A loose approach to governance and ministerial oversight hampers Indigenous outcomes

By Stephen Easton

December 14, 2018

COMMENT: Close scrutiny during Senate estimates has done little to improve the governance and ministerial oversight of one of the federal government’s key Indigenous agencies.

As the Indigenous Land Corporation looks ahead to upcoming reforms and a change of title, a series of internal documents confirm its independent board continues to take a loose approach to governance influenced by an odd relationship with the minister.

Indigenous Affairs Minister Nigel Scullion was asked a simple question in Senate estimates on October 26: why didn’t he terminate ILC director Bruce Martin for missing five consecutive meetings without leave, given the legislation unequivocally states he must sack any board member who misses three in a row without leave.

Scullion gave Senator Kristina Keneally a vague explanation citing “cultural and business responsibilities” in a remote area and a lack of telecommunications equipment, suggesting it was a minor episode of absence without leave over “a short period of time” due to very reasonable challenges that had been resolved permanently.

He promised to provide more clarity in a “comprehensive” response on notice and the answer is now overdue. In the meantime a cache of emails and board papers have been released under freedom of information, shedding more light on a strange saga that was far from simple and actually took most of the year to sort out.

One might wonder if all this matters much in the scheme of things – that a director of a special public sector corporation could easily have been sacked for neglecting their official duties over many months, but was allowed to stay on through an unusually generous interpretation of the rules.

A former CEO of the ILC, Michael Dillon, certainly thinks it does. In his view, the papers show Scullion has “comprehensively failed to meet his statutory obligation” to remove Martin and as for the board, he argues “the documents demonstrate deep-seated governance issues within the ILC” in his own independently published analysis.

And he also believes they provide “strong circumstantial evidence that the minister actively sought to engineer a situation” that allowed him to get around his clear legislative responsibility and achieve a different outcome that he preferred, for reasons that remain mysterious.

Dillon made it clear he isn’t taking aim at Martin personally, noting the documents don’t illuminate whatever special circumstances led to his absences and periods of non-communication with the organisation. Keneally framed her question in a similar way as Scullion acknowledged.

“This is about me and this is about the board and reporting on the act,” he said in the committee hearing. “I do appreciate that that is what the questions are about. I will provide a comprehensive answer to that on notice.”

What the documents reveal

Senior ILC staff and directors initially assumed Martin would have to go; there is no wiggle room for reasonable excuses, extenuating circumstances or ministerial discretion in the act. But it appears Scullion was reluctant to let him go, for reasons that remain unclear, and got his way in the end.

Chairman Eddie Fry first wrote to Martin in March suggesting he might resign before the inevitable. Then in May, he formally asked Scullion to undertake his melancholy duty, but he never did.

It appears the minister left Fry’s already delayed request hanging and rather than respond in writing, discussed it with him in Adelaide on June 14. Then in July the chairman wrote again to say he’d changed his mind and wanted Martin to stay on as a part-time director.

After the discussion, Fry’s new position was that “the personal extenuating factors which led to the absence of Director Martin now allow him to return to his position and carry our his full duties” – a conclusion he seems to have reached and set about enacting without consulting the rest of the board or informing the administrative team.

“This letter reeks of a political stitch up,” writes Dillon, adding that it also understated the extent of the absences without leave as three in a row when by then it was up to five. Scullion responded to this letter in August, accepting the new decision pending confirmation that leave would be granted.

Dillon goes on to speculate about two possibilities – either Fry had a change of heart on his own and told the minister, or the minister asked him to find a way to keep Martin on the board.

He doubts the first scenario and questions why Fry would keep the board and management in the dark while engaging secretly with the minister to stop the termination he had initially requested, rather than convene a board meeting to approve special retrospective leave. The former ILC chief executive suggests:

“The more likely scenario, however, is that the Minister, acting either on his own, or in response to a communication from Director Martin (who the Government had previously appointed to the Prime Minister’s Advisory Council), sought to avoid terminating Director Martin as was required by section 192H(4) and instead arranged with the Chair for the provision to Director Martin of retrospective leave of absence and a letter rescinding his earlier notification of missed meetings to provide cover for the minister’s non-decision.”

Fry tried to grant the retrospective leave unilaterally in August, shortly after Scullion’s response, by simply writing to Martin and granting it. However there is no record of him ever receiving the necessary authority required by a vote of the other board members.

The board met to paper over these cracks in a meeting on November 1 – after Keneally raised the matter in the Senate estimates hearing. By then it was about eight months after the current chief executive first raised the fact that Martin had missed three consecutive meetings in March.

The brief discussion in estimates started from attendance records in the annual report, as accepted by the minister and tabled in parliament, which suggested the director’s removal was required.

An assistant secretary in the Indigenous affairs branch of Prime Minister and Cabinet, Brendan Jacomb, told Keneally he thought Martin had been granted leave but did not know why the annual report did not say so.

“My information is that I understood that Mr Martin did have leave,” he said cautiously. “I’m not disputing what you are saying is in the annual report there. That is my understanding.”

Scullion then jumped in and said the annual report was correct – eight absences, seven of those without leave.

A likely story?

The scrutiny of the committee led PM&C and ILC staff to investigate and a solution was crafted: it would be recorded that Martin had been officially granted the retrospective leave and the annual report would be updated with a footnote reflecting that. That edit has not yet occurred in the online version and a new version will have to be tabled.

Dillon believes this looks like yet another fudge and lists a range of problems with it, but it is likely to form the basis of Scullion’s eventual explanation, at least in part.

The board paper and minutes of this November meeting aim to suggest Fry did get the delegation from the board to grant the retrospective leave in February — but it wasn’t written down anywhere – then mulled it over for several months before writing to Scullion asking him to sack Martin, then changing his mind after meeting the minister in Adelaide.

This scenario relies on him having received the delegation in a February board meeting which was conveniently held in camera. “Regrettably, there are no minutes or decision sheets that would support that the Board authorised/expected the chair to grant leave of absence retrospectively,” according to the minutes of the recent meeting.

The minutes also claim it was technically accurate for the 2017-18 annual report not to report this retrospective leave against the absences, as it was granted in August, during 2018-19.

But the report was published in September, and Brendan Jacomb thought Martin had been granted the leave when he was asked in late October, struggling to explain why the report did not mention it.

“The various versions of the draft minutes [of November 1] are edifying to read, and include a number of rather self-absorbed statements by the Board, and an apparent complete absence of appreciation that the Board has a responsibility to account for its actions,” Dillon comments.

He finds it “deeply problematic” that the other directors did not record any concerns about Fry acting unilaterally in their names; on the contrary, they felt the lesson was that the chair should have more freedom to deal with similar “exceptional circumstances” in future.

The board also resolved to advocate for an amendment giving the minister more flexibility as well. Scullion, however, told Keneally he did not think that was necessary in the estimates hearing.

In the midst of the mysterious “extenuating factors” that prevented him fulfilling his director’s duties, Martin was also removed from a second paid position as chair of the ILC’s then-subsidiary, Australian Indigenous Agribusiness, which was later folded back into the main corporation.

Dillon uses the issue as a case study in poor governance, and an example of the kind of process that contributes to loss of public trust in the institutions of government.

“While the circumstances outlined above may appear to be quite narrow and technical, they provide a window into the mode of operation of the current Minister for Indigenous Affairs in relation to the portfolio bodies for which he is responsible.

“They also point to the risks which emanate from excessive politicisation of Boards of statutory entities, and the shallow regulatory oversight applied to Commonwealth statutory corporations.”

This is not the first episode of questionable governance at the ILC, which is soon to be renamed the Indigenous Land and Sea Corporation under upcoming reforms that closely resemble past proposals previously rejected by the Coalition. The agency’s former CEO has critically analysed the changes in another independent article on his website.

While it may be an obscure body to many Australians, both Scullion and Dillon recognise the ILC’s importance in the unfinished story of Aboriginal land rights, as a form of ongoing financial compensation for native title that was extinguished by the Crown. But they obviously differ considerably about how it should be run, and how to ensure it continues playing that role.

The Mandarin sought comment from the ILC prior to publication and the board has been extended an opportunity to reply.

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