It was on the last day of the five-day Company Directors Course that it really sank in. Adding value as a board director is tough and the chairman’s role is crucial. All the clearly laid-out expectations, the coaching on roles and responsibilities, ended with a messy but memorable simulated board meeting on the final afternoon.
I was one of 30 aspiring directors who fronted up before Christmas for the Australian Institute of Company Directors’ signature course. The group included a smattering of company secretaries, a chief financial officer, a school principal, a clutch of investment bankers, a government agency head, executives and business owners with retail, pharma, energy and health care experience, a university-student-cum-student-politician and top-level research academics.
The individuals who made up this seriously talented and experienced group, a quarter of whom were PhDs, were all looking to back up roles they already held with deeper insights to build out their knowledge and credentials for new career pathways.
Drama and learning
Part of the training included watching a dramatised series chronicling the board meetings of a badly governed and mismanaged company beset by safety crises, management and performance issues, conflicts of interest, fraud, personality clashes and power plays. Then, suddenly, it was our problem to fix. The fictional board was spilled and our class became the new board, charged with righting the ship. Each one of us was assigned a different role: as chairman, directors and members of remuneration, risk and appointments committees.
The board began to work its way through the agenda items: should we replace the CEO? What do we do about the workplace safety breaches? And what about that overseas expansion? All were urgent and complex.
That’s where the real drama, and learning, started. “Should we be having this discussion: are we or aren’t we solvent?” the chairman asked. The head of the audit committee responded calmly, walking everyone through the financials. But anxiety levels spiked as the directors opined on the situation.
The question was batted back and forth as the directors tried to keep calm and remember their roles. The group decided it didn’t have enough information to make a call. With that reminder of what was at stake, and that directors are not the frontline of control but are where the buck stops, the meeting continued.
On the course, the fundamental need for financial performance is drilled home again and again. It’s a core element of Australia’s corporate governance regime. The challenges are not just getting good information, though this is of primary concern, because ultimately it’s a board’s job to make sure the data and insights flow. A clear understanding of financial management, how cash flow relates to the profit and loss report and the P&L; to the balance sheet is crucial. The lessons from the Centro decision are referred to over and over.
Making time for strategy
But directors have a heady mix of tasks, with enormous responsibility and many risks attached. They’re agents for shareholders, so they must focus on helping executives drive performance, but also work with executives to set the strategic vision, explore growth opportunities, manage multiple risks and cultivate the right culture.
Several classmates queried whether the course was too focused on risk management, making the point that the current environment demanded an innovative and growth mindset. There’s evidence to back the focus on strategy. AICD research shows that high-impact boards spend on average 39 days a year meeting, with 12 days devoted to strategy and four on governance. Low-to-medium impact boards meet 19 days a year and spend only four days on strategy.
The course was enlivened by instructors with high-level experience as directors and board advisers, all of whom had a flair for engaging real-life stories of the curious and complex situations that directors have to navigate.
Important lessons that the budding directors took home: the quality of the chairman is crucial, boards have to consider political, environmental and social issues in their decisions; directors should be noses in, hands out, they must strive to ask material questions, and play a big role in setting culture. And finally, confirmation that good decision making as a group is what it’s all about.
Joanne Gray attended the Company Directors Course at the invitation of the AICD.
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