An Interview with David Gonski
An astute businessman and director, David Gonski has had a remarkable career. He spoke to Christopher Niesche about what he has achieved and the legacy he hopes to leave behind.
David Gonski AC FAICDLife is a quietly spoken man. He talks slowly and deliberately and isn’t afraid to ponder a question or take time to explain his answer. He doesn’t lay down the law. He begins many sentences with “I think”, or “in my opinion” and often appends his comments with “if you follow what I’m getting at”.
Gonski’s modest and considered manner belies his enormous influence, and the respect he commands. He is chair of ANZ Banking Group and Coca-Cola Amatil. Outside the corporate sector, he is chair of the Sydney Theatre Company and chancellor of the University of New South Wales (UNSW), where he studied law and commerce in the mid-1970s.
Outside of corporate circles and the city of Sydney, Gonski is perhaps better known as the author of what came to be known as the Gonski Report, which when released in 2012, proposed a complete overhaul of the school funding system.
The man who has earned the nickname “the chairman of everything” sees the role of the chair as more facilitator than leader. “To me, a board is a team. I believe that the chairman is the conductor of the team. He is there as a servant of the board and, basically, his job is to make that team run well,” says 62-year-old Gonski.
This means making sure the board is made up of people who have diversity of knowledge, background, gender, geography, and ensuring board members contribute but don’t dominate. It also means ensuring the board has sufficient information for decision-making and allowing for board resolutions to be dealt with efficiently, while also spending enough time on them to ensure the decisions are valuable.
Gonski says the biggest issue currently facing directors is how to balance short-term and long-term considerations when making decisions about company strategy and governance.
Investors are chasing yield in today’s share market and this can put pressure on directors to pay dividends or to do something to push up the share price, yet those decisions might be to the detriment of the company in the long term. Gonski observes that the majority of a company’s shareholders are typically long term, yet the short-term shareholders who do the majority of the buying and selling generally set the daily share price.
“Never before, in my opinion, has it become more starkly a question of whether you are governing for the long term or the short term,” says Gonski. “The question is, are you there for those holding for the long term, or the short term, or for both, which means as directors you have to make trade-offs.”
Gonski has served on the boards of several Singaporean companies – he is currently on the advisory board of Optus’ parent, Singapore Telecommunications – and says the biggest advantage they have over local companies is their long-term perspective.
In fact, the long-term perspective and interest in Asia of former ANZ CEO Mike Smith was one of the reasons Gonski rejoined the bank’s board in February 2014, after having served from 2001 to 2007. “Generations that come after us will be disappointed in those companies that haven’t sought to at least do something in Asia, because companies from other places will do it or indeed the Asian companies themselves will, and the opportunity will be lost,” he says.
Gonski describes the time frame over which directors should govern, while balancing the competing interests of short and long-term holders, as well as other stakeholders such as employers and the community, as a fundamental issue that has not yet been solved.
A second key issue for directors is risk-taking. “Should we be risk-averse and never take a risk? In which case, maybe our company will not grow. Or should we be prepared to take risks, making sure we understand what it entails? That’s a big decision,” Gonski says.
Reserve Bank of Australia officials and some business leaders have noted that there seems to be an increased conservatism on the part of company boards and that business investment remains subdued, despite what appear to be favourable conditions.
Gonski says the conservatism is in part driven by a fear of failure, with directors concerned that once a company becomes insolvent they lose the corporate protection and become personally liable. “No director wants to lose their house, and nor should they,” he says.
Since Gonski made those comments, the Turnbull Government said it plans to ease the burden of bankruptcy laws to make it easier for start-ups and other companies that get into financial difficulties to trade out of them.
The proposed changes formed part of the Government’s Innovation Statement and will reduce the minimum bankruptcy period from three years to one year and provide safe harbour from liability for insolvent trading for directors who engage restructuring advisers and pursue a turnaround plan."
Generations that come after us will be disappointed in those companies that haven't sought to at least do something in Asia.
Gonski says that Australians tend to give people only one go, and that perhaps this should change. He adds that it’s hard to think of a successful Australian entrepreneur who has lost, in a big way, their shareholders’ money then bounced back.
“I’m not saying one should be cavalier about it; I believe in being very careful, but I do think that sometimes failure that does not involve fraud or misleading conduct is basically just part of life. Business inherently involves taking risks and sometimes when you prove something fails, you’ve actually taken a step for mankind by proving that it doesn’t work,” he says.
If Australian businesses have been reluctant to invest and take risks in recent years, they have received a fillip of confidence from the ascension of Malcolm Turnbull as Prime Minister. “We feel that we are now being consulted, that there are opportunities, and that we have people governing us who want to understand what we’re doing. This is not a criticism of the people there before. It is just a fact,” says Gonski. The Government’s focus on innovation, with its Innovation Statement released in December last year, has given business the confidence to explore new ideas, he adds.
“Malcolm is a businessman; he is a very good thinker, and I think the business community understands that.”
Turnbull – who Gonski has known since they were on the same debating team at Sydney Grammar – is an old friend, and just one of Gonski's many associates across both sides of politics, business, arts and philanthropy. He was an adviser to Frank Lowy, Rupert Murdoch, Izzy Asper, Kerry Stokes and Kerry Packer, of whose will he was a co-executor.
“I am very keen on people who I respect and, as far as I’m concerned, those people can be from either side of politics, of either gender, in business, academic or not-for-profit sectors,” he says. “I feel very strongly that there is good in all sectors, and I think that if you like and respect people, it’s not difficult to be able to see who the good people are and work with them, whoever they are.”
His range of contacts was on display in 2007 when he raised $12.5 million to establish the Centre for Social Impact at UNSW. He persuaded Warwick Negus, then CEO of Colonial First State Global Asset Management in mid-2007, to tip in a million dollars by promising to match the donation with a million of his own, and called in donations from retired investment banker Robin Crawford and media investor Daniel Petre, as well as Macquarie Bank, National Australia Bank, AMP and PwC. To top it off, he helped recruit the former head of the Prime Minister’s department, Peter Shergold AC FAICD, to run the new project.
“I strongly believe that it is important that people try and be broad in their thinking and that quite often the work we do leads us to a narrowing in our thinking,” he says.
“And one of the wonderful things about being involved, whether in the arts, education, health or administration, is that you get a little vision of what others are doing and it makes you understand that your narrowness can be broadened.
"It also does one other thing – it contains your own ego as you realise that people are doing wonderful things all around you and it puts you in your place, which is excellent,” says Gonski.
Gonski was born in Cape Town and moved to Sydney with his family when he was seven as they tried to escape the violence of an apartheid-era South Africa.
His father was a Polish-born neurosurgeon and his mother a relationship counsellor. He attended Sydney Grammar before going on to study law and commerce at UNSW, where he is now chancellor.
He joined the law firm that was then known as Freehill Hollingdale & Page, becoming the firm’s youngest-ever partner in the decade he was there, before leaving to start his own advisory firm, Wentworth Associates. He sold this to Investec Bank in 2001, where he worked until he became ANZ chair in 2014.
At the same time, he was building an impressive career as a director. Aged 23, he joined the board of Miroma, a school for the disabled, after his master solicitor (as they were then called) at Freehills told him it was important to have a spirit of generosity. And having joined his first substantial for-profit board at the age of 32, Westfield Holdings, he has now accumulated 30 years' experience at the board table of substantial companies. He has also been chair of the ASX and served on the boards of John Fairfax Holdings and Singapore Airlines.
Gonski has been on the Coca-Cola board since 2001 and served for 26 years on the board of Westfield, and perhaps in fitting with his views on taking a long-term focus, he rejects calls for limits on board tenure.
He says making rules around tenure – for instance, limiting terms to six years – would mean that strong and effective directors would leave too early while weak directors would stay for the whole six years. Tenure is part of board diversity, he says.
“I don’t have a problem at all with people being there a long time. In fact, I think it gives enormous history and has the ability to make sure you don’t make the same mistakes the previous boards made,” he says.
“But – there’s a very big ‘but’ – the board as a whole must not be old in the job. In other words, if you have a board of nine, you’d want to have at least half of them who’ve been there for four or five years, so that you’re bringing in new people at the same time as having people who have been there for a while.”
He says that although he was on the board of Westfield for 26 years, the company changed its nature “many times” and when he left, he in fact left a different entity.
In the 15 or so years Gonski has been a director of Coca-Cola, there have been rising concerns about the health effects of sugar consumption. In August 2015, Kerr Neilson’s Platinum Asset Management added its voice to the concerns, issuing a report called Sugar Addiction, Breaking the Cycle with Neilson saying sugar is now regarded as the “new tobacco”.
“I read it. He’s a smart man,” says Gonski. “However I think our products are very good products and can safely be enjoyed as part of a balanced healthy lifestyle. Obviously, consumers must decide how much to drink. It’s our job to produce all varieties of product, whether they are diet products with no sugar in them or products with sugar. I believe in choice and I believe in making available good products but I also believe that we should inform our consumers of what’s in them and we don’t run away from that.
Coca-Cola as a worldwide enterprise has always been a leader in sustainable and social measures, always priding itself on “doing the right thing” and this has continued at the company. These include litter reduction, portion control and food labelling, he says.
Gonski also has statistics at hand to respond to what is obviously a frequent question. He says sugar consumption has declined by 15 per cent per capita in the past decade, yet Australians are still getting fatter. “So, something else is happening, but people generally don’t ask the next question,” he says.
Another contentious issue on which Gonski is willing to express his view is the imposition of higher capital requirements on banks, which was introduced in 2015 by the financial regulator Australian Prudential Regulation Authority as part of a global effort to shore up financial institutions in the wake of the global financial crisis.
Gonski doesn’t agree that the higher capital requirements were necessary, pointing out that if they were, bank boards would have raised them themselves. Their job, after all, is to ensure the banks are able to grow, while at the same time securing them for depositors and shareholders.
“We’re very careful to weigh up who has to pay for the additional capital. It’s a balancing act; we have to do the best we can and be conscious of our responsibilities to all our stakeholders,” he says.
Gonski, who lives in Sydney’s Eastern Suburbs, has been chair of the Sydney Theatre Company (STC) since 2010 when then co-artistic director Cate Blanchett identified him as someone she believed would work well on the board. The arts form a big part of his and his wife, Orli Wargon’s, life and they have been enthusiastic theatregoers for many years.
“Who wouldn’t want to have Cate Blanchett as their CEO, as I had for many years?” he says. Gonski goes on to say that under the leadership of Blanchett and her husband Andrew Upton the STC has risen to new standards.
Gonski said he most recently enjoyed The Present, an adaptation of Chekhov’s Platonov starring Blanchett and Richard Roxburgh, two of his favourite actors. “They did a wonderful job of a difficult play and it was fantastic,” he says.
In 2002 he was awarded an Order of Australia for service to the community through Australian visual and performing arts organisations, the development of government policy, and the promotion of corporate sponsorship for the arts and for charitable organisations.
A Gonski legacy
Gonski is probably most widely known as the author of the Gonski Report, into federal and state schools funding. He doesn’t claim to be an expert on education, and so was initially apprehensive about taking on the role. However, once he realised it was to focus on funding rather than teaching, he felt confident he could make a contribution.
The review advocated that funding be allocated on a needs basis, and Gonski is pleased to say this has been put into place. However, aside from New South Wales, many states haven’t allocated the extra funding. Indeed the Federal Government has indicated that the additional funding sought from his review will not be forthcoming from 2017.
“I remember very clearly the day that I got the call and I remember in the hours that I was thinking about it, realising that this could be the biggest contribution I make to Australia in my life. I would hope that perhaps one day it will end up being implemented,” he says.
In fact, Gonski says that as he is getting older he is starting to think about his “legacy”. He thinks about his own contribution in comparison to those of his neurosurgeon father, his wife, who is a paediatric dermatologist, and his daughter, who is also a doctor. “These people have direct tangible effects on people’s lives. The work I do doesn’t and, therefore, one dwells a little bit on one’s contribution and I think that drives us to do good,” he says.