8.1
As 'the oldest continually operating organisation in Australia', Australia Post provides critical services to the Australian public across the country. All Australians have a stake in its future and in ensuring that it is properly managed in a way that serves the national interest.
8.2
This chapter considers evidence in relation to the Board of Australia Post; its directors, and its Chair, Mr Lucio Di Bartolomeo. The chapter looks at:
governance, oversight and process failures of the Board;
the mishandling of the Holgate matter by the Board;
the make-up of the Board, including a lack of diversity and independence from the current government;
the adequacy of the current processes for appointing Australia Post Board members; and
best practice approaches to ensuring independence of Australian government boards, both of agencies and government business enterprises (GBEs).
Governance issues and oversight failures of the Board
8.3
Throughout the course of this inquiry, the performance of the Board of Australia Post has repeatedly been called into question.
8.4
As detailed earlier, the Australia Post Board is the accountable authority under the Public Governance, Performance and Accountability Act 2013 (PGPA Act). Under the Commonwealth Government Business Enterprises Guidelines (GBE Guidelines), the Board is responsible for implementing effective governance frameworks to support its role and responsibilities. As such, the Board is required to establish and maintain appropriate systems and processes to ensure compliance with relevant legislation and to live up to community expectations.
8.5
The Maddocks review into the proper use of public resources at Australia Post found that the former Group Chief Executive Officer and Managing Director (CEO), Ms Christine Holgate, did not breach any specific policies when purchasing the watches, despite the purchase appearing to fall short of public expectations.
8.6
The investigation also identified a number of other unspecified expenses incurred by Australia Post that may have similarly failed to meet public expectations. This suggests a more widespread problem of responsible spending across the organisation and failure of oversight by the Board.
8.7
The Maddocks report made two additional findings that relate to the performance of the Board. First, the report found varying levels of understanding of the PGPA Act among current and former Board members, indicating some were not sufficiently aware of their duties and obligations with respect to the corporate governance of Australia Post. The committee notes that Shareholder Departments subsequently required Board members to undertake training on their responsibilities under the PGPA Act.
8.8
Second, the Maddocks report concludes that the Board's induction processes with regard to necessary legislative and policy frameworks were inadequate for new members. The committee notes that under the GBE Guidelines, the responsibility for the induction of board members lies with the respective GBE.
8.9
Despite the clear responsibilities of the Board to ensure adequate processes and policies were in place under the PGPA Act, neither the Board itself, nor any of its individual members, have yet been held to account by the Shareholder Ministers (the Minister for Finance and the Minister for Communications, Urban Infrastructure, Cities and the Arts) for these significant failings. This sits in stark contrast to the government's public and forceful criticism of Ms Holgate.
Policies and processes
8.10
This inquiry has highlighted a range of areas in which the Board of Australia Post appears to have failed to put in place adequate policies and processes. For example, expenses incurred by the former CEO were signed off by the Chief Financial Officer (CFO), who reported directly to the CEO. The former Chair, Mr John Stanhope AO, described this arrangement as 'unusual'. He also stated:
When I arrived that wasn't happening. I asked the question. I was told by the then company secretary that because I wasn't technically an employee I couldn't. So I accepted that. I recall on another occasion, when it moved across to the CFO from the company secretary, asking the same question and getting the same answer. Before I participated in the departmental inquiry, I asked again the question: 'Where is the documentary evidence to suggest what I was told was correct?' It was not forthcoming.
8.11
The Board of Australia Post has similarly appeared to fail to appropriately manage issues related to Ms Holgate's standing aside and offer of resignation. The Board met repeatedly throughout the afternoon of 22 October 2020 to address what is likely to have been its most pressing and high profile crisis of recent years. Yet, these deliberations were held without the involvement of the corporate secretary and general counsel, with no independent witnesses, and with no written evidence secured in relation to Ms Holgate's alleged agreement to stand aside.
8.12
Records show that Mr Di Bartolomeo advised the Board that he had obtained Ms Holgate's agreement to stand aside from her position as CEO of Australia Post, as discussed in Chapter 6. The committee notes that the Board did not consider the terms of Ms Holgate's contract at any stage during its meeting on 22 October 2020. In addition, the Board did not seek legal advice before agreeing to instruct Ms Holgate to stand aside. Finally, the Board did not even attempt to secure Ms Holgate's agreement to stand aside in writing. The failure of the Board to consider Ms Holgate's contract, seek legal advice, and secure her agreement in writing (if indeed there was any agreement, which Ms Holgate contests, as detailed in Chapter 6) suggests a concerning lack of due diligence on behalf of the Board and its Chair.
8.13
In addition, the Minutes of the 22 October 2020 Board meeting indicate that at no point did Non-Executive Director, Mr Tony Nutt, inform the Board of Ms Holgate's preference to take annual leave, rather than stand aside, despite phone calls between himself and Ms Holgate totalling over an hour-and-aquarter throughout the day, as well as a series of emails, during which she clearly expressed this desire.
8.14
The Minutes of these critical Board discussions related to the contested events of that day and were dictated by the Chair to the General Counsel and Corporate Secretary after the meeting was concluded. They were approved a week later on 29 October 2020, despite the Board convening also on 23 October 2020.
8.15
The Board again failed to act responsibly and proactively on 2 November 2020 to avoid a potential contractual dispute when Ms Holgate offered to resign from her position as CEO of Australia Post. Once again, the Board failed to engage with Ms Holgate and address her concerns related to her offer of resignation, and once again the Board released a public statement before it had secured Ms Holgate's written agreement to vary her contract.
8.16
Members of the Board repeatedly expressed their support for Ms Holgate as an excellent CEO. Mr Di Bartolomeo described her as 'a very good chief executive', while Mr Nutt stated that she was 'an outstanding CEO'. It was therefore surprising that the Board did not attempt to retain Ms Holgate, as far as possible, including adequately supporting her through the strong political backlash she experienced following the Senate Estimates hearing on 22 October 2020. The Board failed to do this.
8.17
As noted in the Licenced Post Office Group (LPOGroup) submission to this inquiry, the CEO of Australia Post reports directly to the Board, not to Shareholder Ministers or to the Prime Minister. It was therefore the responsibility of the Board to make independent and informed decisions that were in the best interests of the organisation and the Australian public with respect to Ms Holgate's position. The speed and determination with which the Board implemented the government's demands and ensured her removal, however, suggests that it failed to do so.
8.18
Ms Jan West, one of the Non-Executive Directors of Australia Post, rejected calls that the Board should take responsibility for the events that occurred in October and November 2020, claiming the Board had 'followed the normal board procedure and that this was a series of events that played out, as we all witnessed and saw'.
8.19
Board members essentially contended that they followed the agreed processes and procedures with respect to Ms Holgate's standing down and offer of resignation. Yet, as this inquiry has demonstrated, these processes were inadequate, leading to repeated scrutiny of the Board's poor performance by this committee. Australia Post has consequently also exposed itself to a potential legal challenge related to this matter (see Chapter 7).
8.20
These events demonstrate that the existing governance procedures and processes within Australia Post were both inadequate and inconsistent. The Board's internal governance processes appear to have been too weak, and its Directors lacking sufficient independence (discussed below), to make the decisions that were in the best interests of the organisation and the public, rather than the government.
Independence of the Board
8.21
As a GBE, Australia Post effectively belongs to the people of Australia. While its Board is directly accountable to its Shareholder Ministers, its ultimate accountability must rest with all Australians. The government itself has acknowledged its limited role with respect to the governance of Australia Post, stating that, as with other GBEs, the organisation operates at 'arms-length from Government'.
8.22
Moreover, under the Australian Postal Corporation Act 1989 (APC Act), the Shareholder Ministers may, in the case of actions deemed to be necessary for the public interest, issue formal directions to the Board and share such directions with each of the Houses of Parliament. The APC Act establishes that the organisation and its Board are not otherwise subject to government direction.
Makeup of the Board
8.23
The committee notes that throughout this inquiry, the Board has not sufficiently maintained the appearance of having acted in the interests of the Australian public. As an example, in an excerpt from an email cited in the LPOGroup submission, one unnamed individual asked:
How many Board Members are there, old mates of the LNP getting paid $50,000 a year? Chairman $100,000? What do they contribute to Australia Post. Their lunches for a year probably cost more than the watches given to 4 people who earned $100million from the banks [sic].
8.24
In evidence before this committee, Ms Holgate similarly detailed what she alleged to be close professional and personal ties between many on the current Australia Post Board and the Liberal Party, including the Deputy Chair of Australia Post, Ms Andrea Staines, and Non-Executive Directors, Mr Nutt, Mr Bruce McIver, and Mr Mario D'Orazio.
8.25
Ms Holgate also drew attention to Non-Executive Director the Hon Michael Ronaldson having been a Liberal Senator, alleged close ties between Mr Nutt and the Prime Minister, and described Mr D'Orazio as a 'personal friend' of former Finance Minister, Senator the Hon Mathias Cormann.
8.26
During a public hearing on 3 May 2021, Senator Kitching also described close ties between former Senator Ronaldson and the Shareholder Minister, Senator the Hon Simon Birmingham, Minister for Finance.
8.27
With many of its directors having ties and affiliations to the Liberal Party, it is hard to argue that membership of the Australia Post Board is solely dependent on the specific skillset and experience of its members. Evidence before this committee indicates that the makeup of the Board of this publicly owned company has compromised its ability to take decisions and act independently, as is now also required of them by their own Board Charter.
8.28
In written answers provided to this committee, Australia Post stated that it does not 'maintain a record of any membership with political parties of its personnel (ie directors, employees and contractors)'. Australia Post also insisted that it had observed 'no conflicts of interest' with respect to any political involvement of its personnel. The organisation further stated:
Australia Post recognises the right of its personnel (ie directors, employees and contractors) to participate in their personal, individual capacity in political and policy processes.
Board appointments
8.29
Board directors are responsible for establishing and maintaining effective and robust oversight processes to ensure 'unfettered and independent judgement' and to 'avoid activities that could give rise to questions about their political impartiality'. Yet the Australia Post Board appears to have been unable to function with robust independence, as evidenced by the level of engagement throughout the two critical days in question: 22 October and 2 November 2020.
8.30
Outgoing phone records for Mr Di Bartolomeo and Mr Nutt demonstrate the extent to which the government was involved in the discussions related to Ms Holgate's position:
Mr Di Bartolomeo called the Minister for Communications, the Hon Paul Fletcher MP, on five occasions on 22 October 2020;
Mr Di Bartolomeo called the Chief of Staff to the Minister for Communications, Mr Ryan Bloxsom, twice on 22 October 2020 and three times the following day; and
Mr Nutt called (unsuccessfully) the Chief of Staff to the Prime Minister, Dr John Kunkel, twice on 22 October 2020.
8.31
Australia Post stated that no further contact was made, received, or attempted between the Board and the Shareholder Ministers, the offices of the Shareholder Ministers, or the Prime Minister's Office on 22 October 2020.
8.32
Under the APC Act, directors are appointed on the nomination of the Minister. Under the same Act, the Managing Director is appointed by the Board. The Chair of a GBE is required under the GBE Guidelines to provide recommendations to the Shareholder Minister with regard to Board composition and membership.
8.33
The Board is also required to monitor the ongoing independence of its Directors, including maintaining a register of the interests of each director, as detailed in Chapter 3.
8.34
During the Estimates hearing of 23 March 2021, Senator Louise Pratt asked whether the appointment of Mr McIver—a former Liberal Party director—to the Board had been through a merit-based selection process. The Department of Communications subsequently responded in writing that the appointment of Mr McIver was made by the government. Ms Holgate alleged before this committee that the appointment of Deputy Chair, Ms Andrea Staines, was made by Minister Fletcher. The process through which other Board members were appointed remains unclear to the committee.
8.35
The committee notes the objection to these assertions by Non-Executive Director, Ms Deidre Wilmott, who stated that she had 'worked on important issues with all sides of politics'.
8.36
In evidence before this committee, Ms Angela Cramp, Executive Director of the LPOGroup, stated that she believed the decisions taken by the Australia Post Board to be 'politically motivated', describing the Board itself as 'inept and self-interested' and 'obviously under direct political instructions. The LPOGroup submission called for Australia Post to be 'managed by a bipartisan, competent, and qualified Board of Directors and executive team to provide the best commercial outcomes for all stakeholders'.
8.37
The issue of the potential for GBEs to lack sufficient independence from government is well-recognised. A 2012 study into public sector governance in Australia noted that within Commonwealth companies:
The allocation of power is greatly complicated by the role of the minister in appointing directors to the board and the unclear lines of communication that may subsist between the minister, the chief executive and the chair.
8.38
The Cabinet Handbook specifies that relevant ministers are expected to make appointments to GBE boards on the basis of relevant skills, qualifications, and experience. The 2012 study similarly advocated for boards to be composed of highly experienced and diverse directors drawn from both the public and private sector, recommending also that boards propose to Shareholder Ministers the range of skills and experience needed to complement the existing board, and that Ministers consider suitable candidates that reflect these needs.
8.39
While this approach is also supported by the relevant legislation and guidelines outlined earlier, appointments nevertheless remain at the discretion of the relevant ministers, the Prime Minister, and Cabinet.
8.40
Australia Post's current Board appears to the committee as a good example of a board that suffers from a conflict of interest related to its appointments, which can affect the governance and integrity of this important GBE.
8.41
As the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) put to the committee, the APC Act requires that the board include at least one member whom:
…the Minister, after consultations with representatives of industrial organisations representing employees, is satisfied has an appropriate understanding of the interests of employees.
8.42
CEPU told the committee that they had received a telephone call from the Minister's office—advising them but not consulting them—that this responsibility would be undertaken by the Chair, Mr Di Bartolomeo. This conduct is inconsistent with the original intent of the APC Act.
Committee view
8.43
The committee acknowledges the importance of Australia Post to the Australian people and businesses, as well as its vital role in regional Australia.
8.44
Yet Australia Post—particularly its future direction—has become too opaque. Stakeholders have not been given adequate opportunities to contribute to important discussions about its future. A culture of secrecy has been allowed to develop, shutting out important voices.
8.45
Those shut out of the conversation are not only the Australian people, but those who run licenced post offices, contractors, and employees and their representative associations, businesses, and industries that are dependent on an effective postal service.
8.46
Even the Parliament has faced repeated challenges accessing information relevant to this inquiry from Australia Post and its Shareholder Departments, as detailed in Chapter 2.
8.47
Australia Post has blamed the Shareholder, and the Shareholder has blamed Australia Post. Each has referred questions to the other, and neither has been willing to provide answers, or to open up an inclusive dialogue. This is not good enough. It shows a profound disrespect for the role of the Senate in exercising scrutiny of government and for the services provided to the Australian public.
8.48
The readiness of the current Chair and Board to submit to an informal 'directive' from the Shareholder to remove the CEO without following Australia Post's own policies, or the regulatory requirements imposed on them, indicates a concerning lack of independence.
8.49
Further, whilst this committee recognises the important role of the Shareholder Departments and Shareholder Ministers with respect to the performance and operation of Australia Post, it emphasises that the ultimate accountability of the Australia Post Board is to the people of Australia—something its directors appear to have forgotten.
8.50
As a result, the Board has failed to live up to either its oversight obligations or its responsibility to ensure adequate policies are in place, as evidenced in its handling of the Holgate matter. The directors of Australia Post appear to have relied on flawed systems of internal governance and oversight that exposed executives to unnecessary risk, ultimately leading to the end of Ms Holgate's tenure as CEO. It is therefore incumbent on the government to review the current makeup of the Australia Post Board with a view to making new appointments based on merit, diversity, skill, and appropriate experience.
8.51
The committee nevertheless acknowledges recent efforts made by Australia Post to improve its governance and accountability processes, including: undertaking a review of policies that apply to executive expenditure; requiring the CEO to seek approval from the Board for transactions exceeding a certain value; and training Board members on the PGPA Act. Australia Post also provided a list of 32 areas that it had identified for improvement related to governance and financial oversight. The committee also notes that Australia Post has updated many of its policies in light of the events detailed in this report.
8.52
The Board's lack of independence was, however, also evident in its contradictory handling of the Holgate matter relative to its previous attitudes towards rewards and gratuities. For example, in evidence submitted to this committee, Ms Holgate claimed that members of the Board approved a luxury pen for the previous Chair, sent a delegation of executives to the London Olympic Games, and agreed a $10.8 million payment for the previous CEO, Mr Ahmed Fahour, among other large expenses for gifts and rewards.
8.53
In light of the evidence throughout this report, statements made to this committee by members of the Board in relation to Ms Holgate's circumstances appear somewhat disingenuous, insincere, and at times politically motivated.
8.54
Further to this point, the committee notes the Hon Michael Ronaldson's politically-based aspersions that the committee was looking to 'take scalps' was misguided and unnecessarily antagonistic, as was his disrespect for the Senate when he described aspects of the inquiry as 'a complete and utter beat-up'.
8.55
Existing government policies for GBEs promote board independence by encouraging boards to make skill and experience-based recommendations to the Shareholder Minister for future appointments. It is unclear if this was done in the case of the current Australia Post Board. Indeed, the committee remains unconvinced that experience, skills and diversity are adequately considered in GBE board appointments. Moreover, the problematic makeup of the Australia Post Board suggests these policies have fallen short, resulting in a board that lacks sufficient autonomy and independence to govern the organisation effectively, as evident throughout this report.
8.56
It is the committee's strong view that more care and attention must be given to the appointment of directors to GBE boards, including Australia Post, to ensure appropriate levels of diversity, a range of experience and skills, and an absence of political loyalties.
8.57
The current structure of the Australia Post board, although compliant with the Australian Postal Corporation Act 1989, does not serve the best interests of the Australian community and does not operate in a way that captures the full intent of the Act. A rebalancing needs to occur between public accountability, efficiency and community service obligations.
8.58
The committee believes that the board should be restructured to ensure that it is properly aligned with the original intent of the Act, and that a greater diversity of stakeholders with industry knowledge should have a seat at the table when decisions are made.
8.59
The committee is of the view that there should be a greater involvement of the Parliament, employees and their unions, and of licensees on the Board of Australia Post.
8.60
This approach is not new: models exist currently at the National Archives of Australia and historically at the Australian National University, and similar structures could be replicated in Australia Post. All of these organisations share the common characteristic of having the Australian people as their owners and the delivery of essential services to the Australian people as their core business.
8.61
Restructuring the Board would also create an opportunity to bring the work of Australia Post closer to the Parliament, improving transparency and oversight. As part of the restructure the committee believes there must be board positions for nominees of:
the House of Representatives;
the employees and their unions; and
8.62
Including these nominees as board members cements the responsibility that Australia Post has to the Parliament and provides employees, unions and licensees with a voice in the decision-making process. Nominees from the House of Representatives and Senate would not receive additional remuneration for their position on the Board, as this work would be considered as a part of their parliamentary duties.
8.63
The committee recommends that the Australia Post Board be restructured to ensure that its makeup is consistent with the original intent of the Australian Postal Corporation Act 1989, and so that it functions properly as a public enterprise. A restructured board should include nominees of:
the House of Representatives;
the employees and unions; and
8.64
The committee recommends that the Australian National Audit Office conduct an audit—of a similar type to the audit conducted into the governance of the Australian Broadcasting Corporation in 2002—into Australia Post's corporate governance arrangements, including its relationship with government, to identify areas in which its governance structures and processes are in need of reform. The audit should also include a review of Australia Post's post-separation arrangements.
8.65
The committee recommends that Australia Post, in its annual report, detail the findings of any Board evaluations and actions that the Board might have taken to improve its performance, processes, policies, skillset and composition throughout the year.
8.66
The committee recommends that the Australian Government ensure it duly considers the advice from Government Business Enterprise boards related to skills gaps and prospective appointees, and acts upon this advice as far as appropriate when appointing new board members.
8.67
The committee recommends that the Department of Finance review the Government Business Enterprise guidelines with a view to ensuring ministerial appointees to Government Business Enterprises are more diverse and more representative of a broader range of skills and experience.
8.68
The committee recommends that the Chair of Australia Post resign in acceptance of his responsibility for the organisation's failings with respect to the Holgate matter, the veracity of his evidence provided to the committee, his capacity to defend the independence of Australia Post and the lack of effective robust policies and financial oversight processes in place throughout his tenure.