Tuesday, February 27
Mulesing and AWI Ltd
Senator RHIANNON: I want to go back to the issue of proxy votes. While we've been sitting here, I looked at the terms of reference that were circulated and I noted that No. 6 covers the handling of proxies. But I want to clarify that your situation remains that proxies under your constitution allow the person who is holding those proxies not to follow the shareholders' instructions. Does that remain the situation?
Mr Merriman: No. Jim, could you please explain the proxies.
Mr Story: Yes, I can. On that point, that's actually the one that I think Senator O'Sullivan was talking about as well. During the last election process, there was some publication in a media outlet that, under our constitution, there's a provision which would, in effect, allow a proxy holder—the chairman or anyone else—to vote contrary to directions given to them in a proxy. That is purportedly clause 12.4 of our constitution.
Senator RHIANNON: Could I just read out what I've got, because I don't have the numbers.
CHAIR: I think Mr Story is on the punchline here. What he's going to tell you is that that section doesn't provide that.
Senator RHIANNON: Yes, but I'd just like to read it out so we're talking about the same section—that's all I'm asking to do. I'm not giving an opinion.
CHAIR: It's very short, so you're welcome to read it out.
Senator RHIANNON: It states: The validity of any resolution is not affected by the failure of any proxy or attorney to vote in accordance with instructions (if any) of the appointing shareholder. Is that what you're referring to?
Mr Story: Yes. We went to get advice on that. It seemed odd to us. The advice came back succinctly and very specifically that that media report was misconstrued and the section of the constitution does not allow a proxy holder to vote contrary to directions given to them. Furthermore, it was pointed out that, were a proxy holder to attempt to do such a thing, it would actually be an offence against another section of the Corporations Act.
CHAIR: Section 250BB.
Mr Story: That's the one. I might add, I have never seen such an attempt during my time, Senator.
Senator Ruston: Senator Rhiannon, it's probably worth noting—and officials will correct me if I've got this wrong—that, actually, in the election of board members for AWI, voters don't have to vote on the day. If somebody has a predetermined position in how they wish to vote, they are more than entitled to pre-vote. So, largely, one would assume that only proxies that have not been predetermined are issued for other people to exercise on the day of the election.
Senator RHIANNON: Okay, thank you for clarifying. Mr McCullough, I'd like to go to some of the questions on notice that you gave responses to and ask for some clarification. When we were together last, in the hearing this was my question:
How much funding is AWI putting into promoting the genetic solution to mulesing versus the investment in anaesthetics for mulesing?
I can take that question on notice and give you the precise figure.
I want to check what the precise figure is. You did provide a number of figures, and I'm referring here to question number 50, answer 1a. There's a table there. My question is about the genetic solution. That term is not used at all in the table. Does genetic solution refer to breeding and selection? I actually would have thought that breeding and selection is more than about the genetic solution, but I'm just trying to clarify.
Ms Slack-Smith: Can I interrupt. We've only got 36 QONs. We don't have QON 50.
Senator RHIANNON: I've got here: 'Question No. 50—division/agency: Australian Wool Innovation'. It's got what I asked and it's got your answers.
Mr McCullough: You seem to have a different numbering system to us.
Mr Quinlivan: Anyway, we've got it now.
CHAIR: It's your document, not ours.
Mr McCullough: It is; it's just that ours have different numbers.
Senator RHIANNON: I refer to answer 1a. Do you have that?
Mr McCullough: Yes, I have got that up in front of me now.
Senator RHIANNON: I will go back to my question on notice about genetic solutions. You say you will give precise answers. What are the figures on that table that refer to the genetic work that has been done?
Mr McCullough: The genetic work refers to breeding and selection, and breech modification developments.
Senator RHIANNON: And is that for research on that specifically?
Mr McCullough: Yes.
Senator RHIANNON: Is all of that on the research for what you call genetic solutions? I just saw breeding can be a whole lot of things so I am just trying to clarify.
Mr Merriman: To try and help you, that whole table relates to breech strike. It is the extension of management procedures.
Mr McCullough: It is headed up 'AWI breech strike R&D strategy expenditure'.
Senator RHIANNON: Yes. But I just want to see that it was about the genetic solutions, which are quite considerable these days. Again, my original question was about genetic work being done. The genetic work covers removing the wrinkles, resistance to worms, reducing susceptibility to diarrhoea. Is that what we are talking about in those first two dot points about breeding and selection and breech modification?
Mr McCullough: That's correct.
Senator RHIANNON: Staying with this answer, just under 1A on the third line, you say, 'AWA does not focus per se on investment in mulesing or non-mulesing programs.' But then in the paragraph under the table, you actually give details of the amounts—which have been very useful—of the amounts of money going to mulesing programs and non-mulesing programs so it just seems to be contradiction. You say you don't do it but you provided information on it. Have I misunderstood something or is it in fact correct that you do differentiate in your research?
Ms Slack-Smith: We do not actually distinguish within the business non-mulesed or mulesed. We actually invest in those five key areas that are summarised in that table. But for the benefit of the question, we have actually categorised it in mulesed and non-mulesed in that first paragraph underneath the table.
Mr McCullough: Underneath the table, there is an explanation.
Senator RHIANNON: So doesn't that contradict when you say you don't focus on it? I mean I think it is obviously good that you provide the details. I am just trying to understand why you made that statement.
Ms Slack-Smith: The idea in the strategy for fly strike prevention, which Mr Lindon has managed for around the last nine or 10 years, has got five key areas and those five key areas summarised in that table. So breeding and selection, another company might call genetics; we are calling it breeding and selection. You have asked specifically in that breeding and selection component or the breech modification. We do not make a distinction between mulesed and non-mulesed; we invest in a whole range of things for farmers to make their choice on what is going to suit their sheep and their property. For the purpose of the question that you specifically asked, the paragraph underneath summarises that investment in that capacity for you.
Senator RHIANNON: Moving down to 1B, you have detailed some information about the National Wool Declaration. AWA does promote the use of the National Wool Declaration to provide transparency in the marketplace. Usefully, you say how it includes not mulesed, ceased mulesed and mulesed with pain relief categories. That is very assistive specific and sounds useful. How does the consumer learn that? Where can they access that information?
Mr McCullough: It's probably not so much a consumer issue. It is very difficult to explain to any consumer in the United States, for example, that might be a sweater what mulesing is. First of all, most of them don't know where Australia is. Secondly, they don't know that 90 per cent of the world's apparel wool comes from here. Then you have to explain to them this has got to do with the lamb soon after it is born and some skin being removed that has something to do with flies. So it is a very difficult piece of conduit or nexus to explain to a consumer. This is not so much a consumer issue as it is with the retailers and their concern for creating a supply chain that they can track back to the very beginning and understand how these animals are being treated, how the supply chain has handled that wool in the processing and how it is reached them. We don't know of any retailer in the world currently that's actually branding their garments with a swing tag on them saying they're non-mulesed or mulesed, because once you say this you have to then go and explain it, and it's very difficult to explain.
Senator RHIANNON: But some are tagging that there's no cruelty involved in the—
Mr McCullough: There is. We are constantly communicating with the retailers overseas that are concerned with this issue. We have an ongoing program there to brief them on what's happening here. But one thing that we don't do is go to our 55,000 levy payers and tell them how to treat their animals. We think that they know how to look after their animals and keep them alive. Certainly, in some places in Australia, to change practice might provoke a detrimental welfare outcome for those animals—in other words, they die.
Senator RHIANNON: Just going back to the original question, where do you release this information?
Mr McCullough: The National Wool Declaration is controlled by the Australian Wool Exchange and not by ourselves. But we have as part of our policy that it should be used. That is actually mentioned in the catalogue of the wool sale in the open-cry auction system, so buyers can see whether it is non-mulesed or ceased-mulesed or treated with pain relief. In some cases, it follows the supply chain up—certainly if they've sourced non-mulesed, and there's a slight premium being paid for that these days. That might follow a batch of wool all the way through to the retailer, because they've requested it.
Senator RHIANNON: So every batch of wool actually has that information on it—non-mulesed, ceased-mulesed or otherwise?
Mr McCullough: Some don't declare.
Senator RHIANNON: What portion would declare?
Ms Slack-Smith: Sixty-one per cent.
Senator RHIANNON: So 61 per cent would have one of those labels on it?
Mr McCullough: Yes, and it's growing.
Senator RHIANNON: Can you take on notice what proportion within that 61 per cent has those different categories that you've listed here?
Mr McCullough: We can get that for you right now.
Senator RHIANNON: Okay, great.
Mr McCullough: Then there's a proportion there that are not declared, which we assume are—
Senator RHIANNON: Is that the 39 per cent that's not declared?
Mr McCullough: Yes. It's a hard figure to get an absolute grip on across the Australian wool clip because there's 39 per cent that's undeclared, which is assumed is actually off an animal that's been mulesed.
Ms Slack-Smith: I have the figures for 2016-17. As Mr McCullough said, these are AWEX figures and not AWI figures, because they manage the National Wool Declaration. So 61 per cent of the total clip was declared, 9.9 per cent was declared non-mulesed, 2.9 per cent was declared ceased-mulesed, 27.7 per cent was declared pain relief, 20.6 per cent was declared mulesed, and 38.8 per cent was not declared. It's a voluntary system and we know that there's far more non-mulesed and pain relief wool available out there. Both AWEX and AWI are working to try to encourage growers to actually declare their wool.
Senator RHIANNON: So that 100 per cent is the declared and not declared. You said that there's 38 per cent not declared. Is that 100 per cent of all the wool production? Is that what we're talking about?
Ms Slack-Smith: It's 100 per cent of the wool that is sold through AWEX through the auction system, and the vast majority of wool is sold through the auction system.
Senator RHIANNON: So that's 100 per cent, and 38 per cent of that is not declared.
Ms Slack-Smith: That's right.
Senator RHIANNON: Thank you; that's very useful. That's for 2016-17. Can you provide on notice that data for the previous five financial years so we can see the trends?
Mr McCullough: We can get that for you on notice.
Senator RHIANNON: Thank you very much.