When mandarins join the big end of town

By Verona Burgess

Wednesday May 2, 2018

view to the sky surrounded by skyscrapers of Sydney

You’re leaving a senior position in the Australian Public Service and covet a plush seat in the elite company directors’ club. Be careful what you wish for.

It has become something of a rite of passage for former senior mandarins to aspire to move into the corporate sector by picking up one or two plum non-executive board seats in the big end of town.

Other more usual moves include joining the boards of not-for-profits, the “review mafia” and/or consulting firms, and taking up positions in universities.

Top public servants often have a fascination with the corporate sector’s ability to get things done with what can seem like enviably few shackles, compared with the multiple accountabilities of the public sector.

They are sometimes also surprised at how little real understanding of the machinery of government there is out in the corporate sector. That’s not because the captains of industry are stupid – far from it. It is because it is not their world. In turn, they are often flabbergasted by public servants’ lack of understanding of commercial and industrial imperatives.

The peak industry associations such as the Business Council of Australia, the Australian Banking Association, the Australian Chamber of Commerce and Industry and the Australian Industry Group function as an interface between three quite different intersecting cultures: politics, big business and the public service.  Then there are the lobbyists. You only have to look at the official register to see who represents who in what is unkindly dubbed the “log-rolling” industry in Canberra.

Former mandarins can be quite attractive to the big end of town as non-executive board members, because while they lack the single-focus, profit-at-all-costs gene and commercial experience of those for whom regulation is largely an annoying obstruction, they bring their networks, their understanding of government, their reputations, their commitment to high-quality corporate governance and their experience of managing large bureaucratic institutions to the table. You can’t buy integrity but you can borrow other people’s – for a little while, anyway.

Now, with the awful revelations spilling out of the banking royal commission, some former mandarins will be thanking their lucky stars that they didn’t crack the top echelons of the elite company directors’ club.

In reality, only a handful of them ever get there, especially in the financial sector. Former Treasury secretary Ken Henry is, of course, the chairman of NAB; former Health secretary Jane Halton is on the board of ANZ and, as we’ve seen repeatedly on television in the last week, former Foreign Affairs secretary Peter Varghese is, at time of writing, a board member of AMP who, along with the other surviving board members, has already taken a symbolic 25% cut to his pay. A former Prime Minister and Cabinet secretary, Peter Shergold, finished his term on the AMP board last year – just in time, as it transpires. Ouch.

While the government is putting the finishing touches to next week’s budget and desperately trying to shift the focus on to its suddenly acquired “rivers of gold” tax revenue, the royal commission is beginning to cast a shadow over the public service.

That is primarily because there has, quite evidently, been another catastrophic failure of federal regulation.

Whether at the end of the day the Australian Securities and Investments Commission was not given sufficient clear powers and funding – in the decade-long turmoil of successive governments and prime ministers – or simply chose, for whatever reason, not to crack down on egregious misconduct will be hotly argued for months to come.

You would not put money on the regulator’s chances of emerging unscathed – and the royal commission is only just getting warmed up. But the spotlight is now fixed once again on the deficiencies of allowing self-regulation too much rein, and that could spread into other areas of government regulation quite quickly. It is hardly just a happy coincidence that the Australian Prudential Regulation Authority’s scathing report on the CBA was released on Tuesday as the government seeks to stem the political damage.

The royal commission is also looming large in another way.  There does seem to be momentum gathering for a new Coombs-style review into Australian government administration, which would include the Australian Public Service and other Commonwealth bodies that are not staffed under the Public Service Act (including APRA and, now, ASIC).

The idea was floated last year on July 18 by the former head of Defence, Dennis Richardson, at the Lowy Institute. A number of former mandarins agree with him. It is a topic that keeps popping up in various forums and ways, not least in The Canberra Times this week when former Public Service Commissioner Andrew Podger mapped out an authoritative potential terms of reference.

A full-scale review of federal administration is unlikely to be something any government would embark on just before an election. It would not be cheap, it would not be short and it would doubtless produce some “gotcha” moments if it had real teeth. But it is still a very good idea – and one that could be attractive to an incoming government.

All departments should now be thinking not just about their own capability and whether they are fit for purpose for the future, but also about the bottom line: what scandals might crawl out of their own woodwork if an uncompromising, independent and powerful spotlight were suddenly turned on them. The banking royal commission is showing at the very least that now is a good time for everyone to clean house.

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