Q&A with Peter Newell

ClubsNSW chair, Peter Newell, has risen to regulation and corporate governance challenges by protecting the clubs sector’s financial sustainability and steering it through times of mergers and acquisitions. Tony Featherstone reports.

The avid junior golfer joined a club in  New South Wales and in the 1970s became a member of a city leagues club. He recalls the smoky club having two bars: one for members (men) and another where men and women could congregate.

Today, Newell chairs the influential ClubsNSW and is the president of Clubs Australia, a coalition of state and territory associations that represents more than 6,500 licensed clubs across Australia and New Zealand.

The former newspaper editor also chairs ClubKENO Holdings and the Illawarra District Rugby League Football Club, is a director of Club Plus Superannuation and the NSW Institute of Sport, and an alternate director of the St George Illawarra Dragons board. He played a key role in the 1999 merger of the Illawarra Steelers and St George Dragons national rugby league teams, and is occasionally still criticised by disgruntled fans.

Few governance roles are more important or challenging than Newell’s clubs work. The clubs sector had almost $10 billion in revenue in 2011, contributed $2.3 billion to the community and paid $2.4 billion in taxes, according to the National Clubs Census. There were 11.6 million paid club memberships across Australia, 250,000 volunteers and 96,000 employees in city and regional clubs.

But almost half of all clubs in Australia are in financial distress, hundreds have been forced to close or merge in the past decade, and more amalgamation is needed – something many clubs have resisted.

Regulation is another threat. Clubs Australia successfully led an aggressive campaign in 2011 to lobby against the former Federal Government’s deal to override state and territory controls on poker machines, which was designed to retain the support of Tasmanian independent MP Andrew Wilkie. The deal would have meant Australia’s five million annual poker-machine players requiring a licence to gamble – and would have potentially crippled the clubs sector.

Poker-machine opponents argue that the gaming lobby, particularly in NSW, has too much influence. It’s a fine line: Newell and his fellow directors must ensure the clubs sector meets its corporate social responsibility (CSR) obligations by working with governments to introduce and enhance harm-minimisation strategies for problem gamblers.

But they have to protect the clubs sector’s financial sustainability, the needs of communities that rely on sporting clubs, and the millions of Australians who are recreational poker-machine players. Poker machines are the sector’s main revenue source.

Changing governance requirements is another challenge. The NSW Government has mandated that by 1 January 2017, club boards must have a maximum of nine members. “This addresses a long-standing issue of extremely large and at times, unworkable boards,” says Newell.

ClubsNSW is active in board education. Its Clubs Director Institute has provided governance training for 13 years and about half of the 10,500 directors of NSW clubs are members. The NSW Government introduced mandatory director and manager training in clubs in July 2013.

Governance standards

However, weak governance remains an issue in parts of the sector. “Because of the industry’s diversity, I would rate the standard [of governance] from excellent to poor,” says Newell. “There have been great strides in improvement in recent years, but there is a way to go and, in reality, it will be never-ending.”

Newell says the responsibilities placed on club directors and managers have grown. “You still might get a raised eyebrow or two when informing some club leaders that although they may be in charge of a small club in the bush, they have the same responsibilities and exposures as a director of BHP Billiton,” he says.

NSW clubs, for example, are subject to around 20 state or commonwealth acts ranging from the Registered Clubs Act, the Gaming Machines Act, the Liquor Act, the Work Health and Safety Act and the Anti-Discrimination Act in NSW, to the Corporations Act, the National Gambling Reform Act, the Anti-Money Laundering and Counter Terrorism Financing Act, and the Income Tax Assessment Act.

That creates a complex risk-management environment for boards of large clubs. “There is a far greater emphasis on club director and manager education today than in past decades – for their self-protection as well as the clubs they represent,” says Newell.

ClubsNSW is working with the Australian Institute of Company Directors (AICD) to enhance clubs governance. Its Clubs Director Institute has agreed with the AICD to launch a Director Search Assistance program that enables clubs to advertise board vacancies to AICD members. AICD managing director and chief executive officer (CEO) John Brogden, is a keynote speaker on the opening day of ClubNSW’s upcoming annual conference. 

The promotion of club board vacancies to AICD members is an important governance development. It means the clubs sector will access a wider pool of skilled governance professionals and AICD members will have better information on club-board vacancies. The long-term result should be enhanced governance across the clubs sector.

Sporting clubs have much to offer directors. Some have more than 100,000 members, produce more revenue than many ASX-listed companies and offer services from gaming to restaurants, entertainment, aged care, childcare, healthcare, hotels, and shopping malls. Others with fewer than 50 members provide an opportunity for emerging directors to learn about grassroots sporting governance, gain their first board role, add to their directorship portfolio, or give back to the community.

Newell’s interest in clubs has always been about the community. Asked what he loves most about the sector, he replies: “The people – short and simple. Being involved with those making it happen – in most cases, dedicated ordinary people who specialise in loads of community and interpersonal goodwill.”

Newell adds: “I saw many sides of life with more than 30 years in the newspaper game – and encountered many fine people – but this has opened my eyes to the nation’s greatest asset: people who love their respective communities and generally regard each other with affection. I know it’s a hackneyed expression, but I am a better person for it.”

Here is an extract of Newell’s interview with Company Director:

Company Director (CD): What are the biggest challenges facing clubs?

Peter Newell (PN): The clubs industry’s rationalisation has continued for some years and there’s no magic bullet in arresting the trend. Some have questioned whether, after mushrooming development in earlier decades, there are too many clubs in NSW. That is a vexed question, but the trend can’t be ignored.

Clubs have closed, others have amalgamated. The latest National Clubs Census has produced the sobering statistic that 51 per cent of clubs nationally were showing signs of financial distress, while in NSW 64 per cent were either operating at borderline profitability or in financial distress.

There are many reasons for this, among them demographic changes in cities and the country, population drift, drought, various pressures on discretionary spending – all affecting clubs’ abilities to invest – along with administration shortcomings, in some cases.  

CD: Is it hard to find enough quality directors for clubs?

PN: Finding and encouraging good club directors, particularly younger ones, remains a challenge, as is ongoing director education.

With ClubsNSW’s support, the State Government has mandated that clubs requiring specialist director skills may appoint up to two directors as part of a maximum board size of nine. These initiatives will help, but the issue will remain. Attracting good directors of either sex remains an ongoing issue for clubs. This is particularly so in regional and rural areas where volunteer directors can have heavy calls on their time while trying to run a business, farm the land, or are in employment to keep a roof over their families’ heads.

We try to insulate our clubs from regulatory or wider political shocks, which is essential as there is a correlation between supportive conditions and government policies, and the industry’s overall health.

Informing the general and political community of the role and value of clubs to their local communities, as well as to their particular state or territory, is an ongoing challenge. Some years ago, ClubsNSW took a strategic decision to commit significant funds annually to an educational and promotional public campaign to position clubs in the eyes of the wider community. This is part of an ongoing plan.

CD: What are the biggest opportunities for clubs?

PN: In broad terms, the opportunity is to leverage the substantial physical and people assets of clubs [land and members], which requires good decision-making and financial investment.

An opportunity now is low interest rates. We have encouraged clubs across NSW to not miss the moment; those with the means to undertake properly planned and evaluated development projects should strike while the iron is hot.

Digital opportunities will continue to evolve. One underplayed asset with enormous potential development is individual clubs’ member databases. Others in the hospitality industry try to create such things and this can be a rich asset just sitting there for many clubs to develop.

CD: How do you expect the clubs sector to evolve over 10 years?

PN: We are seeing evidence of how the industry may evolve and are optimistic. Achieving scale is important and consolidation [of clubs] will enable this. While some, mostly small, clubs are finding it difficult to come to grips with regulatory or general economic shocks, others are powering ahead, growing, diversifying and securing their long-term futures. Supported and encouraged by ClubsNSW, clubs will further evolve, and enhance their community roles and relationships.

The issue of amalgamations is a mixed bag. We do all we can to encourage and facilitate them where such a joining would appear to bring positive cost-reduction, development and other opportunities. But in some cases it can be like pulling teeth, and in the odd extreme case directors of a club have made no bones about trading to the last day, then closing the doors rather than seek amalgamation. Some of this can be linked to rivalries and “bad blood” that might go back decades.

Finding a compatible amalgamation partner is also not easy, not the least because some clubs ignore early warning signs and don’t issue distress signals until they are unattractive to an amalgamation partner. There have been some excellent amalgamations and they will continue, but certainly not apace.

One issue is getting clubs that are travelling fairly well to look ahead and explore the options of an amalgamation among equals with the positives that can bring.

Clubs will continue to do whatever they reasonably can to diversify their revenue base, but they need to have the ingredients to do so. Primarily, in many cases, that means property and funding. Gaming will remain an integral offering and principal revenue raiser for most clubs into the next decade. The face of gaming will change in its delivery and offerings, but it will remain an important ingredient. That in itself is a clearly identified major operational risk, but it’s not going to be fixed overnight.

CD: Critics of poker machines say ClubsNSW has too much lobbying power in NSW and that the changing of gambling regulations announced in the state in June was misguided. How do you respond?

PN: Some critics of poker machines will say just about anything. We saw that when the mandatory pre-commitment issue flared [in 2011]. They simply don’t understand, or don’t want to, that millions of people love their community clubs, and that a great number of them enjoy playing poker machines.

ClubsNSW and Clubs Australia strive to maintain a relationship with government and opposition built on trust, mutual respect and recognition of clubs’ contribution to communities across the state and nation. Clubs are part of the fabric of Australian life, providing economic benefit to governments while providing facilities, infrastructure and services to millions of ordinary Australians, aiding social cohesion and wellbeing. In many regional and country areas, the local club is the “town hall” – a centre of community focus and activity.

Regarding criticism of changes, the NSW Government was a willing signatory to a memorandum of understanding (MoU) with ClubsNSW, which I signed with the Premier [Mike Baird] and the now Deputy Premier [Troy Grant] in front of 1,000 people last October, and which the [State] Coalition took to the people in the March election when it was returned comfortably.

This MoU included measures to improve harm-minimisation measures [from poker machines], while giving a not-for-profit industry regulatory stability. The Coalition and Labor rejected attempts by the Greens to amend the changes.

CD: Have governments got the balance right with gambling reform?

PN: As far as clubs and poker machines are concerned, the balance is reasonable, which is reflected in Australian jurisdictions having some of the lowest problem-gambling rates in the world.

Gambling regulation as it applies to clubs has traditionally been the province of state and territory governments, but some focus shifted to the federal legislature as a result of the hung parliament during Julia Gillard’s prime ministership.

I am sure the Prime Minister did not understand the unintended consequences of her agreeing to a demand by Tasmanian independent MP Andrew Wilkie to introduce mandatory pre-commitment under which every Australian who wished to play a poker machine would need to have a card, set a limit on his or her spend, with every machine across the country linked to a national grid that would record people’s play.

Our research was that ordinary recreational players who frequent our clubs would react poorly to such an imposition and would refuse to engage, with devastating effects on community clubs. It would have cost billions of dollars to implement, which would have resulted in clubs closing, putting people out of work and causing sports teams and community groups that rely on clubs’ support to fold or be badly affected. Gillard later walked away from this deal with Wilkie and Labor later voted with the Coalition on another reform package.

Federally, we are seeing discussion and potential action on sports-betting companies being allowed to woo customers betting on credit, and on unlicensed internet casino providers. [Clubs are not permitted to allow poker-machine play on credit – a position ClubsNSW supports.]

Media reports as recently as September revealed the Federal Government would move before Christmas to overhaul Australia’s outdated online gambling regime, with tougher rules to target the business models of offshore bookmakers.

In NSW, much continues to be done [on poker-machine reform]. While quick to defend the industry from what we would see as unfair and ill-informed attacks, we have a strong and continually developing harm-minimisation program that has short- and long-term aims.

CD: How much time does the ClubsNSW board spend on the issue of responsible gambling?

PN: The matter is constantly before the board, not least regarding statewide initiatives being put in place in conjunction with government, the regulator, or gambling counsellors.

All these matters and operational issues are contained in monthly strategic plan reports that are considered by the board. To further enhance this oversight – and wider industry involvement – in July ClubsNSW signed an agreement with the Australian Centre for Corporate Social Responsibility to develop a CSR strategy and best-practice “how-to-guide” for the industry that should be rolled out early in 2016.

At the same time, an individual seminar titled Securing Our Social Licence to Operate will be presented at the ClubsNSW annual conference of member clubs in October.

CD: What are the ClubsNSW board’s main tasks?

PN: The board of six is elected by the membership on a three-year rotating basis. It exercises the required corporate responsibilities regarding oversight of financial, risk, operational and regulatory planning matters. But it also provides first-hand intelligence to assist the organisation in responding to major or grassroots opportunities or challenges affecting some 1,300 clubs across NSW.

While respecting the “church and state” separation, the board offers support to the CEO and his executive team, at times of more positive focus, but also at times of industry concern.

CD: Sporting and club boards, including ClubsNSW, are male dominated. Are we seeing enough progress on gender diversity in club boards?

PN: Not overall, although I detect in my travels an increasing number of women on club boards and in senior management positions. I am not in favour of some formal “quota” system and I’m sure our member clubs – men and women – would also be reluctant. But more could be done in this area.

CD: Why are clubs and grassroots sporting associations a good governance training ground?

PN: Because they all have rules that must be followed, albeit some basic, but usually in a collegial environment. It’s a fairly easy “toe in the water”.

CD: What makes a good clubs board?

PN: Directors must be driven by the right reasons to seek election – believing they can contribute to their club and, through it, to the community it serves, not because they’re the most popular drinker at the Friday night “table of knowledge”.

While not afraid to argue a point of view, they also need to be a team player, particularly on matters of strategic and investment importance. It must be remembered that while basic inviolate rules still apply, at times decisions taken in the hard-nosed confines of a multinational corporation boardroom for the good of shareholders might not be seen in the same light in a community-based NFP club.

CD: What has been the effect of ClubsNSW’s director training program on governance across the clubs sector?

PN: It has been taken up with enthusiasm across the board. We have some 5,000 members of the Club Directors Institute under whose banner much of our training offerings take place. Some may say, well that’s only about half the 10,500 club directors across the state but, given such a diverse industry involving 1,300 clubs across the far reaches of NSW and involving people of all ilks, that’s a pretty good outcome.

Admittedly, some of this enthusiasm may have been enhanced by a government requirement, with ClubsNSW support, that club directors, other than those meeting exemption criteria, now be required to undertake mandatory director training in two key areas: director foundation and management collaboration, and finance for club boards.

Nevertheless, the spotlight has been firmly on director training for some years now with a wide range of governance education opportunities. We regard this as a critical program that will continue to receive support and resources for the industry’s ongoing good.

CD: How does ClubsNSW help directors?

PN: ClubsNSW has a dedicated learning and development department that, using its own resources and expertise and consultants, offers training on a wide front to clubs across NSW, both face-to-face and online.

Our Club Pathways program offers director training in numerous areas ranging from the two mandatory basic subjects to Certificate IV in governance and beyond, Leadership to Cert IV level, a BBus in International Hospitality Management and Club Work Health and Safety training. ClubsNSW is also about to release to the industry a newly developed board self-assessment tool to assist directors identify areas where further education and training may be helpful.

CD: What advice would you give a first-time director who joins a club?

PN: Know what you’re committing to before you start. Indeed, clubs in NSW are obliged to make available to potential board candidates information to help them understand what is required of a director to fulfil his or her role.

Be aware of the time commitment, the knowledge commitment, and the responsibilities you will shoulder. Know why you’re doing it. What purpose is your becoming a club director serving? What will you bring to the board and the organisation you will be helping administer?

This in itself should not scare potential directors away; you don’t need to be a genius; above all, you need common sense, a willingness to contribute, and an appreciation of what you need to know to do the job.

CD: How did your media background help you make the transition to governance?

PN: I was lucky to experience both sides of daily newspaper life, as an editor then a jump to “the dark side” for 15 years as a general manager, which themselves required discipline and adherence to the laws of the land. They also offered an opportunity to interact with, or observe, a wide range of people. It exposed me to Australia’s political ways of life at local, state and federal levels, to business imperatives, to dealing with people of differing skills and complexities, and to having regard to levels of risk in both theatres.

CD: Will we see you on more boards in coming years?

PN: Who knows? I do not have a driving ambition in that regard, not the least because as things stand I have plenty on my plate with my other board roles.

CD: How do you relax away from work?

PN: I like associating with friends at a club and so does my wife. For my sins, I was introduced to the sport of kings by my gatekeeper grandfather at bush picnic race meetings when I was four, and that attachment has not waned. I still love horse racing.

I maintain full playing membership at the seaside golf club across the road from where I live and a local bowls club, but play only now and then. I’m an aviation nut, unable to stop nearly breaking my neck to observe anything overhead. I learned to fly as a young chap and might have ended this happy story some 45 years ago when fortunate not to crash on my first solo flight.