Poor governance spurs calls for directorship caps

Governance experts are questioning how directors of multiple boards fulfil their duties and drive sustainable performance.

Appearing at the Financial Executive Women Leadership Conference in Sydney last month, BMFS Consulting managing director Sarah Brennan said it is unlikely a non-executive director could truly fulfil their duties if they are serving on several boards.

"The reality is, with all the work you need to do to understand the organisation, being on five, six or seven boards just isn't sustainable. You probably can't deliver," she said.

Following the release of the Royal Commission final report, the Governance Institute of Australia chief executive Megan Motto said: "Commissioner Hayne and his team is right to highlight the important role of leadership embedding an ethical culture from the top down."

"It cannot be based around an attitude of it being a 'box-ticking' exercise for compliance purposes."

Estimating the time she spends on board-related matters, Brennan said at least one day a week. She sits on just one board - Mortgage Choice.

"It's not just about the board papers and sub-committee meetings. You're on a board because of your expertise and your experience, so if you're not keeping up to date with everything then you're probably not contributing appropriately to the board either," she said.

Egan Associates estimates a non-executive director of one ASX200 company would need to commit at least 27-33 days per annum, meanwhile a minimum of 48-72 days would be required of an ASX200 chair each year.

Good governance isn't just about oversight however. Testament to this is the Banking and Finance Oath, with individuals working in industry committing to - among other things - serve all interests in good faith, operate with ethical restraint and speak out against wrongdoing.

While the BFO doesn't engage in broader governance issues, BFO director Pauline Vamos believes governance conversations are of limited value if in the end a director is appointed and does not have the available time to contribute to the board and the company.

"There must be bandwidth to be able to step up when things go wrong," she says.

However, each company is different and the amount of time needed to truly add value will vary. It is therefore too easy to just apply a board number limit, Vamos notes.

"Whatever the board, voluntary or remunerated, ignoring your realistic availability to contribute time wise is part of the ethical dimension you need to consider," she says.

This is an abstract of a story first published in the latest print issue of Financial Standard. You can view the full article on our free iPad app.

Read more: Banking and Finance OathBMFS ConsultingEgan AssociatesFinancial Executive WomenFinancial StandardGovernance Institute of AustraliaMortgage ChoicePauline VamosRoyal CommissionSarah Brennan
Link to something ANCJmVHx