How much does it cost to remove a managing director of the ABC?

For an organisation with acute financial problems, the ABC sure knows how to blow up a budget — it spent the equivalent of employing more than a dozen journalists for a year just to remove one managing director.

Sacking Michelle Guthrie as the ABC’s managing director has likely cost the public broadcaster more than $2 million, including legal fees that were charged to the ABC of more than $250,000.

Costs revealed

ABC invoices from law firm MinterEllison obtained by Crikey show the broadcaster was charged $233,913 for what the documents say are “Adverse action claim — MG”, plus another $25,067 for general legal advice about Guthrie’s unfair dismissal case. A total of $258,981 in fees is listed for legal work undertaken between November 27 2018 and January 30 2019.

The cost of that advice was on top of the $1.64 million Guthrie was paid, which included a $730,000 out-of-court settlement, as well as the staff hours spent on dealing with the matter, the public relations disaster that ensued, the disruption to the board and the money spent on headhunters both for Guthrie and her replacement, as well as the search for a new chair.

Crikey obtained three invoices through a freedom of information request to the ABC, but access to eight other documents relating to the cost of the dismissal case were withheld, with the ABC claiming the correspondence contains “confidential and privileged” legal advice that it is unwilling to make public.

The withheld documents include various internal email threads between senior ABC staff, as well as an ABC board paper containing discussion about the case.

Legal fallout

Guthrie was sacked in September 2018 after serving just two-and-a-half years of her five-year term, with then-ABC chair Justin Milne saying the board of directors believed it was not in the best interests of the ABC for Guthrie to continue to lead the organisation.

She immediately instigated an unfair dismissal case, saying there was “no justification” to apply the termination clause in her contract. Guthrie’s sacking triggered some of the rockiest months in the ABC’s history, with Milne resigning just days after Guthrie was dumped as managing director, and the pair slinging mud at each other through the media in the weeks following.

An out-of-court settlement was eventually agreed between the ABC and Guthrie, a payout that new ABC managing director David Anderson has argued was necessary to avoid an even bigger legal bill for the dispute. The legal costs were covered by the ABC’s insurance.

The Saturday Paper reported that Guthrie was originally appointed after a search by recruiters Egon Zehnder, through a lengthy process that included psychometric testing and with only one other candidate interviewed by the full board: Anderson, who has now succeeded her. The Australian Financial Review’s Rear Window column estimated recruiter Spencer Stuart likely pocketed $300,000 from the ABC to recruit for Guthrie’s replacement.

New chair Ita Buttrose was appointed by the government, which rejected the candidates suggested by another global recruiter, Korn Ferry.

‘No more fat to cut’

Managing the ABC’s budget has been a particular concern for the public broadcaster since last year’s budget included a funding indexation freeze that started on this Monday. The cuts will cost the ABC $84 million over three years, which Guthrie said could not be absorbed with efficiencies, and Anderson has said will mean “inevitable” job and programming cuts.

“Despite extensive requests from the ABC, the budget papers locked in the $83.7m pause in indexation funding flagged in last year’s budget,” Anderson told staff in an email. He said the first-year impact of the cuts would be $14.6 million.

News director Gaven Morris also said there was “no more fat left to cut” when the freeze was announced. “In ABC News, almost 96% of our annual budget of $202.4m is spent on journalism and production,” he told the Melbourne Press Club. “Make no mistake, there is no more fat to cut in ABC News. From this point on, we’re cutting into muscle.”

Then-Communications Minister Mitch Fifield told 2GB the freeze, and efficiency review, were in place to ensure transparency at the public broadcaster and said the ABC was still funded well enough to fulfil its charter requirements. 

An ABC spokesman said: “Legal costs from the case were covered by insurance and so had no substantial bearing on the ABC’s budget.”

NOTE: This story has been updated to clarify the nature of Guthrie’s payout and to add a comment from the ABC received after publication.