Opinion Piece – Peter J McGrath
As the new year is upon us, I thought it would be an appropriate opportunity to give an update on the activities at the Brumbies. As we move into another important year in the history of the organisation, I was generally hoping that things would be more positive, and on some accounts they are, but unfortunately not all is well.
This opinion piece is written from the perspective of a former representative player, administrator at Club, State, National and International level, a Foundation Member of the Brumbies and a former Director and Chair of the Board. I have not been a Member of the Brumbies Board since my election to the Australian Rugby Union in 2005. I resigned all positions in Rugby in 2012. It gives me no joy to raise the many issues set out in this paper but these are matters that rightly should be brought to the attention of the Members and the community generally.
On a positive note, the appointment of Michael Thomson as CEO of the Brumbies should be applauded. Michael is an outstanding administrator and will be a positive addition to the Brumbies organisation. He brings with him considerable experience gained at Fédération Internationale de Football Association (FIFA), Football Federation Australia (FFA), Nike Australia, Australian Rugby Union (ARU), Nike (China) and more recently at the Australian Sports Commission. I point out there was no urgency regarding the CEO search until I raised this in my last opinion post under the heading “Brumbies in Crisis”.
The Brumbies occupy one of the finest facilities in Super Rugby, if not in world Rugby. Maybe the appointment of Michael Thomson as CEO will be the catalyst for the Union to realise the full potential of the physical facilities and the special relationship with the University of Canberra.
The recent signing of major Sponsor, Plus500, is also a great outcome for the commercial team led by Simon Chester who has travelled far and wide to bed this agreement down and this sponsorship is significant in the history of the organization.
I understand that Phil Thompson, the interim CEO on-loan from the ARU, was able to eliminate considerable expenditure in the hundreds of thousands of dollars, from the organisation during his short stint in the seat. This will not come as any surprise to those with any experience in the operation of a professional sporting club. One wonders however what the Board was doing during this period of inflated expenditure and what role the Audit Committee played. Maybe this is a question that the Members should ask in the lead up to the AGM.
Issues that are of immediate concern and which in my opinion, demonstrate a Board that has little understanding of the environment in which it operates include:
I am advised that up to 26 players are “off contract” at the end of the 2017 season. This, in a roster of 37 players, represents approximately 70% of the playing squad (including those on Extended Player Contracts). At most only 30% of the playing staff should be “turned over” every year with succession planning critical for the top 25 players. This is a question of long and short term effective roster management.
As an example, AFL teams turn-over approximately 8 to 10 players each year to renew the squad (noting AFL Clubs have a significantly larger roster of approximately 43 players, including rookies).
The Canberra Raiders, I understand, have all players contracted beyond 2017.
This contracting oversight opens the organisation to potentially massive contract uplifts and pits the organisation against each of the other Super Teams and the professional teams in France and the UK to retain the players. Be under no doubt the player managers will be seeking the best offers for their clients and will play each organisation off against each other to achieve this result. This is normal, what is not normal is the number of players that are off contract.
As most observers are also aware, the ARU has indicated that they may look to reduce the number of Super Teams in the Australian Conference. No matter the rights and wrongs associated with such a decision by the ARU, the number of contract terminations in 2017 could well be attractive to the ARU where a decision is taken to reduce the teams in the Australian Conference. This certainly places the organisation at risk in the current environment.
While it is not for the Board to be involved with the day to day management of the player roster, it is an inherent duty that this fundamental aspect of running a professional sporting organisation is being undertaken. This in my view goes to “Governance 101” in the context of a professional sporting organization.
The planning is not simply about 2017 but rather what happens in 2018, 2019 and the period beyond Rugby World Cup 2019. The Union is at considerable risk where this essential function is not undertaken on an on-going basis.
It is no excuse that the Head Coach leaves in June. In fact, this is more reason to have this work undertaken to ensure a squad that is relatively settled for an incoming coach on which to build for the future.
A Board fails in its basic duties where it does not properly ensure this planning is being undertaken.
2. New Constitution
Late in 2016, the Members approved changes to the Union’s Constitution that have been contemplated for some time and many of the changes, in principle, are overdue. However, the document itself contained considerable drafting anomalies. I and others provided significant feedback which was generally ignored in the haste to produce a new Constitution that would enable elections to be held following reference of nominees to a Nominations Committee (NC). I understand that the rumour is that such commentary from me should be “sidelined”.
It was my view, and remains my view, that an organisation, which in the past prided itself on excellence and being ahead of the game, should not approve a document so fundamentally flawed and further, the document should not have been recommended to the Members until the Constitution was in proper and final form.
I was advised by at least one Club President that the Constitution was approved by the Members, on the condition that there was a further review at some later date to remove the anomalies and the approval by the members was to effectively save the Union from further embarrassment.
3. 2017 AGM and the Nominations Committee
We move forward to 2017 and the Annual General Meeting (AGM) which is scheduled for the 8th February (however as at the date of writing this paper no formal notice has been issued to the Members). To assist in obtaining the Members’ approval of the new Constitution, a clause was inserted to allow nominations to be made up to one month before the 2017 AGM, that is by the 8 January 2017.
I am aware that at least 2 nominations were submitted prior to the due date and have been advised that both initially received negative responses from the Chair of the NC due to time constraints. I understand that the Chair of the NC indicated to one of the nominees at least, that his nomination was effectively out of time and the Nominations Committee did not have time to consider the Nominee before the Notice of the AGM was to be given to Members.
I was made aware that one of the nominees (whose name I will not disclose but who is someone with significant governance and Canberra business experience), had indicated he wished to be considered not only for the Board but also as the Board Chair. I understand that he was subsequently contacted by the current Board Chair who had information concerning his nomination. This is interesting in that the current Board Chair is also standing for re-election, yet has access to and contact with the nominees for what may well be a contested position. I suggest this conduct is inappropriate and demonstrates a poor understanding of the governance required to occupy this role. Certainly, such behaviour would be avoided in the public sector and protocols put in place in both the public and private sector to eliminate such obvious conflicts.
I have been informed that subsequently, the same nominee was contacted by the Chair of the NC who told the nominee:
“that [the NC] had already finished their work so would not be considering his nomination and since the Board, not the shareholders, decides the Chair [and they had already confirmed support for Mr Kennedy] there was no basis to consider (his) nomination.”
I might say this was an obvious outcome in November when the previously stated clause was inserted in the Constitution to appease the Members’ concerns. For the 2017 AGM, the NC had a small window, one week as it turned out, to vet nominations between the closing date for nominations and the date that the formal notice of the AGM was to be issued to the Members.
The Chair of the NC in subsequent communication which has been passed to me, simply apportions blame on the representatives of the Clubs for submitting nominations which were submitted in accordance with the provisions of the Constitution. So, in effect it appears that the NC Chair was indicating that the operation of the NC was to take precedence over the constitutional provisions. This is an interesting interpretation of the Constitution which is newly minted and recommended to the members by the Board.
Certainly, at the very least, questions need to be asked of the Chair, and the Chair of the Nominations Committee by the Members at the AGM to ensure the Board and the Nominations Committee remain accountable to the Members as does the processes adopted, to ensure transparency.
The function of the NC is to vet nominees to ensure they satisfy the criteria as set by the Board. If a nominee satisfies that criteria, then that person should be put to the Members for election or rejection. It is not for the Chair of the NC or the NC to do anything other than vet the nominee against the criteria. The Chair of the Board, who himself is a nominee, should be completely excluded from this process.
I suggest that the following matters should be examined:
- Why was the nominee referred to above rejected out of hand and without the benefit of an interview;
- Why and how did the Board Chair have access to information regarding a nominee or nominees when the Chair is also standing for election – this on its face would seem to constitute a serious conflict of interest;
- Why and for what purpose did the Board Chair directly contact a nominee – again I would consider this a conflict of interest;
- Why did the Chair of the NC dismiss the nomination without the benefit of an interview;
- Why was the Chair of the NC and I assume the NC, unprepared to undertake this work when this outcome was effectively required pursuant to the Constitution; and
- Why does it appear that the NC had finalised its deliberations prior to the closing date for nominations?
It is for the Members to decide who should be elected to the Board. It is not within the powers of the NC to take this power away from the Members. It is only when the Directors are elected or appointed that the Board collectively determines who should be Chair. It would appear arrogant and out of touch to make any assumption that the current Board Chair will be elected as a Director before the will of the members is tested at the AGM.
As an observer and a person who operates in the governance field daily it would appear that the conduct of the Chair and the Chair of the NC demonstrates a poor understanding of the governance standards which should apply in these circumstances.
The Board and the directors should always be accountable to the Members.
4. Brumbies and the Clubs
The relationship with the Union and the Clubs remains one of “disengagement”. This can simply be evidenced by the number of club officials and players who are members of the Brumbies and who attend Brumbies games. There is a dysfunction between the two essential parts of the organisation and no apparent strategy to bring the two closer together.
Following the commencement of Super Rugby and the Brumbies participation in that competition, Brumbies Rugby made a grant to each Club. In return the Clubs and the Union negotiated a participation agreement which specified those things that each party was to do for the other. Both parts of the game were united in that each needed to be successful for the organisation to prosper in a broad sense.
Over time the grants have disappeared and so too the essential nexus between the Clubs and Affiliate Members (as “owners”) of the Brumbies and the Union.
Subsequently, the Brumbies and the ARU placed a levy on the Club players which has resulted in each Club and/or the players being required to pay a levy which amounts to around $25,000 depending on the number of players that participate for the Club. This has seen a turnaround of approximately $400,000 between what the Union used to pay the clubs as against what the Clubs and /or the players now pay the Union/ARU.
Clubs or the players now pay the levy as required and are disengaged because there is little, if any, tangible benefit to the relationship. Clubs battle every day to keep their teams on the field. There has been no collective strategy by the Union in conjunction with the Clubs to deal with this impost. I understand that the Union’s revenue is approximately $20m, although I am not privy to the accounts. The previous level of grants made to the Clubs if they were still in place, represent approximately 1% of the Union’s revenue.
Unless there is a tangible benefit then there will be no “buy-in” by the Clubs and I contend that these grants should be first call on revenue not the last call as has occurred.
Coaches, players, CEO’s in professional sport are hired or fired on the basis of performance. One only has to read the papers to see how precarious the profession of sport can be. How many Managers have been “moved on” in the English Premier League, and we are only half way through the current season?
The same rigour should be applied to directors of professional sporting organisations.
In addition to the matters raised previously in this paper, the Union, I understand will post a loss of somewhere between $0.5m and $1m for the 2016 financial year. That means 2 years of significant losses of well in excess of $2,000,000, under the stewardship of the current Chair, if the reports of the results for the 2016 financial year are accurate. I am sure public company shareholders would be asking questions if this was happening to their investment as reflected in the company share price.
What is the short, medium and long term strategy which will turn this decline around.
What is further disturbing regarding the financial performance over the last 2 years is that the team (the Brumbies) has had winning seasons and played in the finals in both 2015 and 2016, with the team hosting a home final in 2016.
This all gets me to my final point about performance. What is the vision, values and culture of the Brumbies? The Brumbies Website offers no answer. How can an organisation operate within an ethical framework if its culture and values are not clearly defined?
It is clear that the Union has lost ground with its stakeholders, its members and the Canberra community generally and it is time the Members of the Board collectively, individually and honestly answered the question I always ask of boards:
“Is the Board adding value or is it simply a cost centre?”
This may also be a question for the Members to consider when electing the Directors who represent them and who are the custodians of the Brumbies Brand.
For the record the writer is a former:
- Director (1994 to 2005) and Chairman (1999 to 2005) of the Brumbies;
- Director (2005 to 2012) and Chairman (2007 to 2012) of the Australian Rugby Union;
- Member (2006 to 2012) and Chair (2006 -2007 and 2012) of SANZAR (as it was then known);
- Member of the Council and Executive Committee of the International Rugby Board (2008 to 2012), now World Rugby.