A couple of times each year the Flight Centre directors pack up and head overseas to hold a board meeting in a foreign country.
“We’re spread across 20 countries and expanding all the time so we try and mix it up to get to different places. It’s really an opportunity to get out and just talk to people in the business,” says chair Gary Smith FAICD.
Recently the travel company held a board meeting in London and met the key employees in the UK business, as well as the management team from its South African business who flew up to present to the meeting, and the executives running its European expansion strategy.
In 2016 they held a meeting in Toronto to spend time with the Canadian arm of the business. “We went around and visited some of our shops, spoke to some of the sales consultants working in the business. We had the management team there and had a dinner with them and just got to know them a bit better,” says Smith.
“In a lot of the countries we operate in we have a retail shop network so, invariably, we’ll go and look at some retail shops and look at some of the new initiatives they might have been putting into play in terms of store design or technology.”
In fact, Smith says the out-of-boardroom activities are in some ways more valuable than the formal meeting.
“Often that’ll be in social functions that we might have aligned with a meeting where you get time to sit down and just have a chat with someone over a bite to eat,” he says, adding that socialising with staff is important for several reasons.
“One is that you build that trust and relationship, but secondly, you might hear things that make you ask questions in the board meeting.
“You may become aware of something unique to that country through chatting around issues they face in their business.”
It’s not just travel company boards holding meetings offshore. As Australian businesses invest and expand overseas, an increasing number of boards need to monitor their foreign investments and stay abreast of the economies, business conditions and risks of other jurisdictions.
According to a 2015 Austrade study, one third of Australia’s top 2,000 companies hold direct investments (defined as at least a 10 per cent stake) in an offshore market.
On average, companies that had invested overseas held investments in 4.5 markets. The top five locations of foreign affiliates of Australian companies were New Zealand, the US, the UK, Singapore and Hong Kong.
Frequently, when directors are asked about the most useful time their board has spent in the past 12 months, those who have travelled nominate the trip.
For many directors, the travel also provides an opportunity to spend time with their colleagues in a less formal setting, in addition to the benefit of what they actually learned on the trip.
It also provides them with the opportunity to be immersed in another operating environment which they can compare and contrast to what’s happening in Australia. This can be particularly useful where they’re looking at an operation that they are familiar with, but the technology, the plant, the processes, the employment practices or the regulatory environment might be completely different.
Planning for success
The key to a successful overseas trip and meeting for a board is for the chair to have a very clear idea of the purpose of the trip and to have very clear expectations of the board.
Moving a whole board overseas is an exercise in logistics. Businesses risk less-than-optimal results where chairs haven’t been explicit about what the expectation is of board members when they are overseas.
Important questions include:
• Are we over there as ambassadors?
• What are we doing?
• Are we entertaining?
• Are we being hosts? Are we being hosted? What does that involve?
• What are all our roles? Who’s speaking to whom?
• Are we meeting people in the evenings?
“In a well-planned trip those things are organised and pre-arranged and agreed. With a not-so-well-planned trip, people tend to do their own thing after meetings.
It’s a view shared by Tony D’Aloisio AM FAICD, chairman of ASX-listed financial services technology company, IRESS.
“You’ve got a responsibility to shareholders to use their money wisely,” he says. “You would only have these meetings where, as chairman or as a board, you can see the benefit is a benefit that’s going to be over and above what you can get in just an ordinary meeting.”
IRESS has investments in the UK, Canada, South Africa as well as Australia and so holds a board meeting offshore every two years, most recently travelling to South Africa and before that to the UK.
“The key thing for the board is to be across the company strategies and the risks and so on that would be associated with offshore investments,” he says. The meetings also play an important role in demonstrating to shareholders that the board has an in-depth understanding of all aspects of the business.
“You want to be able to say to these shareholders, ‘I actually do know what we do in South Africa. I’ve been there. I do know what we’re doing in the UK. We’ve been there.’ So, when we make decisions, we have both the management input, people visiting, and we’ve been on the ground,” he says.
IRESS’s overseas board meetings are run as strategy meetings and involve clients and staff. They also play a role in bolstering staff confidence in the company’s governance and strategy. “They’ve got to have confidence that they’ve got a board that understands them so that, when their proposals come up, they know the people and how they’re going to approach the issue,” he says.
The board of construction company Lendlease, holds offshore meetings at least twice a year, and aside from the opportunity of meeting with foreign executives and inspecting overseas operations, the meetings are also important in terms of culture and risk management, says director Nicola Wakefield Evans FAICD.
“Meeting employees and customers is becoming an increasingly important strategy for boards, particularly on the people side, because one of the key ways to determine a company’s culture is to meet its employees around the world,” she says. “Those companies that allow their boards to meet employees from the bottom up have a better sense of the overall culture of the firm.”
Like other companies, Lendlease combines offshore board meetings with site visits. “Lendlease is a global company. A lot of our revenue and profit comes from our offshore operations. So, it’s important for us as a board to see what we’re doing,” she says.
The board recently held a meeting in the US, where Lendlease is one of the largest construction companies in New York and one of the largest owners of defence housing in the US. “It’s important for the board to see what we’re doing, to look at the market. You often get external presentations from presenters on the local economy, what’s driving the market, and they’re harder to do if we’re sitting in an office in Sydney,” Wakefield Evans says.
In fact, despite advances in videoconferencing technology and the fact that many boardrooms have videoconferencing facilities, directors agree that there is nothing like being there in person.
Wakefield Evans says overseas board meetings can also provide an opportunity to meet Australia’s ambassadors or high commissioners, particularly in Asia. This is valuable because they can be a good source of information about the country or a region. “If you’re looking at a strategy, you’ve got to try and get as much information from internal and external sources as possible,” she says.
This year alone she has met Australia’s high commissioners, ambassadors or consuls in Singapore, Tokyo, Hong Kong, Malaysia, China and the UK. “That’s actually also quite an important part of this process because, in turn, they also want to see what Australian companies are doing globally as well,” she says.
Managing a subsidiary board
Aside from going overseas with the boards of Australian companies, some Australian directors sit on the boards of overseas subsidiaries, which present a different range of considerations.
In his previous role running the southeast Asian operations of building materials giant LafargeHolcim, AGL chairman Jerry Maycock FAICD sat on the board of company-controlled subsidiaries in the Philippines and Indonesia.
Although Maycock was the executive ultimately responsible for the companies’ performances, he sat as deputy chair on both boards and appointed a local chair. The role of local directors was crucial to the success of the subsidiary.
“We knew a lot about the industry that we were invested in but we weren’t locals at the end of the day. We needed these guys – or in one case, a woman – to keep us on the straight and narrow according to local norms,” he says. “One reason we have the local directors is to keep our feet off the landmines wherever possible.”
Maycock says that with Asian boards in particular a lot of the real conversations go on before or around the board meeting as opposed to during the formal meeting itself.
“I think a lot of Asian directors – well, particularly in this case, which was a controlled subsidiary – are reluctant to speak up against the consensus view in a board meeting or against the majority view in a board meeting,” he says.
“But in a less formal setting or one-on-one the week before or the day before, I found it was possible to find out what they really thought. There was much more, in a way, substantive conversation outside the board meeting than during the formal board meeting itself.”
In fact, Maycock made a point of staying in touch with directors between meetings, catching up on the phone or sometimes in person.
“My guiding principle was that, if you treated your local directors with respect and made it clear you valued their views, not only did you get a lot more out of them but you got a lot of behind-the-scenes support. If you ran into a problem, they’d be watching your back,” he says.
“They would ring you up out the blue and say, ‘Listen, we’ve become aware that this is happening and we think that the company would be well-advised to go and do this or don’t do this or that.’”
Tips for getting the most out of offshore business meetings
Jerry Maycock FAICD says it’s important to plan the trip properly rather than just turning up unprepared and trying to organise events and meetings on an ad hoc basis.
Allow unstructured time
Time for socialising and informal catch ups can be very useful, says Maycock.
In addition to board papers, directors should receive briefing packs on the local economy and politics, particularly in the current environment where politics is such an important global issue, says Nicola Wakefield Evans FAICD.
Allow enough travel time
Directors should make sure they get to their destination with enough time to ensure they aren’t too badly jetlagged to make a full contribution to the meeting and get the most out of the trip, says Gary Smith FAICD.