As we demand more of boards, how do those at the top of the table see their role evolving? We ask some of Australia's most experienced chairs how they lead in challenging times.
Michael Smith – Chair, 7-Eleven, Starbucks Australia and Pioneer Credit
Ming Long – Chair, AMP Capital
Glen Boreham – Director, Southern Cross Austereo and former chair, Screen Australia
Judith MacCormick – Founder and CEO, BoardFocus Advisory
For Michael Smith, nothing could have illustrated so dramatically how much the role of chair had changed than when a 2015 Four Corners-Fairfax investigation unveiled underpayment of staff by franchisees of the convenience store chain 7-Eleven, triggering widespread media coverage and commentary. Then a director, Smith stepped up to chair the company as it navigated the crisis in the glare of public scrutiny. “In the early stages there was a reasonable amount of energy about ‘we have to get the story right’ – we had over 1000 pieces of negative media – but that’s wasted energy,” he says.
The priority, he explains, was to address the problems and ensure they never happened again. “You have to be true to the company and its stakeholders and do what’s right and not have your course affected by trying to resolve some of these issues publicly,” he says. “If you take one of these roles in a large organisation, you have to accept that’s one of the consequences – you will get hurt – and don’t go complaining about it.” All of this has made Smith, who also chairs Starbucks Australia and Pioneer Credit, acutely sensitive about what it takes to be effective at the helm. “I think about this all the time.”
Shifting circumstances might demand a chair has expertise in emerging areas (such as artificial intelligence), a changing political, regulatory or media ecosystem, or pricing and business boundary redefinition through digital and other factors.
A former chair of the Australian Institute of Company Directors, Smith believes chairing has become more complex, “requiring greater flexibility and agility” in making the right use of technology at the optimum time, for example. Chairing has also shifted from what Smith sees in retrospect as authoritarian “to something quite different that matches society”.
Over the past decade there has been increased debate about the role of directors and demands that they be held more accountable, says Ming Long, who was appointed chair of AMP Capital in mid-2018 following a reshuffle at AMP’s wealth management arm during the banking royal commission. Dr Judith MacCormick, CEO and founder of BoardFocus Advisory and a former chair herself (most recently of Sydney’s Queenwood school board), says headlines from the commission have led to more of the community understanding the role and responsibilities of boards. “Chairs have a higher-level overview and are being held to account for the behaviour of their boards,” she says. “Indeed, the chair is usually the public face and remunerated with that understanding.” (Pay packets vary but the chair of a listed company can receive more than $600,000 a year.)
These days it’s unlikely anyone would hold more than 10 chairs or directorships as former NSW Premier Nick Greiner did in the years after he left politics in 1992. As a rule of thumb, says MacCormick, five board roles are the most anyone should have full-time and a chair’s position is worth three of those.
“Gone are the days of trophy directors and sinecures for chairs. There isn’t a place for them anymore,” says MacCormick. “Whether it’s disruption or scrutiny or transparency of data, the world is changing too fast. You can’t just take it as a retirement activity.”
Revelations involving parts of AMP, including fees-for-no-service and charging the deceased, generated waves of publicity. But Long says this didn’t change her decision to step up from her directorship to be chair of AMP Capital. “As the chair through significant change and disruption, it’s important to acknowledge the personal pain experienced by our people and our clients but to hold firm and capitalise on this period to accelerate change,” she says. “It’s also important to stay agile, recognise what you can and can’t control, and focus on the bigger picture.”
Similarly, Smith stepped up to the 7-Eleven chair weeks after the disclosure of wage fraud and underpayment hit the headlines. “You need to quickly assemble a picture of what resolution of the issue looks like. Then there will be a list of things you need to get done to reach that resolution,” he says. “Whether the company felt parts of it were responsible or not didn’t matter. It happened in our name and we needed to look after the people who had been hurt, make sure it didn’t happen again and turn ourselves into an exemplar of how to deal with these issues.”
During the upheaval, Smith says the company continued recruiting board talent. “There’s nothing I take more seriously than the appointment of new directors.”
He takes into account the demands of the next three years to identify gaps on the board. “Sometimes you need a special skill set for a while – perhaps an IT expert while the business goes through digital transformation. Then they may give way to someone who is highly skilled in using the product of the transformation, such as data science, analytics or CRM [Customer Relationship Management].”
With increased external engagement, there’s a different emphasis for the chair, says Glen Boreham, director of Southern Cross Austereo and a former chair of Screen Australia and managing director of IBM Australia. Recently, one of his boards examined a minor change to executive pay in great detail, which he says would not have happened even five years ago. And there’s much more focus on a company’s culture, risk profile and diversity.
For most chairs today, board diversity is a no-brainer, says MacCormick. Despite some progress, women hold just 13.7 per cent of chair positions and 25.8 per cent of directorships and represent 17.1 per cent of CEOs and 30.5 per cent of key management personnel, according to Australia’s Workplace Gender Equality Agency. “Around the board table we need cognitive diversity as well – different thinking – which comes from having identity diversity,” says MacCormick. “There will be debate and creative abrasion and that’s what you want. Collegiality doesn’t make for good decision-making.”
But no matter the mix, running a board is about process, too. “There are times you need to have a stand-up argument and allow everybody to get something off their chest and voice strong opinions, to the other end where you need to seek consensus,” says Smith. In a crisis, the approach can “range from saying, ‘For goodness sake, let’s just get on and do it’, to ‘Look, this is really complicated, we need enough time and information to talk it through’.”
The dynamic between chair and CEO can be interesting, notes Boreham. The chair is the senior person, whose function is partly to challenge management, but the CEO has access to information. CEOs often describe their ideal chair as a “sounding board”, says MacCormick. “It’s challenging for CEOs to find a ‘safe place’ to talk about some issues, as they are scrutinised closely. That makes this relationship so valuable for frank and honest conversations.”
While he’s had close relationships with CEOs of organisations he’s chaired, Smith is mindful of the “friendly but not friends” approach. Sometimes, says MacCormick, it’s the responsibility of the board, therefore also the chair, to “appoint and disappoint” a CEO when it’s in the best interests of the organisation and key stakeholders.
You don’t need to have been a CEO to make the transition to chair, says Smith, though many have done so successfully. Similarly, it’s not essential for a chair to have detailed expertise in the sector or be involved in operational matters. There does need to be industry knowledge within each board, adds Boreham, but it doesn’t have to be the chair’s.
Some skills of an effective chair differ from those of a CEO, says Smith. “A board’s intellect is a collective intellect so it’s actually about listening hard to other opinions. It’s thinking about why the good decision in the end is not ‘my decision’ but ‘our decision’.” CEOs have a bias to action, points out Boreham. “When I became a director I had to force myself to slow down and not run the company, to take a more considered view of the business.”
It can be tempting to want to jump in and execute, says Long, especially if you’ve been a CEO, but you must step back, including when giving your opinion. “I prefer to seek the views of my colleagues on the board before [offering] my own,” she says. And while everyone around the table needs to have their say, that doesn’t always mean equal airtime. “When I’ve had a meeting where
a director has been relatively quiet, I’ve called them afterwards to find out if they felt their concerns were being dealt with and whether I needed to give them more time.”
A productive board meeting, these chairs agree, includes robust discussion. Some of the most controversial board decisions Boreham has overseen have delivered the best outcomes: the 2011 hit film Red Dog, for one. “At Screen Australia there were projects that were polarising about whether to invest in a film and it’s the role of the chair to bring out the arguments and debate. We had directors throwing their papers down on the table.”
The adept chair aims for an outcome generated by debate of a range of issues, not just an either/or decision, says McCormick. “Ineffective chairs tend to be those saying, ‘We don’t need to change’ and ‘People want a strong leader’.”
In many ways what’s needed is the opposite of traditional power figures, says Smith. “You have to start each day in this job drenching yourself in humility. You need to bring a servant mindset to it and then you need some quiet strength behind that.” He cites people like medical researcher Professor Fiona Stanley as role models, demonstrating that legitimate authority or power is something you need from time to time but it’s an instrument you use reluctantly or infrequently.
A key role for effective chairs of the future will be transforming how boards operate. Fundamental change is overdue, argues Smith. “Boards are inherently conservative and board committees and the way we meet haven’t changed much for a long while.” He calls the board process “the least evolved part of an organisation – it’s had the least innovation in 30 years and is probably the part most in need of it”.
Smith says he often talks about how the boardroom is in a castle behind a moat – and it’s in the middle of the castle. “The idea that you are going to get the truth about what is going on in the village is ridiculous.”
Who’s the boss?
Chairman, chairperson, chair – does it matter what the head of the board is called? AMP’s Ming Long says she doesn’t really mind but given that research shows the choice has implications for future generations, she uses “chair” and expects men would do the same.
Southern Cross Austereo’s Glen Boreham agrees. “We should be using chair,” he says, although he notes that some senior female chairs (such as the Commonwealth Bank’s Catherine Livingstone) ask to be called “chairman” and he respects that decision, too.
“It’s easier to just say chair,” says BoardFocus Advisory’s Judith MacCormick. “It’s gender-neutral and better for brevity. Fewer people are comfortable with ‘chairman’. As language influences our thinking, I think we should move beyond ‘chairman’.”
Asked what he prefers to be called, 7-Eleven’s Michael Smith says, “Michael”, but adds that any term free of gender connotations is preferable.