Rachel Baxendale, 1 October 2015

The new chairman of embattled convenience-store chain 7-Eleven has praised his predecessor, founder Russ Withers, as “highly effective”, despite Mr Withers and two other executives being forced to step down amid wage- fraud allegations.

Former iiNet and West Coast Eagles chairman Michael Smith was appointed chairman, as Mr Withers, chief executive Warren Wilmot and general manager Natalie Dalbo resigned yesterday, almost a month after the ABC TV program Four Corners revealed allegations of systematic underpayment of predominantly international students working for the chain’s franchisees.

Mr Withers, Mr Wilmot and Ms Dalbo last week gave evidence at a federal senate inquiry into the issue.

Mr Smith yesterday said Mr Withers had been a “highly effective chairman”.

“I doubt my chairmanship will match the quality of his,” he said. “Certainly he had no knowledge of (underpayment), beyond a normal business problem.”

Mr Smith, who has been on the 7-Eleven board since 1999, said the company initially believed the underpayments were not widespread.

“It then grew to a large number and our audit showed it was relatively widespread and affected some or all of the system,” he said.

“Management were on it. Warren was on it. Warren responded to what he knew. We looked into it further and it became clear that there was a much greater instance of this going on …

“At that point (it) started to become unbelievable that there wasn’t an element within our company that turned a blind eye to it or knew more about it.

He said the company realised there was a problem in its culture: “The model isn’t where it needs to be and we need to revisit how we look after stores doing less well.”

“We needed to engage in a wholesale fix of this, and (Mr Wilmot) realised that was better done by somebody else.”

Mr Smith, who became deputy chairman late last year, had been earmarked to take over as chairman at Mr Withers’s planned retirement in 18 months. He will lead the search for a new chief executive, with former Australian Association of Convenience Stores chairman Bob Baily appointed as interim chief.

Mr Withers remains the largest shareholder in 7-Eleven and chairman of the group holding company that owns 7-Eleven and Starbucks stores.

Allan Fels has been appointed to run an independent panel to identify underpaid workers and repay wages.

Extracted in full from The Australian.