Opinion
Business viability is a major issue in the recession.
However, industry institutions like peak bodies must also confront a challenging new reality where funding from government and businesses will tighten as the recession unfolds.
A shakeout of peak bodies is looming.
Agriculture has an excess of peak bodies, with many struggling for financial viability and to show relevance to farmers and other value chain businesses.
Today, the vast majority of businesses and value of industry production are no longer in membership of traditional peak bodies.
The pandemic and the unfolding global recession have wound forward long-term trends with a jolt, creating a window of opportunity to consolidate and modernise peak bodies.
It won't be easy, as history says these organisations will linger on unchanged and continue to exert influence far beyond what their small membership base warrants.
Many agricultural peak bodies can endure because of their government-backed status to influence the work of the rural R&D Corporations (RDCs).
There are 15 RDCs (10 industry-owned and five statutory), which invest over $840m annually, including levy funds from businesses and matching public R&D contributions.
A scoping study of the agricultural levy system by consultants in 2016 also identified 68 prescribed or declared peak bodies.
Most RDCs are legally obliged to consult with and report to at least one prescribed industry body (for industry-owned companies) or declared representative organisation (for statutory RDCs) on matters like levy expenditure and strategic direction.
The idea of a declared representative organisation made sense in the early 1990s when all RDCs were statutory bodies and owned by the government.
However, thirty years on there are ten industry-owned R&D companies with levy-paying businesses in direct membership.
Modern governance says that the boards of these industry-owned companies are first and foremost accountable for performance to their levy-paying members and the government as investors.
In a bizarre hangover from the days when all R&D corporations were statutory bodies, most industry-owned RDC's still have prescribed industry bodies (PIBs) that they must report to.
At best, the arrangements create excessive complexity and confusion, and imposes bureaucratic red tape.
At worst, it creates a serious governance distortion where industry-owned R&D companies are legally obliged to accommodate the interests and priorities of third parties in the form of PIBs - many of which are unrepresentative.
A fundamental question for levy-paying businesses, is whether their industry-owned companies must take direction from and be directly accountable to members, or to an unrepresentative PIB?
The problem is that today, most industry-owned companies are accountable to both their members and PIBs. It comes at a hidden and crippling cost for levy-payers.
The conflicted governance arrangements muddy the waters. It enables blame-shifting, risks empowering vested interests and more than likely stifles rather than improves RDC performance, accountability and innovation.
Modernising institutions is vitally important if businesses are to lead the economy out of recession.
The Australian government has just set an example by acting decisively to discard the Council of Australian Governments model and form the National Cabinet, in what Prime Minister Scott Morrison described as a "congestion-busting" move to "avoid endless meetings that do not result in action".
It's time for business and government leaders to take similar action and make agricultural industry institutions more agile and effective for all.
Agri-food businesses can start by demanding that reforms to the RDC system begin with removal of obsolete regulations requiring prescribed industry bodies for industry-owned R&D companies.
There are many good people involved in peak bodies and rural R&D corporations.
They all need modern business models and governance arrangements that provide clear accountability and the flexibility to adapt faster and perform at their best.
It's time for agri-food business leaders to do some congestion busting and unleash the true potential of the sector.
- Brian Ramsay is the Managing Director of Inovact Consulting and an Adjunct Professor at the University of Canberra. He advises on strategy and innovation and was the inaugural CEO of Australian Pork Ltd.
