The Australian Wheat Board was established as a statutory authority by Wheat Acquisition Regulations in the National Security Act 1939. It was created and continued as a Government controlled marketing authority under successive legislation until July 1 1999.
In 1989, the Government established the Wheat Industry Fund, imposing compulsory levies on wheat sales. This fund was held and managed by the Australian Wheat Board and by July 1999 was approximately $600 million.
In 1992 the Commonwealth Government, with bipartisan support, decided to cease the Government guarantees on borrowings, and therefore an alternative structure was required for the AWB to finance borrowings.
In 1996 the Australian Government indicated that the statutory arrangements would not continue and growers would be responsible for their own financing from July 1999.
A Working Group was formed to facilitate growers' input into the restructuring process, with representation through the Grains Council of Australia, AWB and the Department of Primary industries and Energy.
The Working Group eventually agreed that the best model for the new AWB would be a dual-class share structure, called the "Grower Corporate Model". A co-operative model was not proposed. The Government's broad agreement to this was announced in April 1997.
In theory, then, the AWB was being transformed into a grower owned and controlled business. In fact, a corporate hybrid was being created which would inevitably lead to its lkisting on the Australian Stock Exchange. Only a co-operative model would have guaranteed grower ownership and control.
In June 1998 the assets and liability of the statutory authority (other than the Wheat Industry Fund) were transferred to AWB and AWBI, then wholly owned subsidiaries of the statutory authority.
In July 1999, the Wheat Industry Fund was transferred to AWB and B Class shares were issued to the holders of units in that fund, A Class Shares were issued to persons who met the definition of “growers” in AWB’s constitution. Upon the issue of these A Class and B Class shares, AWB became a grower-owned and controlled corporation.
In August 2001, AWB was publicly floated with B-Class shares listed on the Australian Stock Exchange.
In Bitter Harvest (The Weekend Australianm 28-29 January 2006), Glenda Korporaal noted:
"AWB critics point to a growing culture of greed, secrecy and arrogance at the top of the organisation since its listing on the stock market in 2001, with senior executives allegedly focused on increasing profits and share prices to help deliver them lucrative performance bonuses. "
Korporaal also noted the unique governance structure of the AWB:
"Under AWB's unique structure, the non-executive directors can only be elected by wheat growers who hold A-class shares not available to ordinary on-market investors who only hold B-class shares. The voting structure for directors is even more complex with specific director positions only electable by A-class shareholders from specific states."
"In short, it means AWB directors are not subject to the same pressures as directors of normal Australian listed companies which owe their positions to the support of the majority of ordinary shareholders. AWB rules also make it difficult to change its operation with some resolutions requiring support from grower shareholders in all states. "
The Australian Wheat Board, then, is a hybrid. It was never a co-operative and its evolving structural protection of the grower interest obscured this reality. As a co-operative, the AWB governance structure would be clear and transparent.
Australian Wheat Board
http://www.awb.com.au
