Crucial advice for all aspiring directors

Sunday, 01 December 2019


    From having passion to the importance of asking dumb questions, Simon McKeon AO, chair of Summer Housing, shares important advice for all aspiring directors.

    I have had a very privileged career. After heading up Macquarie Bank’s Melbourne office I went part-time there almost 20 years ago and have been fortunate to pick and choose my governance roles. Most times that has meant I’ve assumed a role for quite a while. AMP was the exception. There have been a whole bunch of wonderful boards including CSIRO [former chair], the Monash University Council [current chancellor], Rio Tinto and many not-for-profits led by CEOs who, frankly, could have done all sorts of things in the corporate world that would have made them wealthy.

    However, no-one should accept any position on any board — whether for an ASX 200 company or a local fundraising committee raffling a chook — unless they are really passionate. People say, “I’d love to end up on the board of a top ASX company and I need to start somewhere,” and they’ll start in the NFP sector. I have enormous problems with that “stepping stones” approach. For the individuals, because they have the wrong objective, it may restrict them in how they participate and what they get out of it. And the organisation, which isn’t looking for people using it as a stepping stone, seriously needs their advice. We have to give it our all, particularly to organisations we are passionate about.

    The not-for-profit challenge

    Some challenges in the NFP sector, frankly, leave the corporate sector way behind. I was on the board of World Vision Australia for 12 years and did quite a bit of travelling to out-of-the-way places, replete with people doing it very hard. The process of governance was just as important as in Collins Street, if not much more so. Resources were limited, there was sometimes little or no infrastructure and communications were tough, yet the importance of the effective delivery of aid — or sometimes just hope — was critical, and so was good decision-making. There were debates [such as] “we’ve only got this amount of money, how do we make it go the furthest?” I just roll my eyes at some of the disputes I see on corporate boards, because they’re very straightforward compared to that — you made the wrong decision, people perished.

    Long live diversity

    As an investment banking adviser, I grew up in an era in which boards were comprised of individuals who all looked, dressed and ate the same. I assumed that unless you really knew Collins Street, were a commercial lawyer or an accountant, or had senior corporate experience, a board just wasn’t for you. That type of person I envisaged 30 years ago as the perfect board member, really only has knowledge and authority over a relatively small part of the range of issues a board needs to be on top of.

    I remember when CRA [Conzinc Riotinto of Australia, which became part of Rio Tinto] appointed brilliant medical researcher Sir Gustav Nossal to its board. It was an inspired decision.

    Diversity is a given for me. I went to a little state school [Dandenong East State] with 50 different ethnicities — I didn’t know any different. Getting into a sporting team at that school had nothing to do with the colour of one’s skin, simply one’s ability.

    Nowadays, we better appreciate the power of diversity. We, as directors, are going to have to be better at getting on, at listening and working together because we’re not cut from the same cloth anymore. Especially in an era when corporate boards are being asked to think in a way we never have before about social issues, we need all the help we can get to navigate some pretty tough stuff. A properly constructed, diverse board is frankly more competitive — groupthink is a bit harder — and it just covers more bases.

    On the value of dumb questions

    Directors must understand they’re part of a team. In particular, when you feel the need to be critical, think twice about not only the issue you have to raise, but how should you raise it, because there may well be people on the board with who you need to be a little sensitive. My motivation is to actually make the communication more effective so it really can be considered — not to give people an easy ride or cushion them when the criticism or the difference of opinion comes.

    Have the courage to ask dumb questions and, as the years go by and you are no longer a new director, keep having that courage, because it gets harder. I’ve been of the view for a long time that I’m allowed to ask at least one dumb question every meeting, one question that may raise a suspicion in someone’s mind: “Oh, Simon isn’t very good”.

    But I know that when others have asked dumb questions — and sometimes they have been dumb — every now and then, one comes that stops all of us in our tracks, even the most experienced in management.

    Such questions can save our bacon!

    Fight courageously, leave gracefully

    When Allco Finance Group got into trouble some years ago, Sir Rod Eddington AO FAICD, a doyen of company directors, was on the board. He had every opportunity to leave and many of us were surprised he didn’t. He stayed until the bitter end. His was real leadership.

    You join a board to make a contribution over a reasonable period and sometimes it gets dastardly hard. I said to myself, “Gee, Simon, I hope you can be as good as Sir Rod one day.

    And I hope you have the guts and tenacity to stay on and do the hard stuff.”

    At some point, we may have to say, “This isn’t working.” I have done that only once, when I left AMP in 2016 [after three years, two as chair]. I’ve said precious little about the circumstances and there is a strong reason for that. I took the advice of a couple of very senior people who were particularly experienced in governance. One thing they each drilled into me was: play the long game. So if one resigns, it is important that not only is the decision made logically, but that it occurs in the best possible way for the future of the company.

    People skills are trumps

    The number-one issue for me is teamwork — groups of people working well together — because when it doesn’t happen, it’s a disaster. You can get a group of relatively inexperienced “amateurs”, but they’re on a mission — they fall into line, know who’s leader, how to behave, lock in closely behind their chair, and are invincible.

    Then you have another group, with absolutely brilliant individual CVs as long as your arm, but the only way to describe that board is “dysfunctional”.

    I’ve been lucky to have an elite sporting career [sailing] and spent time with some of the nation’s most highly credentialed sports psychologists. I realised long ago that elite sport absolutely relies on the effective functioning of a team. The team must come first.

    Over the years, behaviour, particularly in knowing how to play one’s role in a highly effective team, has become the most important single issue — followed closely by the right make-up of the board in terms of an appropriate spread of abilities and experience.

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