In his recent autobiography Tough Customer and a related article in the Financial Review (AFR, 1 Sept. 2019), my friend Allan Fels provides a lively account of the backdrop to the Productivity Commission’s high-profile Executive Remuneration inquiry. A decade has passed since then and memories can sometimes deceive. But for the record, since Allan makes reference to matters of some significance that involved me, I feel I should give my own two bob’s worth. (I did not have an opportunity prior to publication.)
Allan recounts how late one February evening in 2009, Kevin Rudd called to ask him to run an inquiry into the problem of excessive executive remuneration ‘using the PC’ for research. Although it became clear that this would necessitate a formal PC inquiry, the PM’s office apparently said he could still lead it. Allan quotes me in the book as pointing out that under the Productivity Commission’s enabling legislation the Chairman ‘was officially the chair of any PC inquiry’ – which is correct. However, he then implies that I agreed that we would effectively co-lead the inquiry. He notes that this was because the inquiry ‘was a bit unusual – the media had already started calling it the Fels Inquiry’.
There is in fact nothing in the statute preventing a temporary Associate Commissioner such as Allan being delegated by the Chair to lead (‘preside on’) an inquiry. While this would be unprecedented, as a practical matter most inquiry ‘Divisions’ are not in fact led by the Chair but by one of the incumbent Commissioners. However, for various reasons, not least the significance and sensitivity of this particular inquiry, I chose to preside myself (as I had done for various other inquiries). I also appointed my fellow Commissioner Robert Fitzgerald to expand the ranks of the Division. So Allan’s role in a formal sense was a subordinate one.
Might I nevertheless have given him license to act as de facto leader of the inquiry, as he implies?
To have done so would have run counter to my purpose in choosing to preside on it. As I recall, I faced no pressure externally to give Allan special status. And I would have been alert to risks for the inquiry (and the Commission itself) in taking such an unconventional course.
Did we, as Allan further claims, ‘work out a rather elaborate protocol by which we would both speak at events relating to the inquiry’?
It is normal practice for inquiry members to divide up the task of making presentations at ‘events’, although key ones are normally the preserve of the Chair or Presiding Commissioner, as was the case here. My primary concern was to ensure that any dealings with the public, and more particularly with the media, occurred with my knowledge and consent. If there was anything resembling a ‘protocol’ it was a verbal agreement to that effect. (Which is not to suggest that it was always observed!)
I’ve gone to the trouble of making these clarifications because I feel strongly that the credibility and thus influence of the Commission, then and now, depends on the integrity of its processes and its capacity to take an independent view. In my experience, Associate Commissioner appointments make a valuable contribution to inquiries, not only by bringing relevant expertise and experience, but also as a foil to the potential for insider ‘group think’. However, individuals may be chosen by a government for this special role for a variety of reasons, including prior knowledge of their views on the matter at hand. There is accordingly the potential for an appointee to be perceived by stakeholders as having a less than open mind, which can undermine trust and participation. That is why the statute requires the Chair to be consulted in advance about such appointments, and ultimately to have the final say on recommendations.
Hence my sensitivity about what otherwise may seem a trivial matter!
[As a footnote, the AFR article attributes the ‘two strikes’ rule relating to shareholder ‘say on pay’ to Allan, and readers of his book would be forgiven for drawing the same conclusion. In fact, the idea of introducing such a rule was first raised early in the inquiry by one of Australia’s foremost company directors, in a private meeting with the Commission in Sydney.
As a second footnote, while some journalists may indeed have ‘started calling it the Fels inquiry’ when it was first announced by Treasurer Swan, it soon became known for what it was – an inquiry by the Productivity Commission.]