What makes an effective board director?

Friday, 01 September 2023

Emma Foster

    Understanding that diversity of talent and interests makes boards operate better keeps Kate Spargo FAICDLife learning and loving her involvement with everything from construction to the Geelong Cats. 

    After serving on some 20 boards during almost three decades, Kate Spargo FAICDLife has learned the toughest times in business often teach you the most.

    “While you don’t wish for them, going through negative experiences is incredibly important, because it prepares you for when the really challenging issues come along,” says the veteran Melbourne-based board director. “You need just enough of them so that you don’t panic when challenges arise, and you’ve got a better view of how things might go.”

    Drawing on experience gained in a wide array of companies — with current board roles including those at CIMIC Group, Sigma Healthcare, Adairs, Sonic Healthcare and Geelong Football Club, and prior roles at the likes of Fletcher Building, IOOF and Pacific Hydro — she’s seen her fair share of corporate ups and downs.

    “However, I’ve found that what you think might happen, often is not actually what happens,” says Spargo. “These processes have a lot of twists and turns in them... and that’s how you learn to not jump at things, but to stand back and take a careful, objective, patient, calm view of things. Being the calmest person in the room is a good place to be. That quality in directors is incredibly valuable.”

    It’s traits like these that Spargo first honed in her formative career years — spent mainly in Adelaide, where she was raised — in roles she recalls were probably considered “quite unsavoury” by her “conservative” parents.

    Solid background

    From an early age, Spargo wanted to become a lawyer. To get there, she needed a job that would enable her to save to pay her way through university. At the age of 17, after putting her name down for laboratory work at Adelaide University, she landed a role as a histopathology technician, a job involving the study of human tissue, often affected by disease.

    “When I think back, it was very character- building,” she recalls of the work, which saw her spend most of the next five years in mortuaries, absorbed in numerous autopsies.

    After graduating with a law degree, which she began when she was 22, she made her way into the cut-and-thrust world of criminal prosecutions with the South Australia Attorney-General’s Department in the Crown Solicitor’s Office, one of only a couple of women there at the time.

    “For the Crown Solicitor, to his everlasting credit, gender was not an issue and, so, whatever the next trial was, you took it, however unpleasant or unlikely you were to win,” she says. “I can remember going into some situations being absolutely petrified, but you did it. It actually stood me in pretty good stead, because it made me reasonably resilient and you’re taken seriously if you can do that sort of work. It’s not the easiest work to do, but it’s a solid background, there’s no doubt.”

    Positive outcomes

    In 1994, Spargo was approached to gauge her interest in joining a board — a job she admits she’d previously never thought about as a career — and was offered her first directorship with the Adelaide-based government statutory body, HomeStart Finance. After finding she enjoyed the style of the work, she became open to other board opportunities. When a position arose with financial services group IOOF in Melbourne, she took it, relocating there with her husband and three children in 2000. Since then, she’s added a number of directorships to her portfolio in both listed and unlisted companies in sectors including engineering, infrastructure, health services, energy, retail and, most recently, automotive, with her appointment this year to vehicle parts and accessories provider Bapcor.

    Spargo says her choices about which boards she’d join have been swayed, over time, less by the company’s industry, size or listed status, and more by its people. “If you’re on a board with colleagues you regard well and who are good, reliable, interested people, then your time on that board is so different from ones where you have dysfunction, ego, competition or lack of interest,” she says. “Working together effectively to produce positive, constructive outcomes for a company — that, to me, is the best part.”

    Spargo has also actively avoided companies where she’s had a sense she might not be given “the full story”. “I’ve never minded businesses that have been in a bit of trouble, so long as I’ve felt it’ll be transparent to me,” she says.

    Risks and opportunities

    Since assuming her career as a company director, among the many changes she’s seen in the governance landscape, Spargo points to the rising level of accountability as among the most significant, reflecting that “the days of treating board positions as rewards at the end of a long executive career are long gone”.

    “While it’s not universally true, in previous times, executive management teams sometimes assumed that the board would tick matters off a bit more easily,” she says. “It’s not a criticism, it’s just a change in the requirements of the role now. The obligations to enquire, scrutinise and manage risk have all increased over time and directors have to be clear about what they are signing off. I’ve always viewed it as a serious, full-time job. You are absolutely accountable and there are consequences if you don’t get it right. You’ve got to think about it all the time, proactively looking for the risks and opportunities.”

    Like many other directors, the issues currently exercising Spargo’s mind include how companies can best navigate the uncertain geopolitical and economic conditions, and normalise results now that the world has entered the tail end of COVID-19 disruption. She notes that a particular complexity for many remuneration committees is in setting executive remuneration rewards fairly and reasonably in sectors experiencing ongoing earnings volatility.

    “There are so many challenges that are heightened at present,” says Spargo, noting that prevailing issues are especially amplified by the need to balance the tension between short- and long-term outcomes. “I’m a long-term thinker.

    I don’t agree with short-term reactions, but that can be a real challenge, particularly in the listed space where you report so frequently, which means a lot of investors are judging you on short-term returns. To me, the better, more resilient returns come from taking a long-term view.”

    Team spirit

    Since Spargo joined the board of the Geelong Football Club in 2016 — home to the Australian Football League (AFL) team known as the Geelong Cats, which she has followed since living in Geelong for a time with her husband, also a huge Cats supporter — the age-old comparisons she’d heard between sports and business performance have an added depth. The Cats’ premiership win in 2022 is a case in point.

    “If you looked at those Geelong players in the weeks leading up to the grand final last year, they had such a team spirit, extremely team-oriented, positive, happy,” she says, noting that the team has finished in the AFL’s top four more than any other club over the past 30 years. “That same ethos is fundamental to companies. If you get a board and a management that are really team-oriented, who move past individual egos and support each other, it makes for a much better environment to succeed than where you’ve got selfish players, for instance, who try to kick the goal when they could have given it off to somebody closer.”

    There’s also much to be noted by companies from the way players in elite sporting codes like the AFL are trained, she says. “They’re constantly given guidance, they’re given the right diet, the right healthcare, performance analysis is very specific and immediate, they’re constantly given all the things that will make them successful. I sometimes see less of that ethos in companies, but I think it’s really beneficial.”

    Recognising that winning a premiership every year is highly unlikely — and noting that the Geelong Football Club board is “not there to tell the team how to play football, but to create the environment in which the coach and the players have the best opportunity to win a flag” — Spargo says it is key for the team to finish in or near the top group each year. Again, she draws the parallel with company performance, noting that it’s untenable to consistently be “the most profitable in a sector, every year, forever”.

    “Instead, should a company be happy enough to make a certain level of profit consistently over time?” she asks. “I’m not advocating mediocrity, but if a footy club can finish in the top four, for instance, very consistently, the likely result is that it will win more often than those that can’t. It’s an interesting way for companies to think about it, to plan for that long-term, consistent performance.”

    Hallmarks of success

    Beyond having a team orientation, Spargo believes other hallmarks of successful board directors are a proclivity for life-long learning and staying across community, commercial, economic and geopolitical trends through “broad reading, listening and thinking”.

    “You can never stay across everything, but you’ve got to be proactive in the sense that you don’t passively receive a whole lot of information and just take it on board,” she advises. “You’ve got to really be trying to think beyond what you’re being given. Go outside the sector you’re in, outside your sphere of comfort, diversify your network. It’s that combination that keeps directors valuable.”

    Spargo is also a firm believer that being involved in a diverse range of industries helps to provide a wider lens. “For example, if I look at the construction companies I’m involved with — which are advanced in ESG, in systems, in safety — it helps me consider what could be done in other companies that might be at an earlier stage of development,” she says.

    In the limited time she has outside her board commitments — which see her regularly travelling to meetings around Australia and the world, most recently to Essen in Germany for the AGM of construction group Hochtief, now the owner of CIMIC Group — as well as staying on top of her reading, heading out to watch the footy or spending time with her husband, children and grandchildren, Spargo’s lesser-known passion is for textiles.

    “I just love fabrics and sewing — I spend my relaxation time in my sewing room,” she says, noting with amusement how many people she’s met around boardroom tables in recent years who are closet sewers. Many of the clothes she makes she donates to the charity she’s been involved with for a number of years, Geelong Mums.

    While other directors with such career longevity might be ready to increase their time for these types of leisurely pursuits, Spargo says she continues to love her career as a director. “I feel so fortunate to still be doing what I’m doing. Sometimes, it’s hard work, sometimes, it’s stressful, but it’s a privilege to have this opportunity.”

    This article first appeared under the headline 'The Consistency Principle’ in the September 2023 issue of Company Director magazine.

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