Staff have revealed internal divisions stemming from tensions between the CSIRO’s board and its departing chief executive, who put industry priorities ahead of science. By Rick Morton.

Insiders expose ‘bullshit’ at CSIRO

A man in a back blazer sits at a piano while another in a blue blazer leans on its side. Both men are smiling toward the camera.
Minister for Industry and Science Ed Husic (left) with outgoing CSIRO chief executive Larry Marshall, at Marshall’s farewell this month.
Credit: Facebook

The relationship between the board of the nation’s premier science and research organisation, the CSIRO, and its long-serving chief, Dr Larry Marshall, fractured completely last year when he was refused another term at the helm.

Marshall, who modernised the institution but also led it into controversial arrangements with corporate interests, was furious and embarrassed. He went on the front foot and gave interviews to The Australian Financial Review saying it was his decision to step down. The press was glowing.

“I’m sorry about this language but that is complete and utter bullshit,” a senior CSIRO employee with knowledge of the internal ructions tells The Saturday Paper.

“There has been a slow burn of mega-hostility with the board that finally went too far. He openly said he wanted another year, he wanted another term, in many forums and it took them a long time to tell him no.”

On Monday, esteemed molecular and cellular biologist Professor Doug Hilton was announced as Marshall’s replacement at the agency, starting in September.

Senior staff at the CSIRO, including some who left before the news was announced, had waited months for a decision. One messaged this reporter when the news broke: “Poor guy.”

The Saturday Paper has confirmed that in a shortlist of five chief executive candidates proposed by the CSIRO board, Marshall did not feature. In interviews with eight current and former senior CSIRO staff, and others with insights into management at the agency, a portrait of power has been sketched. All the sources spoke on the condition of anonymity.

“There’s a small group of people who, on Larry’s departure, want to have a big influence on how the organisation goes forward,” a source says.

“I’m going out on a limb in speaking about this but I don’t know what else to do. There’s no use putting in a public interest disclosure because they are all stitched up, they get shut down pretty quickly.”

There is now an open animosity between those close to Marshall at the CSIRO and the board of directors. At a senior leadership meeting almost two weeks ago, tensions were especially high.

Witnesses said the board was accused of “meddling in management affairs”.

On multiple occasions, the CSIRO board chair, Kathryn Fagg, has been deliberately frozen out by management, who have neglected to tell her about significant meetings she was required to attend or kept her, and by extension the board, in the dark on major decisions being made at the executive level.

A spokesperson for the CSIRO said the agency “refutes comments inferring a negative relationship between CSIRO management and the CSIRO board”.

As an independent Commonwealth agency, the CSIRO is accountable only to its board, which in turn is accountable to the minister for Industry and Science. Marshall, for his part, was clear about its priorities when questioned by Greens senator Barbara Pocock at his last senate estimates hearing on June 1.

“CSIRO was originally created almost a hundred years ago, specifically for the purpose of assisting industry,” he said.

Pocock hit back: “Surely it’s to assist the Australian public as its primary goal?”

Marshall backed himself in.

“I think the first purpose under our act is to assist Australian industry, then the Commonwealth and then society,” he said.

“But they’re all important. Because we were created for that purpose, most of our governance and most of our systems and processes are designed to manage the fact that we’re going to work with industry.

“We just want to emphasise – it’s about balance.”

The Science and Industry Research Act does list the CSIRO’s function as “assisting Australian industry [and] furthering the interests of the Australian community” but it does not rank them in a hierarchy.

Critics will argue the balance between these core functions has been off kilter throughout Marshall’s reign. Before he officially started in the job, in January 2015, Marshall gave an interview to the ABC in which he wondered aloud whether there might be something to the idea of “water divining” or dowsing.

“I’ve seen people do this with close to 80 per cent accuracy and I’ve no idea how they do it,” he said at the time.

“When I see that, as a scientist, it makes me question, ‘Is there instrumentality that we could create that would enable a machine to find that water?’ ”

His latest preoccupation has been with the finicky and expensive technology of carbon capture and storage, which has never worked at scale. After management consultants McKinsey & Company was paid $6 million by the Morrison government to model Australia’s net-zero strategy, Marshall’s CSIRO decided to run its own model. The lessons taken from that exercise, however, left many of Marshall’s colleagues unimpressed.

“We felt it was very important for us to analyse that problem because it is one of the six big national challenges that we’re concerned about for Australia,” Marshall told senate estimates this month.

“We’ve used that to guide a lot of the investments that we made, like in hydrogen energy, in the really hard to abate emissions sectors and in technologies like carbon-locking that can literally suck CO2 out of the atmosphere and lock it away.”

In November 2021, oil and gas company Santos announced it was “partnering” with the CSIRO to “develop what is hoped could become the lowest cost direct air capture technology in the world”.

Such a collaboration would “continue to develop CSIRO CarbonAssist” – an agency trademark. According to Santos’s chief executive, Kevin Gallagher, it would allow carbon dioxide to be sucked out of the air and – potentially – negate emissions elsewhere in the economy.

Independent experts said the strategy was prohibitively expensive and cost “several hundred dollars a tonne”. It’s cheaper, in other words, to reduce emissions in the first place.

As one of Marshall’s colleagues told this newspaper: “Carbon capture and storage is only slightly more respectable than water divining as a pursuit.”

Another observer noted it’s not so much the technology that is suspect – although it doesn’t quite work yet – but the fact that energy giants don’t need it to work. They just need enough confusion around emissions to keep producing gas.

“That’s why Santos has been banging on about carbon capture, because they’ve tried to brand themselves as a transition energy source, from oil to renewables,” the insider said.

“And so part of their whole ideology in promoting carbon capture is to create this sort of fog where they can keep producing. And I think CSIRO has played, quite possibly, a questionable role in this.”

In remarks at the Spark Festival in October last year, Minister for Industry and Science Ed Husic used the Santos partnership to launch a scathing attack on the priorities of the agency.

“They’re doing some interesting arrangements with other firms. I don’t know if they’ve inked this deal yet, but they’re doing one with a very major gas company at the moment to help them with decarbonisation,” Husic told host Maria MacNamara.

“Gas firms at the moment are making enough money there to ensure that the mint could blush. I do wonder why we need to have gas firms renting out the brand, the CSIRO to do decarbonisation work that I’m sure they could get a lot of others to do.”

Such firms, who are buying not just the expertise of CSIRO scientists but also the credibility of the name, are entitled to research and development tax breaks funded by the Australian government. These offsets are refundable and worth an additional 18.5 per cent on the corporate tax rate for firms with a turnover of less than $20 million. For firms with income above $20 million, the offset is non-refundable and equivalent to the corporate tax rate plus between 8.5 and 16.5 per cent, depending on research intensity.

Not long after the Santos deal grabbed Husic’s attention as minister, he issued an extraordinary “statement of expectations” to the CSIRO, which was emphatic in its drafting.

“CSIRO must provide me and my department with advice of commercial relationships CSIRO intends to enter into, especially when large and/or private companies are involved, or the partnerships may be of public interest or raise a real or perceived conflict of interest,” the statement says.

“I expect CSIRO to ensure any such partnerships reflect the organisation’s core mission and the priorities articulated in this Statement of Expectations, and seek to retain intellectual property in areas of strategic national importance.”

The CSIRO still “undertakes work” through the Gas Industry Social and Environmental Research Alliance, known as GISERA, a third of which is funded by gas companies.

The Northern Territory Labor government says it is working with the CSIRO and industry “to develop a business hub” for carbon capture and storage at its Middle Arm precinct, as part of its broader, controversial green light for gas production and exploration in the Beetaloo Basin.

These contracts with industry are also reflected in the make-up of the organisation.

David Knox, who was recently the subject of an overpayment scandal, is a board director at CSIRO and former chief executive of Santos.

Another board director is former Coalition senator Ian Macfarlane who, as the current chief executive of the Queensland Resources Council, authorised a multimillion-dollar advertising campaign attacking the Queensland government’s proposal to raise more revenue from mining royalties.

The complaint about work for industry is not that it shouldn’t happen. The question is balance. Even Marshall’s critics freely concede the chief executive has modernised the agency’s work with industry, turning the CSIRO into an organisation that doesn’t just give away its expertise but takes equity in return for services.

Marshall accepts a balance must be properly struck between the imperatives of commercialisation and research for the sake of pure knowledge. After lab costs, he says, about half of the agency’s revenue comes from external sources and the other half from government funding.

“The thing that’s good about that is that it means that we know that what we’re creating is being taken up by Australian industry,” he told senate estimates this month.

“We know that we’re not just kidding ourselves on the importance of what we research. That’s an important test. The trick is keeping that in balance.

“If we get pulled too far towards the external revenue, it constrains us, but, if we get pulled too far away from the external revenue, we don’t know that what we’re doing is the right thing that is going to help the country.”

When Tom Munyard was promoted by Marshall, from chief financial officer to chief operating officer, his old position was not advertised until four months later, in September last year. It was only filled in February this year, by former NSW Treasury chief financial officer Stewart Walters.

Walters brought fresh eyes to the national science agency and began questioning whether the CSIRO was getting value for money from its medley of commercial arrangements. He has been repeatedly shut down.

Several staff have told The Saturday Paper the new chief executive, Professor Hilton, will have a particularly difficult takeover because of a culture at the agency that tends to hide or ignore problems.

“I mean, who is going to want to tell him about any of this stuff,” one source says.

“It would be too reputationally damaging if they, as an agency, were held accountable and actually owned up that they were being accountable. They would lose all of their previous credibility and that’s a big thing to lose.

“I don’t think they’re brave enough to do that.”

As Marshall’s term ends, there has been a rush to finalise plans that had stalled, including legacy projects.

One of Marshall’s big achievements in the role was the establishment of Main Sequence Ventures, which invests in “innovative” startups under the imprimatur of the CSIRO.

The Saturday Paper has learnt of a move to sell part of the Main Sequence Ventures ecosystem, which appeared without warning via the CSIRO’s major transactions committee earlier this month. It struck some observers as unusual because of the apparent urgency.

A spokesperson for the CSIRO said: “The suggestion that the CSIRO innovation funds, managed by Main Sequence, are in the process of being divested is incorrect.”

However, staff seconded from the science agency have recently transferred to a “subsidiary created by CSIRO”.

The spokesperson said this change “will not impact the investment activities of Main Sequence, the manager of the CSIRO innovation funds, or on CSIRO’s relationship with Main Sequence”.

The statement said the “national science agency is in a strong position as Dr Marshall completes his term”.

“Claims to the contrary are speculative and ill-informed,” it said.

“Dr Marshall has made a significant contribution to CSIRO and continues to champion the role of the national science agency, its research, and its scientists in helping Australia solve some of the most difficult challenges facing the country.”

The statement did not answer questions put by The Saturday Paper about why Marshall has publicly stated he refused another term when the board did not offer one. Nor did it respond to other specific questions.

Marshall hasn’t announced where he intends to go next, although speculation among colleagues is that he will return to Silicon Valley.

His experience there has shaped him so definitively that when he first arrived at CSIRO some staff struggled to understand him.

“He had just been in that, I’m gonna use that word ecosystem, that Silicon Valley, tech sort of ecosystem, for such a long time,” a person who was at the CSIRO at the time says.

“When he started sending emails to all staff and stuff like that, people were going like, ‘What’s this guy talking about?’

“It was just full of jargon. Didn’t make sense. They actually had to monitor his comms quite closely. Like, almost like they had to kind of strip him down and rebuild him again with a new vocabulary.”

The agency may have tried to rebuild Marshall but he has rebuilt it. He finishes on Friday, June 30. 

This article was first published in the print edition of The Saturday Paper on June 24, 2023 as "Insiders expose ‘bullshit’ at CSIRO".

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