A challenge for non-executive directors, especially since the revelations in the banking Royal Commission, is knowing whether the management team is doing the right thing and behaving in a way acceptable to the general community.
Penny Bingham-Hall, a professional non-executive director of six companies, says being a good non-executive director is asking yourself, “Is this the right way to go? Is this going to be in the best interests of the people who we’re looking to for those customers, or is it going to impact employees.”
However, she cautions about overreacting to the findings of the banking Royal Commission.
“It’s important to take it on board and learn the lessons, but not all of the things that have happened in the financial services sector are relevant to other sectors,” she says. “The important thing is keeping balance in terms of the role of the non-executive and the executive.”
Bingham-Hall doesn’t think the fundamental role of the non-executive director has changed.
“I think all directors just need to assure themselves they’re spending enough time to really understand the company, to make the decisions we’re being asked to make,” she says. “I’m not sure that has changed.”
However, community expectations are now higher and the fallout of the banking Royal Commission has generated a lot of debate on whether companies are acting in the best interests of all the stakeholders, not just shareholders.
But just what are community expectations?
Bingham-Hall, who is on the board of Fortescue Metals Group, Macquarie Specialised Asset Management Limited, DEXUS Property group, Taronga Conservation Society Australia, Port Authority of NSW, and Bluescope Steel, sees it as common sense. She claims if you are operating in the best interests of all stakeholders, that will be beneficial to shareholders in the long term.
However, she sees greater expectations from the investor community and the broad community around environmental and social issues. “Directors need to be across that and aware of where their companies have an impact on the environment and on social issues, and have a robust debate with management about how we’re handling them,” she says.
“As a director, it’s important you continue to learn and stay abreast of community expectations. They’ve changed dramatically in the time I’ve been in business, and it’s important you’re out there looking at what the community expects from your company.”
Bingham-Hall was in her 20s when she started work with the technical services group at Leighton, the international contractor now called CIMIC Group, after studying industrial design.
She worked in the area for a few years but decided it wasn’t for her as it was too micro. However, she found the business side fun.
Along the way she worked with Wal King. When he became CEO, she worked on the successful bid to build The Star casino in Sydney, outmanoeuvring the late media and gaming magnate Kerry Packer.
She ended up in corporate affairs to lift the company’s game in dealing with media and government, and then went on to manage investor relations.
“I got the opportunity to do that for a number of years, which was a great way to learn about the business and understand the investment community and what their issues are,” she says.
This experience shaped her director career.
“I like companies that do things, build things, create things,” she says. “I really enjoyed the mix of how you get financial performance, what the long-term strategy is, and how you get people motivated to deliver that.
“I’ve always liked the financial side of things, but I also find it fascinating about the strategic direction of the company, and the corporate culture, which is very targetable at the moment. And how you get the best out of people.
It’s problem solving and, in a funny way, doing something like industrial design is all about problem solving.”
Bingham-Hall says it is sometimes difficult sitting on the other side of the table after being a senior executive. “The thing I enjoy most about the boards I’m on is when we do a strategy session with the management team,” she says.
“I love the interaction of looking at the market, the competitors, what your short-term objectives are, and how you balance short-term shareholder requirements with long-term investment needs, with the human resources side of things and how we get the right people to do them.
“And then when you’re a non-executive director on a number of companies, you’re looking at different industries, different companies and doing things differently. I find that fascinating.”
For directors, liability and risks have amplified in the past year or so, according to Bingham-Hall. This is why it’s important to make sure the board you join has confidence in the management team.
“There is a degree of trust when you’re a non-executive director,” she says. “You’re not walking the corridors of the company every day of the week. You are part-time, and you need to feel confident that the management team is driving the right way.
“It’s your job as a board to appoint the CEO, and you’ve got to be confident you’ve got a CEO who has the right culture and the right values.”
Bingham-Hall agrees that being on the board of companies across different sectors is an intellectual challenge.
However, this also gives a broad perspective of how businesses operate.
“Some issues, such as safety — a number of companies I’m involved with have high risk environments and safety of people is the number one priority — you learn from different industries and different companies about how they approach that,” she says.
A key skill for directors is challenging management in a constructive way, she says.
“Where I’ve seen boards operate really well is when you walk out of a board meeting and the CEO turns to you and says, ‘Wow, that was a really good discussion and I possibly wouldn’t have thought of some of those issues that were raised’.”
Some board meetings feel like you’re just ticking boxes, she says. But the good ones leave you feeling like, “Wow, I think we really contributed there, we’ve really got management to think about things a bit differently.”
Bingham-Hall says the game of finding a board role is changing. “There is a much greater focus on diversity and accepting that being an ex-CEO and ex-CFO is not necessarily the only skill you need on a board,” she says.
“But if you come from at least C-Suite executive level in a big ASX-listed company, then you’re more likely to be considered than someone from a non ASX-listed background. That certainly gives you a bit of a head start.”
Aspiring directors should think through what their skills are and where they may be applied.
“And then it comes down to networking, to knowing who are the key recruiters, and also having a network of directors and chairmen, or at least having the opportunity to talk to some of them to see where they think your skills could be best applied,” she says.
Penny Bingham-Hall will be speaking at the upcoming Australian Governance Summit, 4–5 March. More information here.
How Busy Is Too Busy?
A hot topic in the wake of the banking Royal Commission is how many boards are too many, and how does a busy director stay on top of issues. When Penny Bingham-Hall gets pinged by a company looking for a director, among the first questions she asks are: what are you looking for in a director? And why are you interested in talking to me?
“I think you’ve got to be comfortable that your values are going to be in sync with those of the company,” she says. “When you sign up as a director, assuming all things go well, and you like them and they like you, you’re there for the best part of 10 years.”
She says it often comes down to a cultural fit with the board and doing due diligence on the management team.
As a non-executive director of six companies, Bingham-Hall hasn’t added up how many board and committee meetings she attends in a year, but agrees it is a lot. She also chairs remuneration committees, is on risk committees and a range of others.
There are times of year, particularly February and August, when it gets hectic.
“Sometimes I’m working seven days a week,” she says. “You do get a concentration around the peak times when you’ve got financial results and remuneration reports.”
Bingham-Hall has a simple method to keep track of the details of the six boards she’s on. She keeps a separate notebook for each.
“That can be helpful because when you’re working on electronic copies, the notations tend to go in time. It’s useful just to bring out the key issues that you may want to raise in a meeting.”