Company directors: appointment must be based on merit only
- The Australian
It was only this week that I realised just how much political correctness has distorted the normal functioning of our society and cowed me into being a wimp of the first water. What’s more, it was a woman of courage who made me come to my senses.
In Wednesday’s Daily Telegraph, Miranda Devine wrote what many of us have believed for some time to be true but lacked the intestinal fortitude to proclaim publicly. The first paragraph pretty well sums up the situation in which we find ourselves: “The obsession with diversity in corporate Australia had a decade to prove itself. The results show that experiment has been an abject failure.”
You can all recall how a decade ago it became an irresistible tidal wave of belief in the view that more women on boards would make corporations more sensitive to their customers. Boards would somehow become more ethical and fairness would replace any rapacious desires of those awful men who held all the board seats.
While every institution to come before the Hayne royal commission has come out poorly, by far the two worst offenders have undoubtedly been Commonwealth Bank and AMP.
The obvious question therefore has already been answered firmly in the negative. Could anyone possibly believe that these two organisations had been fair or ethical? Both companies have been chaired by women — Catherine Livingstone has the helm at Commonwealth Bank and Catherine Brenner, until last Sunday, had the top job at AMP. The extent of wrongdoing at these financial giants has staggered every Australian from the Treasurer down.
The financial advice industry that sprung up in the past few decades was supposed to help people. At CBA and AMP it was often about exploiting people, and that is putting a benign spin on this. Given the thousands of customers who have been given rotten advice — which in the case of Storm Financial meant many retirees had to start over again in their 70s after mortgaging their homes to invest with crooks recommended by CBA — nothing changed under female leadership.
The Austrac scandal, the robbing of clients and all the other dramas at CBA apparently were ignored by the board — four women and six men. I would love to be able to see the minutes of board meetings so I could see how many times directors asked probing questions about the appalling treatment of their customers. I suspect that would be a search doomed to failure. It would seem the CBA board (to be fair Livingstone has been on it for only two years) rested comfortably while the bank could report quarterly profits in the billions .
It is not as if I am suggesting that the abysmal failure of the CBA board should be placed squarely at the feet of the chair or the other female directors. The men failed as miserably as the women. It is crystal clear though that the women at the board had no effect on the culture of the company. They collected their huge cheques (from $300,000 to $700,000) but made zero contribution in terms of what diversity was supposed to bring with it.
Over at AMP, if anything, the situation was worse. That something was wrong at the company has been obvious for at least 18 months. We didn’t need a royal commission to tell us its share price had been heading south. While the commission has accelerated the drop, it was not its original cause. The company looked old, tired and flat but still too many Australians went to it for financial advice because of its iconic and historical status.
Where was Brenner when the company she chaired lied to the Australian Securities & Investments Commission on 20 occasions? Where was she when dodgy financial planners were kept on the payroll even when their advice was known to be dreadful and had cost customers serious amounts of money? It is even alleged that she knew her in-house lawyer was vetting a supposedly “independent report” to be submitted to ASIC. Again, I am not suggesting Brenner and other women on the AMP board were responsible for a culture which led to the company being accused of criminal conduct, but I’m absolutely certain they did nothing to alter that behaviour.
It took Brenner way too long to acknowledge the inevitable and drift off into the sunset. Like the rest of the CBA board, Livingstone will be hoping that the hoo-ha will blow over and those plush board seats will be waiting for them.
New CBA boss Matt Comyn was quick to announce that every one of the recommendations contained in that damning Australian Prudential Regulation Authority report on the bank would be implemented as soon as possible. I trust the board is not so stupid as to believe that this response could herald the end of the aftershocks following the quake of the past fortnight. Heads must roll at the board and executive levels to restore some faith in the once-revered institution. If she has sufficient pride and sense of occasion, Livingstone should be the first to know her time is up.
Diversity is one half of the problem when boards select new directors, and in practice boards do the picking and the annual meetings of shareholders almost always elect the board-recommended directors. The other problem is that if you can join the right “in” crowd you can expect a slew of directorships to come your way. If you can become good mates with someone like the brilliant David Gonski and he puts in a good word for you then the doors are opened to the boards of the 50 top-listed Australian Securities Exchange companies. Gonski has backed his share of winners but there have been a few losers as well. There is a good club in Melbourne, too, and in these clubs, while you will be told merit has its place, so does obsequiousness. Followers in the club can be given leadership jobs on boards. Some make the transition, many don’t. Nonetheless, a rich vein of cash can come your way as you hop on to two or three boards.
The question then becomes how seriously does a director take their duties. Regardless of gender, there should be proper legislative definitions of what those responsibilities are. Then perhaps we may sort out the wheat from the chaff.
Merit, not sex or connection, should be the only determinant.
