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PRIMARY INDUSTRIES AND ENERGY RESEARCH AND DEVELOPMENT AMENDMENT BILL 2007
Bills Digest no. 132 2006–07
Primary Industries and Energy Research and Development Amendment
Bill 2007
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Financial implications
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Primary
Industries and Energy Research and Development Amendment Bill 2007
Date introduced:
1 March 2007
House:
House of Representatives
Portfolio:
Agriculture, Fisheries and Forestry
Commencement:
Date of receiving the Royal Assent
The Primary Industries and Energy Research and Development
Act 1989 (PIERD Act) provides for the establishment of rural Research
and Development Corporations (RDCs) and is the legislative basis for regulating
their funding and administration. The Bill makes a small number of important
amendments, designed to deliver an enhancement in the governance of the
8 statutory rural Research and Development Corporations (RDCs).(1)
The key amendments contained in the Bill are:
- discontinuing the appointment of an Australian Government Director
to each RDC Board.
- providing for the expansion in the skill set for RDC Board selection
so as to include expertise in public administration.
- providing for an improvement in Board expertise, experience and management
arrangements.(2)
The amendments in the Bill respond to the relevant findings
of the Review
of the Corporate Governance of Statutory Authorities and Office Holders
(the Uhrig Review) conducted by Mr John Uhrig AC in 2003. They also follow
an internal review by the Department of Agriculture, Fisheries and Forestry
of the PIERD Act’s operational and reporting requirements. The aims of
the internal review were to:
- ascertain the appropriate and optimal balance between the Minister’s
role, effective communications and accountability and the role of the
RDC boards.
- consider the interactions of the PIERD Act with the Commonwealth
Authorities and Companies Act 1997 (the CAC Act), having specific
regard to accountability and management obligations imposed by the CAC
Act.(3)
One of the key conclusions of the Minister’s assessment
was that the Board template (recommended by the Uhrig review) should be
retained for each of the RDCs.
As part of its 2001 election platform, the Coalition
Government signalled its intention to examine the efficacy of governance
arrangements of statutory authorities and office holders.
In November 2002 the Government announced a review of
the governance practices of statutory authorities and office holders,
with special focus on those agencies which impact on the business community.
The Prime Minister, the Hon. John Howard,
appointed Mr John Uhrig, AC, to head
the review. The objective of the review was to examine and evaluate governance
arrangements and practices and ‘provide policy options for Government
to get the best from statutory authorities and office holders and their
accountability frameworks’.(4) In doing so, the Government
noted the impact that the performance of statutory authorities and office
holders has on business and the overall health of the Australian economy.
In particular, the review was to focus on the areas where businesses have
the right to expect the highest levels of efficiency, fairness and transparency
in their dealings with government.
A key task was to develop a broad template of governance
principles that, subject to consideration by government, might be extended
to all statutory authorities and office holders. As part of the process
of developing a broad template, the review was asked to consider the
governance structures of a number of statutory authorities and office
holders with critical relationships with business and to consider best
practice corporate governance structures in both the public and private
sectors.(5)
The Report recommended that two templates should apply
to ensure good governance of statutory authorities: agencies should either
be managed by a Chief Executive Officer (CEO) or by a board structure.
Both templates detail measures for ensuring the boundaries of responsibilities
are better understood and the relationship between Australian government
authorities, Ministers and portfolio departments is made clear.(6)
However, as Uhrig explained, the purpose of the template is ‘to
serve as a reference point’ for the development of governance arrangements
and so it is ‘expressed as an ideal’.(7)
Uhrig recommended that the
selection of the management template and financial frameworks to be applied
should be based on the governance characteristics of a statutory authority.(8)
Nearly all government bodies fall under the Financial
Management and Accountability Act 1997 (the FMA Act) or the Commonwealth
Authorities and Companies Act 1997 (the CAC Act).
The FMA Act focuses primarily on the obligations and
responsibilities of Chief Executives and the way officials handle public
money, public property and other resources of the Commonwealth. The FMA
Act applies to budget-funded authorities managed by a CEO, and establishes
various management and reporting responsibilities for the CEO (s. 44–46,
49 and 51), as well as allowing the Minister to give guidelines to the
CEO (s. 64). Furthermore, the FMA Act provides an accountability
framework for CEOs to manage agency resources.
The CAC Act, on the other hand, requires directors and
officers to exercise their powers and duties in the best interests of
the body and for a proper purpose. Directors’ duties apply to help ensure
that prudent decisions are made on the resources that, as a matter of
law, the body holds in its own right. The CAC Act applies to authorities
that are corporate entities managed by a board. It requires the head of
the board to report to the responsible Minister (s. 15–16), and to ensure
that the authority’s activities comply with government policies (s. 28).
A board structure is favoured if there is a strong commercial focus to
the organisation, or if the agency is intergovernmental.
As at 31 January 2007, there were 94 FMA Act agencies
and 99 CAC Act agencies.(9) The Department of Finance and Administration
publication Governance Arrangements
for Australian Government Bodies (August 2005) provides further
explanation on the FMA Act and CAC Act and a comparison between the two
pieces of legislation.
On the basis of the findings of the Uhrig Review, Ministers
and their Departments have been undertaking an assessment of their portfolio
agencies against the governance templates.(10) The Minister
for Finance and Administration has assumed a coordinating role in these
reviews.(11) Thus, a number of similar Acts have been passed
by Parliament incorporating Uhrig Review recommendations.
In the mid-1980s the then Minister for Primary
Industries and Energy, John Kerin, identified
the need for reforms to rural ‘research and development’ (R&D). These
reforms were put into legislation which provided for the establishment
of 14 Rural Research and Development Corporations (RDCs). The RDCs represent
a unique partnership between the Commonwealth Government and industry
that generates widespread benefits for the Australian economy. The reforms
that took place in the 1980s were the basis for the current governance
arrangements.
The significance of agricultural, forestry,
food and fisheries products to the Australian economy is most usefully
gauged by reference to more than one measure. One useful indicator, however,
is its contribution to Australian exports, which is estimated to represent
around 19 per cent of Australian exports of goods and services.
The role that RDCs have the capacity to play
is therefore vital.
Research and development corporations (RDCs) and companies
are rural research funding agencies that invest in rural R&D in
the aim of achieving better productivity and the delivery of high quality
products which underpins the competitiveness and profitability of Australia's
agricultural, fish and forestry industries. R&D and innovation
also support sustainability of primary production and the natural resource
base.(12)
The Explanatory Memorandum states that there is no financial
impact on the Commonwealth.
One of the main objects of the Bill is to discontinue
the appointment of a government director to each RDC Board and Council.
Amendments made under the following items accordingly delete the various
references to government director and/or government member:
(items 1–6, 8, 10, 13–17, and 20–22).
Item 9 is consequential, permitting the number
of directors, as determined by the Minister, to remain an odd number.
Section 24 of the PIERD Act deals with the requirements
for consultation that must be followed prior to preparing or varying an
R&D plan. Item 11 requires the RDC to also consult with the
Minister in preparing or varying a research and development plan.
Section 84 of the current PIERD Act states that:
The Executive Director must give written notice to the
Chairperson of all direct or indirect pecuniary interests that the Executive
Director has or acquires in any business or in any body corporate carrying
on any business.
Item 18 repeals section 84 so as to eliminate
a possible inconsistency with the CAC Act, and leave no room for doubt
that ‘all directors on RDC boards, including the Executive Director, are
subject to the notification regime for material personal interest in the
CAC Act’.(13)
Items 7, 12, 19 and 23 add a new requirement for
R&D Boards and Councils to report on the impact their research activities
have had on the relevant primary industry (or class of industries).
Selection Committees perform an obvious and important
role in nominating appropriate persons as directors of R&D Corporations,
predominantly–Commonwealth-funded R&D Corporations or R&D Councils.
Items 24–28 make an explicit direction about the desirability of
establishing Selection Committees whose composition reflects a diversity
of expertise, experience and gender. In each case, the Minister or Presiding
Member is to point out to constituent organisations ‘the desirability
of reflecting a diversity of expertise, experience and gender among the
nominees’ for Selection Committees.
Item 29 requires Selection Committees to specify
how their nominations will ensure that an R&D Corporation or R&D
Council collectively possesses experience in board affairs, in addition
to the existing requirement for an appropriate balance of expertise.
The Uhrig Review found that the performance of boards
of statutory authorities was reduced by—among other factors—insufficient
diversity(14) among, and limitations in the skills and experience
of board directors. Uhrig drew attention to the significance of and necessity
for having board members with ‘appropriate characteristics, attributes
and experience that would benefit the board’.(15) Items
30–32 contain amendments which respond to this recommendation by Uhrig
and the findings of the internal agency review, including the addition
of expertise in public administration to the list of qualifications for
nomination to a Board or Council.
Item 34 – Inclusion of additional item in Annual Reports
of Selection Committees
As a further measure to secure greater accountability,
this item inserts a provision after subsection 14(1) requiring that the
reports of a Selection Committee for a financial year also include an
assessment of the processes undertaken by each Selection Committee to
identify the widest possible field of available candidates for nomination
for appointment to the Corporation.
Item 33 – Transitional provisions for items 23-31
Notwithstanding the amendments made to Part 4 of the
PIERD Act, this item permits transition provisions to apply to items 23-31.
This means that the provisions which operated immediately before the commencement
of this item, will continue to apply in relation to a written notice given
by the Minister before the commencement under section 123(1) or (2) –
as if these amendments had not been made.
Concluding comments
As already noted, this Bill is one of series introduced
by the government to make what it considers to be relevant and appropriate
reforms in response to the Uhrig Review and corresponding internal agency
reviews. However, it is unclear as to whether these reforms will, in and
of themselves, guarantee the desired outcomes.
- Six of these RDCs cover
the cotton; fisheries; forest and wood products; grains; grape and wine;
and sugar industries. There is also a Rural Industries RDC (covering
smaller and emerging industries), and the Land and Water Resources RDC.
- Explanatory Memorandum,
p. 2.
- ibid
- Senator the Hon. N.
Minchin, Australian
Government Response to Uhrig Report, Media Release, 12 August 2004.
- J. A. Uhrig, AC, Review
of Corporate Governance of Statutory Authorities and Office Holders,
June 2003, p. 1.
- Senator the Hon. N.
Minchin, Australian
Government Response to Uhrig Report, Media Release, 12 August 2004.
- Uhrig, op. cit., p.
83.
- ibid, p. 12, point 6.
- Department of Finance
and Administration, Chart of FMA Act and CAC Act agencies, http://www.finance.gov.au/Publications/docs/FMA_CACFlipchart.pdf,
accessed on 1 May 2007.
- ‘More than 160 Australian
Government Agencies are being assessed against the Uhrig Report principles
and templates’. Susan Ley, MP, Parliamentary Secretary to the Minister
for Agriculture, Fisheries and Forestry, ‘Second Reading Speech: Primary
Industries and Energy Research and Development Amendment Bill 2007’,
House of Representatives, Debates, 1 March 2007.
- ibid
- http://www.daff.gov.au/content/output.cfm?ObjectID=D2C48F86-BA1A-11A1-A2200060B0A03880
> Accessed 10 April 2007.
- Explanatory Memorandum,
p. 4.
- It has been noted that
board diversity may avoid the development of ‘group think’ phenomenon
by offering the prospect of a variety of differing perspectives which
act as error-correcting mechanisms in decision making. Edwards, M &
Clough, R, ‘Corporate Governance and Performance’, Corporate Governance
ARC projects, Issues Series, Paper No.1, University of Canberra, Canberra,
January 2005.
- Uhrig Report, op. cit.,
p. 82.
Juli Tomaras
4 May 2007
Law and Bills Digest Section
Parliamentary Library
This paper has been prepared to support the work of the Australian Parliament
using information available at the time of production. The views expressed
do not reflect an official position of the Parliamentary Library, nor
do they constitute professional legal opinion.
Staff are available to discuss the paper's contents with
Senators and Members and their staff but not with members of the public.
ISSN 1328-8091
© Commonwealth of Australia 2007
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Published by the Parliamentary Library, 2007.
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