The composition of company boards is a constant presence in corporate discourse: who’s joining, who’s leaving, is there equality, are they capable? As an active non-executive director at several businesses it’s a topic I’m very engaged in.
I am often asked if I believe Australia is a risk-averse place and, in particular, if the boards of listed companies are risk averse and don’t seek diverse-enough candidates to fill board vacancies.
As a glass half full person, I generally try suggesting Australian boards are looking for diverse candidates, are open to growth opportunities while at the same time doing a good job of evaluating risks.
"I generally try suggesting Australian boards are looking for diverse candidates, are open to growth opportunities while at the same time doing a good job of evaluating risks.”
But some recent experiences are, sadly, starting to change my mind on this question.
Bumps in the road
I know of two male executives who have been looking for roles. These are highly qualified and experienced men with excellent track records in large listed companies – one at CEO level.
Both have hit what you might call bumps in the road recently. One experienced a downturn which led to the company being placed in voluntary administration.
My outsider view in this case is the circumstances were well beyond the control of the board or management team and the CEO handled the difficult situation with integrity, tenacity and intelligence working toward the best result for creditors and shareholders.
The other company experienced a different type of event where external factors caused a known risk in a subsidiary company to play out very differently than expected.
These executives seem to be regarded as too hot to handle in some quarters. They could be excused for feeling their careers have been somewhat derailed.
Both are struggling to get any realistic engagement from listed companies for either executive or non-executive roles. This makes little sense to me.
Back in 2013, writing in the AICD Company Director Magazine Jane Stuchberry, a consultant on human capital matters, explored the “Six steps towards a board skills matrix”.
Stuchberry rightly noted investors and proxy advisers are showing more interest in board composition and ensuring the companies they invest in have the breadth and depth of board skills to enable adequate oversight of the business now and in the future
She counselled boards to work hard to retain control of the director nomination and appointment process.
Strategic leap
Stuchberry made the key point that in setting the board skills matrix directors need to contemplate the company’s next big strategic “leap” - beyond the scope of the present strategic plan.
They should be thinking about the most optimistic future scenario including diversification, acquisition and growth - while also taking into account the most negative possible outlook which could include divestment, contraction, a merger, rationalisation or restructuring.
Stuchberry advises boards to weigh up the skills, knowledge and competencies which will be needed for success in both scenarios.
If companies are being realistic about downside scenarios surely executives like the two I’ve just described might have skills which make them hot properties rather than too hot to handle.
I, of course, am very grateful the board of Henry Davis York was prepared to take the step of looking for a director who brought different expertise to their board and so recommended to the partners I, a non-lawyer, be elected to their board.
Now with the announcement of the merger between HDY and Norton Rose Fulbright some of the board’s thinking on useful skills comes to light.
I don’t think my experiences biased my input on HDY’s options towards a merger. It certainly made me push on actions to get the firm fit for a merger and understanding the aspects which make a good deal.
Thinking about this made me curious as to what companies might include in their skills matrices on the need for experience in turnaround, financial distress and restructuring.
I had a look at some companies who’ve recently been in the news. Arrium’s 2015 corporate governance statement had some broad stuff. It aimed for directors to “collectively represent a balance of skills” and said they’d appoint directors with “regard to a board skills matrix”.
Network Ten also talked about “a balance of skills” and said it would appoint directors assessed “against a range of criteria adopted by the board”.
The closest it got was to suggest one of the criteria was “risk-management experience”. This is where most corporate governance statements seem to land on the board skills matrix.
My casual examination of a number of statements could not find any mention of valuing the skills of those who have experienced tough times.
Please don’t take my comments to suggest the directors of companies I’ve named don’t have some of these skills – I know a number of these directors have served with some of them and so appreciate the value they bring.
My point is merely there is no explicit mention in public statements of the need for these skills and that itself makes its own point.
Diane Smith-Gander is a Non-executive Director at AGL Energy, Wesfarmers and Henry York Davis. She is immediate past present at Chief Executive Women.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
20 Dec 2016
24 Aug 2017