As the grassfed cattle industry grapples with restructure, a former cattle industry leader is calling for changes to be made at Meat & Livestock Australia as well.
Immediate past president of the CCA, Greg Brown, said the council has been pushing for changes to MLA’s board selection process for several years.
He also believes a full independent operational review of MLA is needed.
Under current board selection arrangements for MLA, a nine-member Selection Committee oversees the process of assessing all applications received for vacant board positions, and provides recommendations to MLA levy payers on which candidates it believes should be voted onto the board.
The Selection Committee is made up of three individuals selected triennially by producers at MLA annual general meetings (one cattle producer, one sheep producer and one lot feeder); three members appointed by the peak councils (Cattle Council of Australia, Sheepmeat Council of Australia and the Australian Lot Feeders Association) and three incumbent directors of MLA, which must include the chair.
Mr Brown believes the existing Selection Committee arrangements lack independence because MLA directors have three votes and therefore wield the highest degree of influence, while each commodity sector is represented by no more than two votes (one peak council appointed, one producer-elected).
He said the decision to include MLA directors on the Selection Committee was initially intended to be a temporary measure to get the first board ‘off the ground’ when MLA was formed in 1998. The original intention was to eliminate board members from the selection process at a future stage, however that had never happened, he said.
Mr Brown said he could think of no reason from a producer perspective as to why MLA directors should be included in the selection process. Removing incumbent MLA directors from the selection committee would remove any possibility that exists for them to be influential in the process, he said.
The North Queensland cattleman also believes the current system is not equitable for grassfed levy payers who contribute the greatest proportion of levy funding to MLA.
In 2010-11 grassfed cattle producers accounted for $56 million of MLA’s levy funds, or 58pc, while sheepmeat producers contributed $28m or 29pc, and grainfed cattle producers contributed $8.4m or 9pc.
Mr Brown said that despite contributing the most income to MLA, grassfed levy payers had no more say on the selection committee process than the feedlot or sheepmeat sectors.
His comments follow the release of a new policy statement on research and development corporation arrangements (RDCs) by minister for agriculture Joe Ludwig in mid-July.
On the issue of board selection procedures for RDCs, the minister’s office told Beef Central last week that ASX Corporate Governance Principles recommended that corporations use a nomination committee comprising a ‘majority of independent members’ for appointments to their boards.
A spokesperson for the minister added that the Government was “also encouraging independent board selection committees for the industry-owned bodies”.
MLA told Beef Central that its selection committee process already met the board selection requirements outlined in the Federal Government’s new RDC policy, because a majority of the committee (six of nine) were non-MLA directors.
MLA managing director Scott Hansen said it was not appropriate for MLA staff members to comment on board selection issues, but noted that the MLA board had unsuccessfully tried to move resolutions looking to reduce the number of MLA directors on the selection committee in its annual general meetings in both 2001 and 2003.
In both years the MLA board moved resolutions (wording for the 2003 resolution is listed below this article) which sought to reduce the number of MLA board members on the selection committee to one, and to add another directly elected cattle producer member and another directly elected sheep producer member.
However, the resolutions failed to receive the required level of support, receiving 69pc of total votes in 2001 and 73pc in 2003, both times just short of the 75pc required.
Mr Hansen said the two resolutions were the only formal moves aimed at changing the selection committee of which he was aware, and both were proposed by the MLA board itself.
Call for independent review
In changes to Government policy surrounding rural Research & Development Corporations flagged last month, Minister Ludwig also announced that the 15 statutory and industry owned RDCs operating in Australian agriculture will be subjected to regular independent performance reviews from now on.
MLA, one of the nine industry-owned RDCs, said it already conducts regular independent performance reviews, with the last carried out by Arche Consulting in consultation with peak councils and the Department of Agriculture, Fisheries and Forestry in 2010.
MLA said the terms of reference for that review were discussed with DAFF prior to the review and the results were reported directly to the minister and published on its website (available here).
Key recommendations from the 2010 review included that MLA consider a more strategic and structured approach to stakeholder relationships; consider the benefits of developing a consistent ex-ante evaluation process; consider establishing quantified key performance indicators for its strategic plan and refine its approach to reporting outcomes to stakeholders to ensure clarity and consistency across business units.
Mr Brown, who served as president of Cattle Council at the time of the review, said he believed it was flawed, because concerns that were aired by Cattle Council of Australia about MLA during the consultation phase – including its criticisms of the board selection process – were not acknowledged or mentioned in the final report.
He was also concerned that Cattle Council, as the group representing the majority of levy payers to MLA, was not included in the process of framing the Terms of Reference for the 2010 review.
Mr Brown said he believed it was time for a new and full operational review to be conducted, which he said should be overseen and managed by parties independent to the research and development corporation.
He said such a review would also help to determine how a more equitable board selection process could be structured.
MLA managing director Scott Hansen said MLA was already required to undertake regular independent performance reviews under its Statutory Funding Agreement with the Federal Government.
He said the terms of reference and the choice of consultant were dictated by the Department of Agriculture, Fisheries and Forestry, and said that Arche Consulting had canvassed a broad range of industry views before handing down its recommendations, which went straight to Government.
He added that last year’s Productivity Commission Review which looked at how all 15 rural RDCs operate included thorough individual reviews of each RDC, a process into which all industry groups including Cattle Council of Australia had input.
Resolution on director selection processes put forward at MLA AGM in 2003
Below is the wording of a resolution proposed by the MLA board at its annual general meeting in Perth in 2003. The resolution received 73pc of votes, just short of the 75pc required for the resolution to be carried.
Item 11: Special resolution proposed by the MLA Board for a director Selection Committee that has greater producer representation.
In response to a recommendation by the 2002 Senate Committee’s review of the Australian meat industry’s consultative structure, MLA consulted widely with members and industry on the reform of
its constitution to address concerns about producer representation in the director election process.
The directors are proposing amendments to the constitution to replace two of the existing director positions on its Selection Committee with two additional members elected by members: one representing grassfed cattle producers and one representing sheep producers. (The Selection Committee is responsible for evaluating applicants for positions on the board of directors and endorsing candidates to fill those positions.)
The proposed amendments give greater producer participation in selecting director candidates while maintaining a skills-based board essential for the effective management of the company.
MLA has consulted extensively on this issue. A number of options were canvassed with industry groups, individual members, state farmer organisations and government. These options included
the direct election model, altering the composition of the Selection Committee, combinations of direct election and Selection Committee arrangements and permitting the Selection Committee
to select more than one candidate.
After considering all feedback on the various options it was clear that increasing producer representation on the Selection Committee was the most favoured option. If members pass the proposed resolution, producers would make up five of the nine committee members.
The Selection Committee would be as follows:
- Two member elected grassfed cattle producer representatives
- Two member elected sheep producer representatives
- One member elected grainfed cattle producer representative
- One appointed representative from the Cattle Council of Australia
- One appointed representative from the Sheepmeat Council of Australia
- One appointed representative from the Australian Lot Feeders’ Association
- One MLA director (chairman)
Under the proposed amendments, the new producer elected representatives would be elected in the same way as the existing cattle and sheep producer representatives. That is, MLA members
will be able to vote for these representatives at the AGM.