Boardrooms around Australia are officially on notice. The culture of the organisation and governance rests with the board. The Royal Commission has sent shock waves through the business community as every day there is a new revelation of criminal and unethical behaviour, disgraceful business and governance protocols. “Boards at the end of the day are responsible for these organisations, and there will be a lot of focus on executives, where executives haven’t been able to deliver here, at the end of the day, the boards of these organisations are the custodians, really, of the governance, and I am sure that that will have plenty of attention, as the commission carries on its important work.” Treasurer Scott Morrison
Profits before customers seems to be the re-occurring theme of the Royal Commission. Corporate social responsibility has become little more than a catchy slogan on a corporate website. Meanwhile in the boardroom you have the likes of Catherine Brenner Chairman of AMP being paid $660,000 per annum plus $750,000 worth of “performance-based” AMP shares. But I think we are just getting started in terms of shock revelations, there are plenty more to come as the Royal Commission works through the mountain of evidence and decades of misconduct.
Old School Networks are Dangerous
So what are my main takeaways about the state of play in the boardrooms in the ASX? Firstly, we are seeing just how dangerous old school boy networks are when it comes to creating group think, criminal, unethical and complicit behaviour in the boardroom. Social pressure to tow the line is immense, everyone is connected to everyone when you are from the elite of society, doing business with each other, and having children attending private schools together in the eastern suburbs of Sydney. Being an isolated independent voice in the boardroom doesn’t play well, its much easier to go along with the crowd. The stakes are high, the remuneration is over the top and very few directors are putting their hands in their own pockets to invest in the company that they lead.
Golden Skirts do not Equal Gender Diversity
The same women appear on multiple ASX boards and make no mistake, they are from the same elite “old school boys” network as their male counterparts. We do not have true gender diversity in Australian boardrooms, we have an elite society running the most powerful companies in Australia. Catherine Brenner was thrown out of the boardroom but not after she dug her heels in for several days refusing to budge. The Australian Shareholder Association will be opposing the re-appointment of Holly Kramer and Vanessa Wallace who were both on the AMP Board when there was the delay in reporting breaches to ASIC and the alleged interference with the independent report took place.
Education Has Failed
Governance education in Australia is clearly missing the mark. The board directors are all Fellows or Graduates of the Australian Institute of Company Directors (AICD) the so called “peak” director body responsible for governance and board director training. The AICD has been silent since this scandal broke and I can see why. Many of the board members who are now front page news for all the wrong reasons have served on various corporate governance committees within the education organisation. Its not a good look.
So what are the solutions? Clearly there is a requirement for board refreshment in the Banking and Financial Services sector but I would suggest we need to be looking at all ASX board appointments. The next generation of ethical business leaders need to now step up, we need fresh blood untainted by scandal and unethical behaviour. The Australian Shareholders Association is urging for this as well. In the coming weeks I am going to share with you my thoughts on how we can set about doing this to make a significant and lasting change. In my opinion, this is the #metoo moment for the Boardrooms of Australia to take stock, draw a line in the sand, redefine what a good board looks like and re-calibrate what education aspiring board directors need to be able to operate ethically, competently and demonstrate the leadership that we require from our top board directors.
Kylie Hammond is founder and CEO of Director Institute Next Generation Directors, a private enterprise that is focused on developing and connecting the next generation of board directors with Australian and International organisations and boards.
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