Professional Series: Transition to the Board
It was a wonderful evening at the Four Seasons Hotel last month as more than 100 guests turned out for the launch of Stanford Brown’s Professional Series initiative. The series hopes to provide timely, informative and thought provoking content for Stanford Brown’s professional clients, in addition to networking opportunities with some of corporate Australia’s biggest movers and shakers.
The first instalment of the Professional Series centred on the transition from senior executive positions to the board, and was presented in conjunction with our professional colleagues at Uther, Webster & Evans solicitors. We were delighted to be joined by an esteemed panel with a depth of board experience in companies of varying size and industries.
Elizabeth Bryan – Chairman of the Virgin Australia Group and the Insurance Australia Group
Chris Cuffe – Chairman of the Australian Philanthropic Committee and former Chairman of UniSuper
David Bartholomew – Non-executive director to Atlas Arteria, Endeavour Energy, NT Power & Water Corporation, and Dussur
Jane Neale – Co-founder of Hattonneale, a leading board and executive search firm
Stanford Brown’s Director of Private Wealth Vincent O’Neill interviewed the panel on a wide range of subjects, with some key takeaways below:
On the responsibilities of directors post-Hayne
Elizabeth Bryan emphasised that the responsibilities of directors have not changed as a result of the Royal Commission. Before and after the Royal Commission, the responsibility of directors is to show loyalty to the company and its shareholders.
The Hayne report surprised many by not recommending a suite of new regulations. Rather, Hayne believed that values such as fairness and integrity, which should guide corporate Australia, were lost in as large financial institutions became increasingly complex. The loss of these values enabled the misconduct reported in the Royal Commission. The responsibilities of directors post-Hayne is to ensure that those values are not compromised.
Considerations before transitioning to the board
David Bartholomew rejected the notion that serving on the board is a “retirement job”, believing that you are embarking on a career change and should treat it as such.
David advised that you must do your homework when considering a board opportunity:
- How can you add value to the board?
- Will you be able to develop new skills in this role?
- Will you be able to work with the Chairman and the CEO?
The ability to develop new skills is of key importance for executives considering a transition to the board. Very few professionals will have the opportunity to transition straight to the board of an ASX 50 company. As such, you will need to develop your skillset and reputation as a director (rather than as an executive) on smaller companies before being considered for larger companies.
Chris Cuffe warned that you should understand your motivations for joining a board before considering a role. Many executives consider a transition to the board in the pursuit of money, power and/or prestige, which has the potential to end poorly for the director in question, their shareholders, and their stakeholders. Chris believes the best motivation for joining a board is the belief that you can use your experience to help the board serve its function.
On the qualities of a good director
Jane Neale emphasised the importance of a non-executive director understanding their role, as many former executives can struggle to take a step back in the management of a business. Some of the qualities she looks for in a candidate are the ability to collaborate, listen, and ask good questions; and has found that taking candidates out of the traditional job interview format (e.g. visiting a store and engaging with customers) allows her to get a better feel for how they’ll perform on the board.
Chris Cuffe reiterated that many former executives struggle with taking a step back in the decision making process of a company. He believes that a good Chairman will snuff out that behaviour and clearly outline the responsibilities of a director. Chris also noted that there is an unnecessary expectation of an adversarial relationship between the board and management, believing that the role of the board is to help management effectively carry out its duties.
Elizabeth Bryan looks for two qualities in a non-executive director. The first quality is a deep domain knowledge relevant to the operation of the company. For example, the board of an insurance company should include directors with extensive experience in the insurance industry. The other quality is the social skills to work effectively within a small group, a key factor being the awareness to know what your role is within the group, which changes over time.
David Bartholomew found that the being able to reserve judgement and listen has aided him greatly in transitioning to the board. Showing humility and respecting the varying opinions of your fellow board members are also key to success, which can be challenging for executives who are used to driving the decision making process.
On Corporate Social Responsibility
Chris Cuffe noted that the focus of smaller company boards is to ensure that the company is a going-concern, whereas larger companies are focused on longevity. Most smaller companies don’t have the resources for their philanthropy policies to make a significant societal change. On the other hand, the focus of the boards of larger companies is longevity. Making positive contributions to society and being a good corporate citizen facilitates longevity.
Elizabeth Bryan prefers to serve on the boards of companies that provide an essential service to society, so that she can work to ensure those services are being delivered effectively. Australians expect fairness and simplicity when they deal with the major institutions, believing they shouldn’t have to “count their fingers after shaking hands”. In the wake of the Royal Commission, companies are now expected to take stakeholders into consideration rather than just maximise shareholder value. The challenge for business leaders is to understand their business deeply enough to figure out how they can increase the societal benefit of their company’s services.
On charity boards as experience for company boards
Unless you are serving on the board of a large charity, Chris Cuffe believes that you are unlikely to gain the exposure that will enable a transition to company boards. For instance, a key role of the board is to hire and fire CEOs. This is unlikely to occur in smaller charities where the CEO is also the founder and face of the charity. Furthermore, smaller charities often struggle to attract experienced directors, meaning that you may have fewer opportunities to learn from mentors.
Both Chris and Jane Neale emphasised that if you are going to serve on the board of a charity, you should have a clear understanding of the expectations of your role, as the primary concern of small-medium sized charity boards is fund raising rather than governance.
Elizabeth Bryan believes that the aim of diversity is to enable the board to look at an issue at different angles in order to come to the best decision. She has found that the best way to achieve this is to have a collegiate atmosphere where board members respect, listen to each other, and speaks among themselves. A board can encounter issues when diversity for the sake of diversity erodes common ground that facilitates collaboration.
You may download the slides from the event by clicking here.