What’s wrong with Australian boards

The lack of business investment in the Australian economy may be directly related to the stereotype type make-up of directors in the nation’s boardrooms.

A number of reports this week has highlighted the lack of diversity at board level and the small pool of career directors who tend to dominate multi board appointments, and may not be have the time to fully review companies undergoing strategic challenges.

As reported in the Australian Financial Review recruitment firm Blenheim Partners’ Gregory Robinson and Dr Brett Wright, and Macquarie University Graduate School of Management’s Professor Charles Areni interviewed more than 80 chairmen, directors and chief executives of private and public companies about why boards were wary of growing their businesses.

The study concluded key areas of concern included: the failure to consider diversity beyond getting more female executives and board directors; worries that income driven “professional directors” do not want to risk blotting their career prospects with failure; excessive scrutiny from investors, proxy advisers, regulators and the media; too much emphasis and time spent on compliance and “box ticking” over genuine growth strategies; and too many lawyers and accountants on boards compared with other areas of expertise.

One participant made the particular salient point that boardrooms were becoming obsessed with reducing risk. “Boards spend a lot of time on governance and with an over-emphasis on risk, which does not necessarily reduce risk.”

“Unfortunately, this is making companies dead scared to take a risk. Are we making enough mistakes in the boardroom? No. Much of this is due to reputational risk. Reputation in a small pond is a major issue.”

Asked about what skills and competencies boards needed more of respondents pointed to international experience, executive experience and social media, technology and technology digital skills. Boards needed less accounting and legal skills.

Shortly after this report was published dbdata also noticed a relevant stoush taking place over at embattled engineering services group UGL where First Super boss Bill Watson had taken directors to task over the number of board they sat on and whether they were spending enough time overseeing their responsibilities at UGL.

All members of the UGL board have multiple directorships.

Respected UGL chairman Kate Spargo led a spirited defence of the board pointing out she (and the board) was “well aware of her responsibilities.”

But demonstrating what a small pool Australian directors swim an Australian Council of Superannuation Investors report released in October showed that 19.3 per cent of ASX 100 directors sat on more than one listed company board.

This is also one reason many companies are finding it hard to respond to gender diversity at board level. Earlier this year dbdata did a quick analysis of its female directors list of 770 women and found 142, or 18.5 per cent, were on two or more boards.

Of course there are many more male directors, over 6600 on the ASX, which means not only are there not enough women directors to go around but many are already stretched over more than one board.

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