In sacking a high-performing CEO without explanation the RACGP board may have ignored some basic tenets of its governing Act.
The more you dig into the sacking of Paul Wappett last week the more a picture emerges of a rogue board, acting irresponsibly and outside the limits of its constitutional and corporate duty of care, without a care in the world for what members might think or want.
Here’s a list of questions we have put to the board which we think it needs to answer on behalf of its members urgently. (Today it was in a “critical” meeting – we wonder what about – and unable to get back to us, but we’ll follow up this story when we get a response.)
Unfortunately the RACGP constitution is so bad in terms of board and executive governance, it’s virtually impossible for the membership to force the board to answer any of these questions, or, indeed, to give any members the time of day on the subject of Mr Wappett’s departure.
- Why, specifically, did they sack Mr Wappett if, as has been indicated publicly so far, his removal has nothing to do with illegality or his performance? Why does the board think it is OK not to explain such a controversial sacking to its members and college staff?
- Did the board make its decision to remove Mr Wappett before the AGM (there are now strong indications it did)? If so can the board explain to members its reasons for not tabling such a significant event to the future of the college and members at the AGM? The Australian Charities and Not for Profits Commission Governance Standard 2 requires “charities to take reasonable steps to be accountable to their members, and allow their members adequate opportunities to raise concerns about how the charity is run”.
- Does the board feel that its management of the executive since October 2019 (when Zena Burgess technically resigned but was likely forced to), in which there have been no fewer than six CEOs or interims (the latest interim being Professor David Hillis) should itself be the subject of some sort of performance review?
- Should there be some sort of independent review of the constitutional setup of the RACGP, given it is virtually impossible for a board director to be removed during their term (and none appear to have been ever removed in history), which makes it extraordinarily difficult for members to oversee or question board decisions and performance?
- Does the board possess expertise of sufficient breadth and variety to properly oversee the appointment of an executive team and develop and monitor strategy for an organisation that now has the complexity of a top 100 ASX-listed company (based on its revenues and staff numbers it would be about 84 on that list)?
- How does the board think its makeup compares to a similar board on the ASX top 100 in terms of spread of expertise and skills in business management and strategy?
- Did the board discuss with Mr Wappett its issues with him prior to sacking him and give Mr Wappett any opportunity to adjust his management style and objectives? If not, why not?
- What does the board estimate the cost of the CEO changeover to be? It will need to include a payout of the existing CEO contract or notice period, an international search process for a new CEO, which will run over the Xmas break, the payment of an interim CEO, potentially a sign-on bonus for a new CEO (given the circumstances of the last three externally appointed CEOs) and possible legal costs if Mr Wappett decides to take the college to court? How does the board reconcile this sort of spend with the need to save money in the short term and the imposition it has already placed on college staff via redundancies?
Quick back-of-envelope as to what the sacking might end up costing the RACGP and its members:
- At least $300-$600k for the notice period or remaining period on contract depending on terms of termination in the contract
- Up to $300k for an interim CEO as the search will take longer than six months
- Up to $350k for the international search and commission for a new CEO they have announced
- Potential sign-on bonus for new CEO of up to $100k given most highly competent people would not want to touch this job with a bargepole now given the history of how the board runs the place and treats its CEOs
- Being on over $600k per annum (over the income threshold for unfair dismissal claims) and presumably a tight contract Mr Wappett won’t likely have many easy legal avenues of recourse, but given the extraordinary circumstances he may have a go and that could be costly for the college; the reputational damage to the college will almost certainly be worse
- Loss of momentum on projects Mr Wappett and his executive were working on and which will now stall significantly – unknown amount
Back to the questions.
9. Does the board feel that any damage may have been done to the morale, continuity of employment and loyalty of the executive team under Mr Wappett, and college staff more broadly, given it has provided no explanation to any of these people what happened?
10. When was Mr Wappett’s last performance review and how did he go? Specifically how many objectives did he meet – was he awarded his bonus and if so at what percentage of 100%?
11. Was any indication provided to Mr Wappett of the board’s discontent with his work at this last performance review?
12. Although the college is governed by the ACNC standards of governance, the Australian Corporations Act requires that any board of a company hold an extraordinary general meeting if 5% of members vote for one. Would the board hold such an EGM and answer any or all of the above questions for members if 5% voted for it?
There are more questions, but I’m sure you’re getting the picture here.
The board can’t simply ignore all the above, as it is currently trying to do.
In all my time as a CEO of companies and as someone reporting on companies and performance for over 30 years, I have never seen such poor accountability, transparency and governance by an organisational board, unless that board has been found to be deliberately corrupt.
I am not alleging that the RACGP board has been corrupt in any way.
I am, however, suggesting the board is acting in a manner that appears to be trashing its ethical and moral duty of care in terms of transparency with and engagement of its members.
Can you just get rid of a high-performing CEO and not explain yourself?
Something is very wrong here.
Of the board’s most serious problems so far, the worst is that it appears as though the board had made the decision to sack Mr Wappett well before the AGM (this is simply based on the college telling us it was a board decision and the board’s last meeting having been before the AGM). Although this can’t be confirmed at this stage, there are some very strong indicators in what went on prior to the AGM that the board had made its decision.
If it did, the fact that it didn’t table its decision at the AGM looks to be a very serious breach of the governance rules of the Australian Charities and Not For Profits Commission (see Governance Rule 2 above), which ultimately dictates the behaviour of the college board and executive.
What then?
Maybe nothing if the members don’t arc up and say enough is enough, stop treating us all like mushrooms.
If the board is as dysfunctional as these events seem to suggest then the problem is obviously bigger than the college and its members. It’s a problem for the government, which has entrusted the college to run training and governance of the most important single group of specialist doctors in the country, and it’s a problem in the end for Australians as patients.
This event makes it look like it is being run like some sort of mediaeval oligopoly by a select few people who aren’t qualified to run a mediaeval oligopoly let alone a large and complex training and governance organisation.
Certainly the RACGP seems to have exposed some very serious constitutional and governance problems in the behaviour of its board here.
Is this board qualified to run such a complex and important organisation?
To be fair, the membership rejected a proposal in 2017 to set aside three board positions for non-GPs, which may have been due to discontent surrounding the executive at the time.
But why does such an important organisation to the healthcare of all Australians have a constitution that makes it impossible for its members to have any oversight over the board’s behaviour or performance, or any ability to make changes to it?
As things stand now, no RACGP member has any right to put a question to the board about this potentially disastrous financial and cultural event, for at least 12 months.
Outside the obvious question of authority and governance to make such a decision without providing any explanation, the question of why the board actually got rid of Mr Wappett is a fascinating one.
If not performance based or illegality, what reason does the board give its members for getting rid of a performing CEO in such difficult transitional times?
Can you as a board decide that you just don’t like the cut of someone’s jib and ditch them?
Technically, yes, but any board would be foolish to do this without first getting their ducks in a row in terms of reasonable explanation to shareholders, or in the case of the college, members.
The evidence so far is that the board acted in a manner way outside the norm of a functional board by not giving Mr Wappett any warning or reason based on performance and not having any discussion with him about what they wanted, and whether he might adjust his management objectives and style.
If Mr Wappett wasn’t doing what you wanted him to do, given his seemingly stunning performance in transitioning training and improving internal morale and member confidence in the organisation, why didn’t the board first sit down with him, explain what they wanted and why, and see how things went from there?
How could that have hurt the situation?
Without a reason based on illegality or performance, it’s hard not to think that there wasn’t something personal going on.
Given the vacuum of information made available so far you start pretty quickly down a pretty deep rabbit hole of possible combinations of personality and politics.
Personality and politics are always in play in big complex organisations, but very rarely does someone get shot in the manner Mr Wappett has without a board having its logic tightly locked down and seemingly reasonable so shareholders aren’t spooked by irrational behaviour from its leaders.
The members of the RACGP board have virtually no experience in managing an organisation, a company (let alone an ASX-top-100-sized one) or indeed, being board members of complex organisations.
None have experience in running complex training and education groups. There isn’t a lot of expertise at the top as backup with Mr Wappett gone.
The constitution and governance of the RACGP board looks here to be grossly inappropriate and requires immediate and drastic remediation.
Who is going to do that, though, if the current constitution gives all the power to the board and no transparency or mechanisms for inquiry to the members?
Most members of the board are voted there by extremely small numbers of state members and the president is voted in by 10% of members. This is a poor way to pick a board to run such a complex and important organisation.
Interested members could start working on this problem by putting together a petition demanding an extraordinary general meeting.
It would be fascinating to see the board reject such a proposal on constitutional grounds. As part of the ACNC, and not entirely subject to the Australian Corporations Act, the board would have the legal right to deny such a meeting. But what would happen if they did?
The only other instrument of change might be the federal government itself, which must surely be looking on at the emerging facts here and wondering whether the organisation is actually too important to the healthcare system to tolerate the nonsense that the board is attempting here.
