There can be no doubt that rugby union in Australia, and more particularly Rugby Australia, has turned the proverbial corner.

Facing an existential crisis, an unexpected board room but more predicable management change has seen the stocks of the parent body increase significantly since the ascension of Hamish McLennan to the role of chair, and the more-than-able assistance of the interim CEO Rob Clarke.

Andy Marinos is still in his RA CEO infancy but appears to have made a valuable contribution to the broadcast agreement at the least.

In extolling their contributions, it would be remiss not to acknowledge the contribution of the previous CEO, Raelene Castle, whose idea it was to package all the sport’s prime broadcast-able products and take them to the open market. Time will tell if Castle’s snaring of Dave Rennie will also prove profitable.

The increase in the screen viewing audience this year is unquestionably the most significant step forward and in large part explains the new sponsorships that are being attracted to rugby from national to club level.

The free-to-air broadcast and the streaming of the Shute Shield in Sydney and Hospital Cup in Brisbane as well as Super Rugby AU have made and will make the biggest difference for the game’s future.

An anecdote I was recently told was that some boys who had committed to play in their school’s first XV for this year had never seen a game of rugby union. That brought home to me the importance of on screen visibility for a sport. It’s hard to get enthused about something you’ve never seen and even harder to attract new fans.

But ironically, this new impetus coming as it did from a change in the governance personnel is based on a governance system that is inherently restraining of growth and development and indeed rugby union’s long-term future as a viable sport in Australia.

That governance system is known as federation and it is enshrined in the constitution of Rugby Australia and its member state and territory unions. So it was with some joy that I read in a recent column by Geoff Parkes:

Long-awaited constitutional and structural change is imminent, which it is anticipated will create distinct functional committees to run Super Rugby and the community game which aren’t dependent upon or subject to, state-based voting blocs.

Expect to hear more on this in coming weeks, as negotiations continue with prospective Private Equity partners, who naturally, seek the certainty that Rugby Australia has its own house in order, and the surety that their investment cannot be held hostage to the whims of a few grumpy ex-captains.

However, supporters of rugby should be under no illusion. If the governance structure of all Australia Rugby is not changed far more fundamentally than the establishment of two committees and the introduction of private equity. The $27 million loss by RA for 2020 will be repeated.

The current unwieldy governance structure is based on costly and inefficient duplication off the field and uncoordinated and uncontrollable pathways for player and game development.

The situation
The complexities, pitfalls and inconsistencies that arise from a federal system of governance was revealed by the COVID pandemic whereby the states and territories have each gone their own way on most issues to manage the pandemic. They have been well known to Australian sport since 1901 when the states united to form the commonwealth of Australia.

As with most Australian sports, the governance structure of Rugby Australia partially mirrors the federal political system. The unions of the six states and two territories are each independent legal entities who can and do go their own way on most aspects of the sport.

However, it is unlike the federal system at the broader political level where the citizens get to vote for the national government and each of their respective state/territory and local governments.

In the Australian rugby governance system, while the clubs, associations and affiliated bodies of states and territories vote or appoint the directors of their respective boards, rather than also voting for the national body, it is the state and territory associations who then vote or appoint the Rugby Australia board with the guidance of a nominations committee. So from the outset, the clubs are disconnected from the national body.

Under the current constitution of Rugby Australia, there are in fact a total of 13 independent legal entities who are the voting members of RA: the six state and two territory unions, the four Super Rugby licensees (the Force do not have a licence), and the RU Players Association.

Beyond the 13 voting members of RA there are also under its constitution nine affiliated unions (being Australian Junior Rugby Football Union, schools, defence force, universities, Barbarian club, women’s rugby, classic Wallabies, NSW Country Rugby Union and Sydney Rugby Union).

Then, as implied above, under the federated system, there are the governance structures of each of the states and territories. The New South Wales Rugby Union, for example, has seven voting members: Sydney Rugby Union, country, suburban, referees, schools, juniors and women. All of them are also independent legal entities.

Notably, the clubs – the grassroots – are not members of the NSW Rugby Union either. By any measure this is a complex governance structure, which as will be explained below, is not conducive to good governance and by extension good outcomes for rugby union in Australia.

According to Sport Australia, governance is the system by which organisations are directed and controlled, the thinking and monitoring part of an organisation providing leadership in terms of purpose, strategy and values. It operates according to the structures and processes for decision-making as set out in its constitution. Governance is different to management and administration, which involves the doing and running of the organisation, the day-to-day and week-to-week activities.

Although trite to say, it is unquestionable that without good governance an organisation is fundamentally doomed. What is good governance? is then the critical question. And this can be further refined to appropriate governance because each organisation and the enterprise in which it is involved must determine its governance structures and processes according to its own idiosyncratic environment.

Thus, the focus of this article is what is the appropriate governance system for rugby union in Australia and how could it come about?

The problem
In August, 2012, Mark Arbib prepared a report for the Australian Rugby Union (the ARU as Rugby Australia was then known), entitled ‘Strengthening the Governance of Australian Rugby’ in which he was charged with reviewing the governance structure of the ARU at the time and assessing its strengths and weaknesses with a view to recommending possible improvements.

The primary recommendations from the report for the ARU were as follows.

• Establish an independent Board of Directors whose mix of skills and experience are well suited to meet the needs of the business by breaking the nexus between Directors and their constituent groups.
• Ensure the Board and management are accountable to shareholders and transparent in their dealings.
• Reform the shareholdings of ARU to fully and fairly reflect the Members of the ARU by including the Super Rugby teams and the Rugby Union Players’ Association (RUPA) as Members and rebalancing the voting entitlements of Member Unions.
• Ensure the Board, Members and management all clearly understand their respective roles within the organisation and are involved in overcoming the future challenges Rugby faces.

All these recommendations were only ostensibly adopted by the ARU as should already be, and will increasingly become, evident.

The report was undertaken some eight and a half years ago. However, besides the point that regular review of governance structures and processes is part of good governance, it will be argued here that there is a strong argument that now is an optimum time to undertake a further review and substantial reform of the governance structures and processes.

However, importantly, the focus of the next review should encompass not just Rugby Australia but the whole of Australian rugby. Indeed, one of the criticisms that could be levelled at the Arbib report was that it focussed just on the ARU and did not review all of the governance of rugby in Australia – from club to city to region to state to country to all stakeholders. In other words, a root and branch review.

As implied above, the governance problems for Australian rugby are threefold at the least. Firstly, there is the federated governance structure of rugby union in Australia: club, state/territory, national union.

The problem is here, as was recently pointed out by Andrew Larratt (formerly of Rugby Australia and Sport Australia) in a LinkedIn post.

As a result of the distorted federation of Australian rugby, the voice of the member and club is filtered if not lost to the national body (RA) and secondly the state and territory unions elect and overturn the national board often in preservation of the status quo or competing with the national interest. Moreover, the current hybrid model causes duplication of effort, frustration in the definition of roles and responsibilities and competing factions between states and territories.

Indeed, duplication is rife with eight state and territory boards and one national board resulting in over 80 directors to govern the sport, while at the management level there are nine CEOs, nine CFOs and nine marketing directors and the list goes on.

This governance structure of nine independent legal entities creates a fundamental flaw for the delivery of services because ultimately:
• RA has limited control over its state and territory union members – they are independent legal entities and therefore able to act independently of the parent body, although they are members of it.
• There is unnecessary duplication – instead of one strategic plan, marketing plan and player development program there are at least nine and probably 14
• Time and energy consuming power struggles – as the 13 members, as well as the seven associate members, jostle for control and power over decision making and access to resources.

As anyone involved in an enterprise with so many independent parts will attest, “organisations with divergent priorities and structures may struggle to achieve ‘best practice’, thus jeopardising their potential for future growth,” as stated by one respondent to Larratt.

Secondly, there is the juridical issue arising by virtue of the RA voting members being independent legal entities. As such, they are duty bound under the law to act in the best interests of their own state or territory association as opposed to those of the parent body, Rugby Australia, of which they are a member.

Under corporate law, the directors on the state and territory, Super franchise and player association boards must act in the best interest of the entity they represent, not the clubs, not the national body, nor the sport of rugby in Australia as a whole.

This means when it comes to decision-making, there are significant conflicts of interest from an objective ‘whole of sport in Australia’ perspective. While the board of Rugby Australia is independent, the voting members of the RA in general meetings (the state and territory unions, the franchises and the RUPA) – which is the ultimate governing authority of Rugby Australia – are often torn between doing what is right for Australian rugby as a whole and what is right for the home union, franchise or association.

It is to the latter that the voting members are legally duty bound. This is not an ideal scenario for getting optimal outcomes and greatest efficiencies for rugby in Australia both on and off the field – especially given the limited resources.

The third issue is who are or should be the members? The clubs, the local association, the state association, all the various stakeholder associations or simply all registered individuals who are interested and want to be a shareholder of the overarching corporate body?

What we have in short is a distorted separation of powers, which is dysfunctional, results in duplication on a grand scale and sees the roots detached from the branches and the over-arching canopy (or crown), which is Rugby Australia. Such an arrangement is doomed in the long term.

The solution
The most fundamental change needed is therefore to connect the roots and the branches and the canopy.

There should be one legal entity governing Australian rugby. Its members should be the clubs (for which a suitable definition would need to be formulated). State and territory associations should be branch offices of the national association. The Super franchises would be licensees of the national association.

This would allow private equity to become involved directly with the parent body. Players at the professional level would be contracted to the national body (own the players, own the game). Fortunately, Australian rugby is coming to private equity after a number of other national unions have done so and accordingly is able to learn from those experiences.

Moreover, by including PE experts and the players association, RA has brought into the PE negotiations tent the right people (a theme to which I will return).

The board of RA should include representatives of key stakeholders and the broad Australian rugby community demographic, as well as the independent experts. Clearly all the stakeholders cannot be represented on the board, so there should be established relevant sub-committees for all stakeholders, which are constitutionally entrenched.

The two proposed sub-committees for community and professional rugby are a good start. However, the board should nonetheless be “a diverse group of people who collectively provide different perspectives and experience to facilitate more considered decision making”, per Sport Australia’s principles.

The governance of Australian rugby should thus have a clear separation of powers between the national and state/territory associations (branch offices of the national body) and the clubs (who are the members and operate in collaboration with the national association through the state and territory offices).

Each level would have clearly defined roles and responsibilities under one strategic plan. The clubs would thereby have transparency on what the state/territory and national bodies are each accountable for delivering. Further, as suggested by Larratt, there is the empowering and embracing possibility for specific referendums where every paid-up member of a club over 18 years would be able to vote on matters that define the culture, resolve conscience vote issues and potentially contribute to the purpose and direction of the sport.

In essence, Australian rugby as a whole becomes more like a company than an association with the clubs (and their members) as the shareholders and the various state/territory administrations (whose personnel will be employed by Rugby Australia) accountable for services while the national body is accountable for the dividends.

Importantly, from a good governance perspective, in doing so, RA will clearly define its structure and the duties, responsibilities and powers of the members, directors, committees and management, per Sport Australia principles.

In short, it is now time to genuinely – and structurally – directly connect the grassroots with head office. That is to say: de-centralise the ultimate power base, but simultaneously, functionally centralise the overall governance of Australian rugby.

The benefits
As should be apparent, there are a number of direct benefits to the sport as a whole.

Duplication is removed, best practice is shared and uniform throughout the organisation, the customer experience at the community level is directly related to the actions of the national body and for which they are directly accountable. The sport will thrive through a singularly defined purpose, strategy and structure that is also clearly accountable to the clubs and possibly their individual members.

Australian rugby would be leaner and more efficient, delivering more meaningful resources at the community level. The clubs would have a voice at the national level and they would have transparency on the defined roles for every level of the sport.

By eliminating the 13 independent legal entities, a whole level of bureaucracy and power plays is removed and everyone from grassroots to the top is reading from the same book and acting accordingly. Time and energy wasted on typically petty political bush fires is saved and used for the one agreed purpose.

Because of the alignment, the relationship would be one of collaboration and hence maximised efficient use of resources and the implementation of whole-of-sport plans, per Sport Australia principles.

In summary, there would be democracy, transparency and accountability from the top to the grassroots.

The conclusion
That so many folk became despondent with the state of rugby – or at least facets of the rugby enterprise – suggests that there are a lot of folk who really care about the sport and want to see it blossom in the future (and indeed, the viewing numbers and take-up of Stan Sport reinforces this point).

It is strongly suggested that only a root and branch overhaul involving all the rugby community will, given the current financial state and governance system of the sport and the disquiet among many of its supporters as well as the perennial detractors and sceptics, ensure a long-term future for Australian rugby.

What is needed therefore is the bringing together the representatives of the entire Australian rugby tribe with the goodwill and fortitude to do what is best for rugby in all of Australia.

While this may not suit any one individual nor any one group nor any one voting member, what it must do is generate a general consensus of all the constituents. And that can only be achieved if all the voices and views concerned with the future of rugby in Australia are listened to, considered and then consolidated into a governance structure and set of processes that encompasses, represents and serves all of those constituents.

Hamish McLennan has been particularly astute at bringing the disparate and often disputing members of the rugby community into the rugby tent, and this is what should occur as the first step. Alternatively, but less desirably, Larratt notes the clubs could rise up and through local leadership build momentum for change. As demonstrated in European football, this approach can be extremely powerful.

The possibility of this being a viable process for Australian rugby was demonstrated recently with the choosing of the definitive colour of the Wallabies’ jersey. Although it was for a singular item of no complexity, it nevertheless was an illustration of what occurs when the relevant representatives of the Australian rugby community are brought together and there is a unity of purpose and clear focus. Whatever the process, it should not be rushed.

It is vital that there is sufficient time for consultation and the consultation is very inclusive of all stakeholders – and pundits – so as to gain the broadest input, understanding and ultimately ownership of the outcome.

Furthermore, it will take the leadership of Rugby Australia and its voting members to embark on the process to define the separation of powers, to install the clubs as the members and to disestablish the states and territories as separate legal entities.

Ultimately then, whether change will occur rests on the shoulders and in the hands of the RA voting members, for only they have the power to change the constitution and the governance system.

Ideally, they will act in the best interests of Australian rugby rather than that of their respective constituency. But – and this is the biggest challenge facing Australian rugby – the RA voting members are conflicted as to whether to look after the interests of their association or the interests of Rugby Australia of which they are the members.

It could be a battle between egos and self interest and minds and hearts directing their decisions and actions. We – the rest of the rugby tribe – should hope it will be the latter.

This is a crucial moment for the governors of the members of Rugby Australia and indeed Australian rugby.

Can those in the positions of power disestablish the entrenched systems of governance structures and processes, which provide their power, status, control and tenure, for the common good and hand them over to those to whom they rightfully and logically belong – in other words, Rugby Australia and the rugby clubs of Australia?

To do so, they would have to decide that these steps are, in the long term, when all is said and done, what is in the best interests of their union, franchise and association.

While I have argued they are, I cannot assume that there are not other possible alternatives. But no matter what they might be, I have also argued and maintain there must be a fundamental change to centralise and de-centralise.

Good and appropriate governance is the bedrock of a sport association’s success and therefore that of the sport itself. The urgent challenge for Rugby Australia is to start the process and seek out, through consultation with its stakeholders, the optimum governance system for Australian rugby.

Then, and only then, will rugby union in Australia have a sound foundation for its future.