simultaneously demonstrate an apparent apolitical or bipartisan appointments
process, while giving a metaphorical ‘up yours’ to the Labor Party, and
particularly the NT Labor Party, remembering Minister Scullion was an NT
Senator.
Similarly, it is unclear what action (if any) Minister Wyatt
has taken since receiving the Thom report and the requested comments in
response from Directors. The levels of distrust and antipathy amongst ILSC
Directors were clearly very high, described by one Director as ‘untenable’, and
this will inevitably affect adversely the overall performance of the
corporation in fulfilling its core mandate. As Dr Thom notes (p.5):
The future of the ILSC will to
a large extent depend upon the quality and performance of its Board.
Notwithstanding the risk, there is no indication of any ministerial
action to date.
Moreover, notwithstanding recommendation 8 in the Thom
report, it seems unlikely that Minister Wyatt (or Cabinet more generally since
all these decisions go to Cabinet) will truly open up Board appointments in the
Indigenous affairs portfolio. The former ILC Board chaired by Dawn Casey
proposed amendments to the legislation providing for an independent and multi-partisan
Board appointments panel to be established from which ministers would choose ILSC
Board Directors. The proposal sank without trace.
Analysis and implications
The ILSC is clearly facing a complex array of governance
challenges. The Thom Review adverts obliquely to many of the most important
issues, but adroitly sidesteps making findings that would require or even
encourage the Minister to act. Thus she focuses on the conduct of the
Chairperson in one meeting on 7 May, and in particular whether his actions
amounted to bullying, clears him of misbehaviour warranting dismissal, but notes
that
…it would be open to a
decision-maker to conclude, on the balance of probabilities, that Mr Fry’s
conduct has breached the ILSC’s Code of Conduct. It is not, however, within the
power of this review to make such a finding. That is a decision for the ILSC
Board.
This is well and good. But the real issue to my mind is
whether Mr Fry has fulfilled the role of Chairperson of a major statutory
corporation to an adequate standard. By apparently sidelining the Board, and adopting
a unilateral approach to managing the corporation and its subsidiaries, and by
unilaterally driving the development of an ambitious and arguably radical transformation
agenda for the ILSC, he has lost the support of his Board. The concern that he
relies on selected loyalists (subsidiary Board appointees and ILSC staff) to
advance his management agenda, if true, is inconsistent with widely accepted
corporate governance principles. The deep levels of concern amongst not one,
but four experienced Directors, suggest something has been seriously amiss. The
Thom report considers multiple issues where the reviewer effectively questions
the decisions taken by the Chair, and implicitly sides with the disenchanted
Directors, but she does not make formal findings nor recommendations regarding
these specific issues. In effect, she has provided a report that might be used
to justify a non-interventionist approach by the Minister, or could be packaged
up to justify action to encourage the Chair to move on, or in a last resort, to
support, albeit indirectly, a case of misbehaviour warranting dismissal against
him.
My assessment (for what it is worth) is that the Minister’s
preference is to avoid intervening overtly, and to hope that the ILSC Board
will settle down and not erupt into further open conflict before he has a
chance to appoint a new Chairperson in November 2021 when Mr Fry’s term
expires. While such a strategy may well be the most politically attractive, it will
not ensure in the interim that the ILSC is fulfilling its statutory mandate in
the interests of First Nations.
The Minister’s substantive options are limited. He could
replace the two directors whose terms have expired and fill the vacancy created
by the Deputy Chair’s resignation. This would implicitly back Mr Fry’s
approach. Under the ILSC legislation, Directors remain in place until replaced.
Unless any new Directors were entirely supine, their appointment would place
them in an extremely invidious position.
Alternatively, he could encourage Mr Fry to step down, or
seek to remove him for misbehaviour.
Of course, there may be scope for some more informal compromises
to be worked out, but the Minister surely owes the wider community an
explanation of how he is addressing the issues that have arisen.
At a deeper level, it is apparent that the strategy adopted
by former Minister Scullion of effectively seeking to amalgamate the IBA and
the ILSC via the use of numerous shared Directors was misconceived. It ignored
the fundamental differences between the two corporations’ statutory mandates,
and viewed their operations through a prism privileging private sector
perspectives and commercial development at all costs. This strategy has failed.
It also raises significant questions regarding the internal workings of the
IBA, an organisation that Mr Fry also chairs and appears to dominate in ways he
has failed to achieve in the ILSC.
The available evidence suggests that central to the
relationship between the current Government and the ILSC (and IBA) is an
implicit understanding that the Government would apply light touch regulatory
oversight, turning a blind eye to poor governance (see for example this
post), and providing corporate welfare when required (for example, the $65m
bailout loan from the Commonwealth in 2016). In return, the ILSC adopts an
acquiescent attitude in relation to the Government’s Indigenous affairs
policies, for example as outlined in the NAIF post (link
here), and provides an underlying flow of initiatives creating an
appearance of government action. One example is the joint MOU between NAIF and
the ILSC and IBA (link here).
In turn, it seems that the light levels of regulatory and
policy oversight have allowed idiosyncratic policies to be pursued without any
(let alone adequate) discussion with the wider Indigenous community. I have in
mind here the Chair’s ambitious transformation agenda discussed above.
It is time that Ministers and the ILSC committed to a more
open approach to managing the ILSC’s activities and to explaining the key
financial and policy parameters and strategic choices that underpin the ILSC’s
operations to First Nations citizens and the wider community.
The ILSC is a valuable organisation, with the potential to
make a larger contribution than it has. However, by placing politics ahead of
policy, particularly in its Board appointments, the Government has placed all
this at risk. By allowing disorder to continue within the ILSC Board, and
failing to address the issues openly, Minister Wyatt is exacerbating that risk.
Disclosure: Given the topic of
this post, I should disclose that I served as CEO of the Indigenous Land
Corporation (ILC) from 2013 to 2015, and while working in the Prime Minister’s
Department was involved in developing the legislation for the ILC in the
mid-1990s.
