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Voting entitlement ‘honesty system’ stuns Senators at Albury

James Nason, 11/06/2014

Senators conducting an inquiry into beef industry structures at Albury yesterday were stunned to learn that voting entitlements for Meat & Livestock Australia’s annual general meetings are allocated on what amounts to an honesty system.

Levy payers seeking to exercise their right to vote at the MLA AGM each year must apply for voting entitlements, which involves self-declaring how much they have paid in $5/head cattle transaction levies in the previous 12 month period.

Under the system, $5 from every cattle transaction is collected by intermediaries such as stock agents and processors on behalf of the producers who have made the transactions.

The intermediaries can then hold the funds in trust for up to one month and 28 days before paying them in bulk to the levies collection unit within the Department of Agriculture.

Because the funds are paid in bulk by intermediaries, there is no definitive record of how much each individual producer or company has paid.

Producers who wish to apply for their voting entitlements prior to each MLA AGM must submit a form declaring how much they have paid in cattle transaction levies for the previous year. They are then allocated voting entitlements according to a sliding scale.

A number of witnesses at yesterday’s Albury hearing said voting entitlements for MLA AGMs should be automatically granted to every levy payer according to how much they have paid in cattle transaction levies, as occurs in the wool industry.

However, the hearing was told that is currently impossible, because there is no definitive record at official level detailing how much each individual entity has actually paid.

The issue was brought to the forum’s attention by cattle producers representing the United Stockowners of Australia, which describes itself as an industry research group.

South Australian cattle producer John Michelmore said that while MLA conducted some auditing of voting entitlements, the lack of certainty in the current intermediary-based system allowed for the allocation of incorrect voting entitlements and the allocation of voting entitlements that did not exist.

Under the current transaction levy system, processors who hold cattle in their own feedlots for more than 30 days and then slaughter them in their own abattoirs are required to pay the $5/head cattle transaction levy, even though no transaction has technically occurred.

The emergence of large-scale processor owned feedlots since MLA was formed back in 1998 meant that processors now controlled some of the largest individual voting entitlements at MLA AGMs.

’11 of the 17 biggest MLA voting entitlements are held by processors’

Sydney-based lawyer Norman Hunt told the hearing that an analysis of MLA’s voting register from 2010-11 showed that 11 of the 17 biggest voting entitlements were held by processors, or companies with processing interests.

Mr Michelmore suggested that under the current ‘self-assessment’ based system, processors could receive more votes than they were entitled to receive, and so could producers.

He said the Australian Beef Association had discovered a few years ago that a producer who had made a mistake filling out their voting entitlement form had been incorrectly granted millions more votes than they were entitled to receive.

The inability to accurately match levy payments to the entities that had paid them was the “fundamental problem” with the current industry structure, Mr Michelmore said.

The system alienated grassfed producers and gave control to “the unelected few.”

Liberal Senator for Queensland Ian McDonald expressed astonishment that the levies collection unit within the Department of Agriculture could not say with certainty who had paid the compulsory tax.

“So you’re telling me that someone pays money into a bank account run by the Government and the Government can’t tell you who has paid it?,” he asked.

“Absolutely,” Mr Michelmore said.

“I can’t believe you’re serious but I’m sure you are,” Senator McDonald replied.

Mr Michelmore said an independent audit was needed to define tax payments with certainty. That would then lay the platform for a more democratic system by allowing every levy payer to automatically receive voting entitlements for MLA AGMs, without having to manually apply for voting entitlements as currently required.

In its evidence to the hearing the New South Wales Farmers Association said its members were unhappy with the process of having to register every year to receive voting entitlements, and believed automated-registration should be introduced.

Don’t give CCA levy funding yet: NSW Farmers

Fundamental questions being explored by the inquiry include whether the Cattle Council of Australia provides the best structure to represent grassfed cattle producers, and whether it should receive direct access to some, or all, of the funds producers pay in compulsory $5/head cattle transaction levies.

Inquiry chair, Labor Senator for WA Glen Sterle, told yesterday’s hearing that everyone seemed to agree that a levy was needed, but said there had been conflicting opinion on the subject of whether CCA should receive a direct share of the levy.

The New South Wales Farmers Association told yesterday’s hearing it believes a decision on whether CCA should receive direct funding from the transaction levy should wait until a CCA review of its recently introduced direct membership pathway is conducted in approximately 18 months time.

“We would be happy for CCA to remain the peak body, but we think it pertinent to wait until the review in 18 months time to see how many direct members they get before they get a direct portion of the levy,” a NSWFA representative told the inquiry.

On evidence so far the take up rate for direct memberships has been disappointingly slow for CCA.

Despite numerous media stories and advertisements announcing the introduction of the new direct membership pathway in January, less than 150 cattle producers have taken up the $110 direct membership option since that time.

In his evidence to yesterday’s inquiry, Sydney lawyer and Australian Meat Producers Group representative Norman Hunt believed the lack of take up was because the State Farm Organisation (SFO)-aligned CCA had not gone far enough to address the disconnect grass roots producers felt with the national body.

He said that by offering only two seats on its new 10-seat board to direct fee-paying members, with the rest filled by SFO-appointed directors from each State, CCA had not gone far enough to give grassfed producers the influence they wanted over the national organisation.

‘You can’t get a good outcome from a bad structure’

“You can’t get a good outcome from a bad structure,” Mr Hunt told yesterday’s Albury hearing.

Mr Hunt advocates the replacement of existing industry structures with a single, democratically-elected, grassfed producer-controlled and levy-funded organisation that combines the functions of policy setting, policy delivery and advocacy in one body.

He said that while the original MLA structure was “okay” in 1997, a lot had gone wrong in its implementation. The merging of producer and processor interests in the same organisation had never been intended, he said, and MLA was no longer an organisation controlled by producer levy payers.

“The concentration of processors, the concentration of supermarkets, the amount of cattle on feed, it is just a completely different industry than was put in place and would have existed when these structures were put in place,” Mr Hunt explained.

Do processors want to pay levies to MLA?

While producers felt disenfranchised by the current system, he said processors did not necessarily like it either.

About three years ago, he said, he was contacted by Senator asking the question: “what could be done to get the processors out of MLA?”

Mr Hunt said he put the question to a range of people throughout the processing industry including representatives of JBS, Fletchers International, Bindaree Beef, and the Australian Meat Industry Council (AMIC).

“We talked about ensuring that all of the processor levies went to the Australian Meat Processing Corporation (AMPC), so they no longer had any involvement (with MLA).

“I don’t want to hold them to it because it was two or three years ago, but each of them said that is sweet with us, we don’t believe we are getting value for the money we are paying to MLA, and (if that money goes to AMPC) at least we have some control because we have direct input into its board.

“So I was able to ring the good senator back later that day and say I believe it is that simple.”

Asked if the conversation had progressed beyond that point, Mr Hunt said it had not, but he believed “it was that easy”.

Levy funds already used for advocacy

Mr Hunt also dismissed suggestions that levy funds could not be used for advocacy purposes under current legislation.

CCA has previously stated that it believes existing laws do not allow socialised funds to be used for advocacy purposes. That means that any funds sourced from industry levies could only be used for strict purposes such as policy setting, while membership fees would still be required to pay for advocacy activities.

Mr Hunt said that in his view, every industry advocacy group including CCA, Sheepmeats Council, AMIC and ALEC has been receiving funding from interest from the $40-$50m red meat industry fund since 1998, in effect meaning that they have been using levy funds for advocacy purposes since that time.

“The distinction between advocacy and policy setting is a fine line, but the realities are that these councils have been receiving interest from levy funds since 1998, that is levy funded money, and the interest on it is going towards advocacy,” Mr Hunt said.

MLA board selection process ‘undemocratic’

Concerns that the process for selecting board members for Meat & Livestock Australia is undemocratic featured prominently at yesterday’s Albury hearing.

The New South Wales Farmers Association said that despite the fact that more than 90 candidates applied for three vacant MLA board positions last year, MLA’s board selection committee put forward just three names for members to vote upon. “Why even bother having a vote?” the NSWFA asked.

Liberal Senator for NSW Bill Heffernan said the selection committee charter appeared to be designed to keep board selections “in house”.

Quoting from a section of the charter titled ‘encouraging board performance’, he said the board’s performance was evaluated through self assessment – “Oh I’m going alright”; peer review – “Hey mate, you’re going alright”; and individual assessment by the chair.

“It seems to me that the concentration of power is in house,” Senator Heffernan said. “Hopefully out of this committee will come an understanding of the … almost pre-telegram era regulation, that if you have enough concentration of power and if you abide by self-assessment, you can play everyone.”

More on the Albury hearing tomorrow – “Don’t tear it down, fix what we’ve got”  – sign up for Beef Central’s free daily news email to receive our stories first

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