Don Mercer has recently completed a three year term as chairman of the AICD. As Nichola Clark reports, his love of publicly listed companies is surpassed only by his passion for opera and ballet. He also has a lot of advice on what makes an effective board.
Until the fat lady sings
Whether it’s Puccini, Mozart, or Tchaikovsky you can guarantee Don Mercer will be there in the stalls applauding heartily in support of Orchestra Victoria. Music is Mercer’s greatest passion and his dedication to the opera and ballet is unquestionable. “I don’t think I’ve missed a production in Melbourne for 25 years,” Mercer says.
It is hardly surprising that when Orchestra Victoria became independent from the Victorian Arts Centre Trust in 2001 that their biggest fan, Don Mercer, was invited to become its chairman. “It’s been a pleasure,” says Mercer. “Musicians are just fantastic people and it’s brilliant being involved with my favourite art form.”
Mercer, who has just completed his three year term as chairman of AICD, has always had an appreciation of music. It began when learning to play the piano in his formative years growing up in Scotland. “I very much enjoyed playing but never went anywhere with it.” Although Mercer’s piano playing never took him to the world stage, his early interest in music followed him on his 19-year globe-trotting career with the Shell Group to his final destination in 1978 – Australia. Mercer remarks that the outstanding quality and accessibility of the Australian opera and ballet “is one of the greatest pleasures of being here”.
Starting his journey with Shell in England, Mercer was posted to Holland, Canada, Indonesia and finally Australia. Mercer speaks affectionately of his first employer: “It was a fantastic place to have spent your early business life, such a large company with a rich variety of opportunities and great people development.” But having been posted to Australia and tiring of a ‘gypsy’ lifestyle he realised Australia was the place for him. “I had the opportunity to stay by joining ANZ – I’ve never regretted it for a moment.”
So in 1984 Mercer became an integral part of ANZ and in 1992 was named group managing director and chief executive officer. These positions enabled him to build ties between the corporate world and the arts, and introduced him for the first time to the AICD.
“One of the directors at ANZ introduced me to the AICD. In the mid 1990s I became president of the Victorian council and as part of the role I was involved on the national council. I retired after a five year stint but was invited back in the year 2001 as one of the national directors.”
By then retired from ANZ and a non-executive director, Mercer became chairman of the AICD in 2003. But Mercer’s 14 years at ANZ not only introduced him to the AICD but to another of his loves – the Australian publicly listed company – an interest that has influenced him on his path as a chairman. “I get a lot of pleasure from working with publicly listed companies,” he says. “I’m very interested in companies as engines of economic activity and development. That’s how the nation gets rich, how the people live and how they have jobs. You have to think about how and why the economy works, and ours works basically through corporations. For me, working with the larger corporations from a national and economic development point of view is being a part of what’s shaping the country.”
But Mercer’s love for publicly listed companies hasn’t prevented him from exploring a multitude of business sectors. Like an assortment of chocolates, his portfolio includes roles as chairman of Australia Pacific Airports Corporation (Melbourne Airport), chairman of Orchestra Victoria, chairman of Orica Limited and previous non-executive director roles with CSIRO, APRA and chancellor of RMIT University.
“One of the great opportunities of being a non-executive director is that it allows you to diversify your interests,” he says. “In management you really need to know a lot about a relatively narrow sector of the economy. But if you are a non-executive director you can actually engage yourself in parts of the economy you would never have done before which is fascinating.”
Mercer’s portfolio of directorships is extremely varied. Part of the attraction of this is learning how different industries are structured as well as the diverse range of problems they face. Some with more or less interaction with the authorities and regulations!
But despite their differences Mercer says: “The principles of what you’re trying to achieve, by working with a collegiate group of people to help an enterprise survive and prosper, is quite similar.”
What also remains constant is Mercer’s approach as a chairman. “This means having a good choice of colleagues to provide the skill sets you need, good chemistry so you function well as a group, only spending time where you can make a difference, and not wasting time trying to second guess management,” he advises. “I also make sure we don’t intrude unnecessarily in management space but are absolutely supportive as well as maintaining the oversight function. I think a good board gets that balance right.”
Regarding the specific role of the chairman, Mercer says you have to look at what agenda the board’s following and what steps will get the job done. “It’s a lot to do with the chairman being an effective manager of the board itself and the work of the board. I’m also a great fan of company secretaries – a good company secretary can make a world of difference!”
So how has Mercer’s approach as chairman paid off in terms of achievements? Mercer is quick to point out that as chairman you don’t achieve wins on your own. “You become a part of the bigger picture. You can counsel, advise and consent to what management wants, but essentially to say that you have achievements in your own right is quite difficult.”
To Mercer, success and satisfaction is measured in terms of ‘good news’. “It’s whether the enterprise is actually doing well – it doesn’t necessarily have to be making big profits, in the case of the orchestra for example that’s not important – it’s whether high performance expectation is actually happening and the people are in good form and good spirits.”
Another of Mercer’s measures of achievement is seeing a company that is in considerable difficulty become a successful growth business. “You’d never claim to have achieved it yourself,” he says. “But you may have appointed the management and agreed the direction, so you’re definitely part of it which is incredibly satisfying.”
In describing the success story of Orica, Mercer emphasises how the board has had to work together as a unit. A cohesive board is something Mercer is very aware of and describes as one of his greatest learnings.
“To develop an effective board you need to have a smaller number of longer meetings and spend a reasonable amount of time together. People need to get to know each other socially as well as in the formal sense to build up the chemistry.” This is something Mercer has applied during his time as chairman of AICD by introducing a new two-day meeting structure. “We have dinner together – often with external guests so we can debate issues with outsiders as well as ourselves. It’s helped a lot with the chemistry which is particularly important because of the turnover – each year about a third of the board retire. I think that structure of meeting is a legacy I’m pleased to leave behind.”
Reflecting on more highlights with the AICD Mercer says: “The financial strength of the organisation is now rock solid, it was not bad five years ago, but go back ten years and it was terrible. That’s a source of real satisfaction and the quality and strength of the education program is just a pleasure. The way in which the membership has grown and the events that are running in the different state organisations are all very high quality.”
But one of Mercer’s greatest contributions to the AICD has been his focus on policy and advocacy in the board agenda and meetings, the use of the state councils as part of the advocacy push, and the influence of the AICD.
“I am delighted about the way in which the policy and advocacy area has grown and the work that we do in trying to understand and influence regulators and policy makers. Somebody has to be a voice for the director community and an awful lot of what’s been going on in the development of corporate law and practice has been done without any consultation with or by practising directors. The AICD has got a real job to do here because if we don’t speak for directors then who is going to? The AICD has moved over the last three years from being a very small voice to having well researched and active agendas that we’re pushing on behalf of our members. And we’re doing that so much better now.”
The AICD’s new focus could not be more timely in a climate where non-executive directors are facing more and more challenges. “The increase in the burden of regulation of publicly listed companies has become alarming,” says Mercer. “We’ve got all sorts of new liabilities arising for directors… The idea of personal liability attached to directors for company failures is just not acceptable. The bottom line is that non-executives in the Australian system are independents – they’re not experts in the field. They’re basically helping to contribute to what should be successful management. If they were executive directors, or full time professionals working in the company, that would be different. But many Australian directors are part time and because of independence expectations many have had no prior involvement with the company. This group of independent people have become so accountable for what the company does that they won’t let it take any risks.”
Mercer explains the detrimental effect: “If you have our corporate sector being risk averse two things happen. Firstly, returns become unsatisfactory so you actually damage the economy and the performance of the corporate sector. Secondly, you give a free kick to all that economic activity that isn’t in the publicly listed sector. During my tenure it’s got worse and it needs to get better.”
Mercer also warns that the increase in regulation is detrimental. “A lot of good people are choosing to not enter the non-executive director field because of it (regulation) and finding opportunities in private equity and elsewhere instead. The performance in the publicly listed sector is not bad, but it’s becoming less and less able to make the most of its opportunities – which is why you see so many companies being bought out. And who is buying them out? Foreign companies, hedge funds, private equity… It’s all big money, highly leveraged money, but it’s not in the publicly listed sector – it’s all private.”
So in retiring from the AICD after his three year tenure and many years of affiliation, Mercer leaves behind a financially healthy and thriving AICD. But not tempted by a quieter life, Mercer is moving on to a new appointment as chairman of Newcrest, demonstrating his attachment to publicly listed companies and variety. “It will be a new experience and new business area. I’ve never been involved in gold mining before – I’m looking forward to it very much!” But Mercer leaves safe in the knowledge that as a chairman he will continue to have a voice through the AICD. “I’ve thoroughly enjoyed my three years but I’m happy to move on knowing the AICD will be battling for me out there.”
As for his new challenge he believes, “It will be a lot more time consuming.” But he will still find the time to visit his biggest love – the ballet and opera – that certainly ain’t over until the fat lady sings.
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