Friday, March 16, 2012

Analysis: Future Fund fallout damages multiple reputations

By Business editor Peter Ryan - analysis

There are plenty of lessons to be learned from this week's ugly stoush over the appointment of the Future Fund's next chairman.

The obvious one goes to the first rule of issues management especially when they involve tens of billions of dollars and big egos - when you're in a hole, stop digging.

First to the personalities.

No one doubts David Gonski's credentials to lead the $73 billion sovereign wealth fund.

But how he unexpectedly won the job is a multi-level case study in how not to manage reputations nurtured and built over years.

The highly regarded Mr Gonski was undoubtedly a clear contender for the role given his multiple chairmanships of listed companies and his status as an honest broker "go-to guy" in business, government and philanthropic circles.

But instead of putting Mr Gonski on a short list of candidates, Finance Minister Penny Wong commissioned him to assess the views of Future Fund guardians on who might be the best successor to David Murray.

It's understood Mr Gonski was told the government's preference was for an internal candidate who could make a smooth transition.

After winning the confidence of guardians, Mr Gonski was given a majority view that the former Treasurer and Fund founder Peter Costello should get the chairman's job.

That "view" rather than a recommendation was relayed to Senator Wong last November. But the Peter Costello's nomination gradually saw the goal posts move and the beginning of damaging speculation.

Mr Gonski makes the point that he was not asked to be a headhunter for the Future Fund role and further, that he wouldn't have accepted such a brief because he might have considered himself as a candidate.

The issue of a perceived or actual conflict of interest was created not by Mr Gonski but by the government's confusing and inconsistent approach to filling a role critical to the superannuation expectations of millions of Australians.

The absence of a clear succession planning strategy has infuriuated Future Fund guardians, in particular the outgoing chairman David Murray who was reappointed last year for a fixed twelve months only days before his term expired.

Mr Murray was choosing his words carefully yesterday when he told me: "the appointment process could have been handled in a more timely manner to prevent speculation about potential candidates."

While describing David Gonski as "a person of stature", Mr Murray would only say he was "a good appointment".

But Mr Murray would not be drawn on whether he thought Mr Gonski was the best man for the job.

The effect of Mr Murray's measured comments and Peter Costello's suggestion that the succession process was a "shemozzle" have the effect of damning Mr Gonski with faint praise.

The fallout from the poorly managed process also makes Mr Gonski's entry as Future Fund chairman far from smooth as his immediate task will be to implement damage control and soothe some bruised egos.

While the Fund's mandate of covering $140 billion of public sector superannuation liabilies by 2020 is been steaming ahead behind the scenes, it has done so despite a high level of instabilty and uncertainty that has the potential to damage Australia's international reputation.

The government's reaction to criticism created by the selection process debacle has also been unnecessarily politicised given that the Fund has built up a reputation for independence and forthright commentary, much of it from the ever dry and direct chairman David Murray.

Rather than maintaining the line that Mr Gonski was "the best man for the job", Communications Minister Stephen Conroy was in attack dog mode yesterday pointing to Peter Costello's political past as a failed contender to replace John Howard as Prime Minister.

And Penny Wong's comment that unlike Mr Gonski, Mr Costello had not been asked to chair any Australian listed companies appears to undermine the status, power and influence of a Treasurer who served for more than a decade.

The public questioning of Mr Costello's credentials also puts the government in the position of undermining one of its key Future Fund guardians who was presumably made a guardian on the basis of his significant background.

Mr Costello has also been damaged by the fallout from his rejection.

Now instead of continuing a corporate life after politics, albeit as a Liberal party elder stateman,

Mr Costello has returned as a partison player who has rejoined the political slanging match to defend his reputation.

The stoush is likely to make current and future governments reluctant to appoint politicians from either side of politics given the "ticking timebomb" factor and in Peter Costello's case on how easily partison poltics can re-emerge.

The unseemly debate also creates boardroom governance issues and whether the Future Fund's integrity can be better preserved through the use of independent selection panels.

The boardroom advisor Nicholas Barnett said the government could consider a process used by BHP Billiton where the board voted on a new chairman and the process was overseen by the accounting firm KPMG.
"In an ideal world, the potential future board chair is sitting on the board and doesn't need to be parachuted in and people are getting a good feel for that and well before the due date, six months out." Mr Barnett told me before Mr Gonski was appointed.
Mr Barnett also flagged some of the boardroom issues Mr Gonski will be facing in relation to the selection process.
"You certainly don't want to be on a board where you do have a conflict and the question is when does that conflict start and stop. Also the perceptions of people in the marketplace are pretty important to take into account."
The media storm over the flawed decision making goes to the heart of how big decisions are debated and resolved in Cabinet meaning the next major appointment will be scrutinised to see if lessons have been learned or are doomed to be repeated.
Peter Ryan is the ABC's Business editor
Twitter: @peter_f_ryan

Thursday, March 15, 2012

Future Fund appointment process raises questions about succession planning

A boardroom governance expert has criticised the selection process use to appoint David Gonski as the next chairman of the Future Fund.

Speaking before Mr Gonski's appointment was confirmed, Nicholas Barnett said the process raised serious questions about succession planning at the $73 billion sovereign wealth fund.

Listen to the interview here.

Future Fund boss David Murray criticises selection process of successor

The retiring chairman of the Future Fund David Murray has described his successor David Gonski as "a good appointment" and "a person of stature".

Mr Gonski has become embroiled in a political row over his appointment as Future Fund chair after Cabinet rejected the candicacy of the former Treasurer Peter Costello.

Mr Gonski had relayed the view of Future Fund guardians that Mr Costello was the preferred internal candidate.

While welcoming Mr Gonski as "good appointment", Mr Murray stopped short of a full endorsement.

Asked if he agreed that Mr Gonski was the best person for the Fund's top job, Mr Murray said: "I didn't say that. I said he was a good appointment."

Listen to my analysis of the Future Fund row broadcast this morning on AM.

The founding chairman of the Future Fund is known to be frustrated over the appointment of his successor, having agreed to a fixed twelve month appointment a year ago days before his term expired.

"The appointment process could have been handled in a more timely manner to prevent speculation," Mr Murray told me.

Mr Murray was not critical of Mr Gonski and stressed he was highly regarded in the business community.

However, Mr Murray's comments add to criticism about the process of the appointment, poor succession planning and perceptions that Cabinet's rejection of Peter Costello as the Fund's next chairman smacks of poltiical payback.