The mail carrier’s chief executive has been asked to stand aside after revelations of luxury watches gifted to executives, but the company is facing much deeper crises. By Rick Morton.
What went wrong inside Australia Post?
Before Australia Post chief executive Christine Holgate was this week sensationally asked to step aside pending an investigation into the $19,950 purchase of four Cartier watches as a reward for executives, her reign in the top job was already under serious pressure.
Heading into Thursday’s senate estimates showdown, Holgate’s tenure had been the subject of accusations by political opponents of poor judgement and profligate spending within the publicly owned utility. Crucially, there was also a threat that the company’s razor-thin profit could be pulled from beneath it by a Coalition senator.
Much of the week’s drama has returned to some form of the same question: Is the national postal service completely out of touch with community expectations?
On Thursday, Labor senator Kimberley Kitching asked Holgate if she rewarded employees for clinching the Bank@Post deal with Commonwealth Bank, Westpac and NAB.
“There were a small number of senior people who’d put in an inordinate amount of work and they did receive an award from the chair, myself and on behalf of the board,” Holgate responded.
“And what was that award?” Kitching asked.
“They got watches,” Holgate said.
Cartier watches, valued at thousands of dollars each, to be precise. Neither Holgate nor Australia Post’s chief financial officer, Rodney Boys, could clarify whether the designer-brand timepieces were purchased using the CEO’s corporate credit card, which had amassed $300,000 of expenses in a single year.
Within hours of the revelation, Communications Minister Paul Fletcher was on the phone to Australia Post chair Lucio Di Bartolomeo demanding an independent investigation. Di Bartolomeo was asked to stand Holgate aside until the issue could be resolved.
“The independent investigation should look into the conduct of the board members and their governance as well as the actions of the management and the executive,” Prime Minister Scott Morrison told the parliament during question time later on Thursday.
“We are the shareholders of Australia Post on behalf of the Australian people … The chief executive has been instructed to stand aside. And if she doesn’t wish to do that, she can go.”
It was a stunning development, but one that pulled focus from a deeper existential crisis facing the postal service, which has been unfolding behind the scenes during the Covid-19 pandemic.
After almost four months of correspondence about the federal government’s decision to relax “critical” service standards for Australia Post during the pandemic, Liberal senator Concetta Fierravanti-Wells finally pulled the trigger on a threat to end the regulatory relief.
On October 6, the senator, chair of the standing committee for the scrutiny of delegated legislation, advised that a motion to disallow the captain’s call made by Paul Fletcher would be moved within 15 parliamentary sitting days, if the unanimous concerns of the committee were not met.
The committee wanted to know whether the government had considered – or whether it has since considered – the implications of reducing mail standards on customers, workers and others with a stake in the national utility.
Its concerns go to the heart of a series of management missteps and financial snafus at Australia Post that have managed to make headlines in a year dominated by upheaval, recession and contagion.
The national mail carrier has operated as a government business enterprise since 1989, which means, despite being owned by taxpayers, it has requirements to make profits and compete against other companies.
Recently though, regional and rural Australians, members of the Nationals and politicians from Labor and the Greens have all expressed misgivings about the direction of the company and the priorities of its board.
“They have obligations to the bush, but one thing we’ve seen in their response to this pandemic is that as soon as things get tough they want to get out of their responsibilities,” a senior Nationals MP, who does not wish to be named, tells The Saturday Paper.
Without government intervention to relax legislated delivery standards – which allowed Australia Post to reduce the frequency of post in metropolitan areas during the pandemic and redeploy up to 2000 posties to deliver parcels in vans rather than letters on bikes – the company would not have made a profit before tax this year.
As it was, the profit was slim: just $53.6 million for the year on a record $7.5 billion in revenue.
Christine Holgate told the senate estimates hearing on Thursday that the profit before tax was up 30 per cent on its targets.
“We were pleased we avoided a loss, which so many of our international peers have done,” she said. “I thank the committee for the support of the temporary regulatory relief. It has been critical in helping us deliver these parcels that now represent 61 per cent of group revenues.”
But Australia Post’s decision to pursue $7 million in executive bonuses in a year when so many Australians found themselves in financial hardship has attracted strong criticism.
The Sydney Morning Herald reported in late August that Holgate, despite promising to forgo “short-term incentive” payments at the start of the pandemic, took a proposal to the board to “pay executive bonuses following the organisation’s strong financial performance”.
In early September, Holgate told the ABC that the performance of the company was “pretty black and white”.
“[The executive team] has led our business through one of the most challenging periods … and yet they’ve still delivered a fantastic result,” she said.
Bowing to public pressure, the board eventually rejected the idea.
To justify the bonuses, Holgate painted a rosy picture of the company’s performance. But when questioning during senate estimates on Thursday turned to community expectations, chief financial officer Rodney Boys walked back this assessment.
“I hardly think that $53 million on $7.5 billion in revenue is a really good result,” he said.
Australia Post people and culture executive general manager Susan Davies told senate estimates that $97.4 million worth of other bonuses were still paid to lower-ranking staff at the company.
“The first one is a thank-you payment that we paid to all of our front-line operators, so that’s 34,500 people,” she said. This portion was worth $21.6 million, or about 1 per cent of worker pay.
Another 3500 licensees and contractors – who operate post offices – were paid $5.6 million in $500 cash and gift cards. StarTrack couriers received $450,000 worth of “thank-you payments”.
“So where is the remaining $50 million?” asked Greens senator Sarah Hanson-Young.
Davies said although no executives were paid bonuses in 2020, 67 general managers received $10.1 million in incentive payments. Heads of departments were also paid extra this year.
“It just leaves a really bad taste in your mouth, doesn’t it?” Hanson-Young remarked. “In the context that we are all struggling in right now, it’s a bit on the nose.”
Christine Holgate said she believed the public understood her company had served the community well during the pandemic.
Paul Fletcher’s unilateral decision to relax Australia Post’s service delivery standards did not require a vote in the senate, but the temporary provisions can be removed by one. It’s a dynamic that renders every vote crucial.
In July, Australia Post was caught up in a furore over the battle to deliver more than 100 stubby holders sent by Senator Pauline Hanson to residents of Melbourne’s locked-down public housing towers.
Hanson had just lost her commentary spot on Channel Nine’s Today after she racially abused the residents of the towers in relation to Covid-19 outbreaks, calling many of them drug addicts.
The stubby holders declared, “I’ve got the guts to say what you’re thinking”, and reportedly came with a note from Hanson that said: “No hard feelings.”
Christine Holgate was alerted by email about 6pm on July 10 about an apparent standoff between her company and Melbourne City Council over the delayed delivery of Hanson’s promotional coolers.
Holgate denied reports published in The Age that she had called the Australian Federal Police or Victoria Police but “did wonder whether someone should” talk to Senator Hanson about the issue. However, it was resolved before that was required.
Less than a fortnight later, Holgate and three other Australia Post executives – including former News Corp Australia chief digital officer Nicole Sheffield – flew to Queensland to give Hanson a private tour of a parcel-handling facility.
Holgate said this tour, conducted despite pandemic border closures, had nothing to do with the stubby-holder scandal.
“It was a coincidence,” she told estimates.
A key problem facing Australia Post, at least according to its political opponents, is the presence on its board of so many people with strong links to the Liberal Party.
Labor’s Communications spokeswoman, Michelle Rowland, was blunt on Thursday, saying that “the Australia Post board is [a] dysfunctional swamp of former Liberal politicians, party hacks and mates of Scott Morrison”.
“This board is incapable of executive oversight and must be cleaned up,” she said.
All of the now-controversial appointments were made by former senator Mitch Fifield when he was Communications minister.
Fifield elevated one-time Queensland Liberal National Party president Bruce McIver to the position of an Australia Post director in December 2015 and former Liberal senator Michael Ronaldson in May the next year.
In 2017, Deidre Willmott – who served as chief of staff to two Western Australian Liberal leaders and spinner for mining magnate Andrew “Twiggy” Forrest – also became a director.
Tony Nutt was added as a director in 2018, the year after he resigned as federal director of the Liberal Party.
Finally, Mario D’Orazio – a former Channel Seven executive – was made a director in March last year, just two months before Fifield retired from parliament at the last federal election.
Despite the questions surrounding Australia Post, no members of its board were able to attend this week’s senate hearings, which Senator Kitching labelled “unfortunate”.
The board’s chair, Lucio Di Bartolomeo, told the committee he could not attend due to an existing family commitment of a medical nature. Company secretary Nick Macdonald said it was Di Bartolomeo’s view no one else from the board ought to address the hearing.
When asked if Di Bartolomeo would be available at a future date for a spillover hearing, Macdonald said: “I don’t know. I would have to seek his instructions.”
Senator Kitching asked about the political affiliations of the board but Macdonald said he was not aware whether any are current or former Liberal Party members.
“Australia Post does not maintain a record of the political affiliations of its directors or employees,” he said.
The two days set aside by the senate committee to probe Australia Post also clashed with another commitment – an ecommerce summit with The Australian, of which Australia Post was the marquee sponsor. Both Holgate and Scott Morrison spoke at the summit on Wednesday.
According to Holgate, Nicole Sheffield – the former News Corp executive – was “in charge of the whole thing”. But Australia Post was not aware the dates lined up with the committee’s scheduled hearings until late September.
In senate estimates on Thursday, Australia Post revealed there were about 4.6 million parcels that it “could not otherwise have delivered” without the temporary relaxation of service standards, which will expire on June 30 next year.
But as the end of this year approaches, it now looks as though those rules will be struck out before the close of December.
Senator Fierravanti-Wells wrote to Paul Fletcher in early September advising him that her delegated legislation committee was still not happy with his responses about the need for Australia Post’s regulatory relief or its impacts on customers.
“From a scrutiny perspective, the committee remains concerned about the adequacy of consultation undertaken in relation to this instrument, particularly in light of the significance of the measures and the broad scope of people and entities likely to be affected by the changes,” she wrote, and announced her plan to move a motion for the 15-sitting-day deadline.
As of Thursday, there was no public indication Fletcher had responded to the last letter. Without an adequate reply, the disallowance can be moved by mid-December.
Despite this threat and a government review, Christine Holgate told the estimates hearing that her company was still planning for the lucrative relief to remain in place until June 30, 2021.
Whether it ends in a few months or in eight months, the pressure on the business will be enormous.
In such a climate, it is unlikely any executive will qualify for a Cartier watch.
This article was first published in the print edition of The Saturday Paper on October 24, 2020 as "What went wrong inside Australia Post?".
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