Q and A with Simon McKeon

CSIRO chairman and champion helmsman Simon McKeon talks to Tony Featherstone about the prospects of the not-for-profit sector and how directors should approach it.

Come lives are meaningful. Others are extraordinary. Then there’s Simon McKeon FAICD, lawyer turned investment banker, passionate charity crusader, sailing daredevil and 2011 Australian of the Year.

McKeon’s distinguished board career almost looks pedestrian compared with his achievements in finance, community work and sport. But through a long list of board positions, among the most diverse of any director in Australia, McKeon strives for change.

He is the most humble of directors. Asked about his goals as Australian of the Year, McKeon almost apologises that he is a not a "giant in a global field" pushing a particular cause that is measurable. Asked why he was chosen to chair the Commonwealth Scientific and Industrial Research Organisation (CSIRO) in 2010, McKeon says he never thought the Federal Government would appoint a "generalist" without even a hint of a formal scientific background. He even downplays his achievements in helming boats that have held world speed-sailing records.

McKeon brings an important quality to boards: diverse experience and a different perspective. That is not to say he lacks governance skills or commercial nous. One does not become executive chairman of Macquarie Group’s Melbourne office without a sharp mind for money. Having chaired or been on at least 20 boards or advisory boards, mostly in the government and not-for-profit (NFP) sectors, McKeon thinks deeply about board structures and contemporary governance issues.

He talks about the need for big business, government and the NFP sectors to work together, and for the "walls between them to be torn down". McKeon may not realise it, but few have gone as deep into the intersection of these three sectors as he has. His most significant contribution may still be ahead: using his position, profile and skills to bring these sectors closer together to help more Australians.

McKeon’s big-business skills were honed first as a solicitor at Blake Dawson Waldron, then advising on billion-dollar deals at Macquarie and as chairman of MYOB from 2006 to 2009. His political connections come through several Federal Government appointments, notably as CSIRO chairman, and founding president of the Australian Takeovers Panel from 1999 until 2010. His NFP skills come through numerous board roles, the first significant one for World Vision Australia, which surely has produced as many outstanding directors over the years as 
any board.

McKeon’s potential to bring sectors together is evident in some of his board roles. He chairs Business for Millenium Development, which encourages businesses to pursue opportunities in the developing world. He is also on the board of Red Dust Role Models, which connects well-known Australians with Indigenous youth. In some ways, McKeon is an obvious choice to chair CSIRO. The world’s great challenges, such as climate change and global poverty, require a multi-disciplinary approach and people, such as McKeon, who bring others together, think differently and have empathy.

And, it requires directors who are not afraid to get their hands dirty and get out of the boardroom. McKeon still works part-time at Macquarie Group, an organisation with an important alumni in Australia’s NFP sector and the tolerance and foresight to let McKeon pursue his charity passion when others only pursue profit.

Investment banking must at times seem a world away to McKeon from counselling heroin addicts in St Kilda or attending one function after another for smaller charities that scarcely have enough funds to survive, let alone roll out the red carpet for an Australian of the Year and high-flying investment banker.

McKeon’s main message to company directors is to volunteer their time to boards of charities they are passionate about and ensure their organisation has a culture of community engagement that connects with all staff, especially younger ones who want to work for organisations that help others. As custodians of culture, and from a risk-management perspective, directors need to encourage and support management in its efforts to create sustainable competitive advantage by thinking about community engagement in every aspect of its business models. It’s simply good business.

So much is possible. McKeon was diagnosed with multiple sclerosis a decade ago, a condition that no longer affects him greatly. In 2009, he was at the helm of the first sailboat to sustain more than 50 knots and peak at 54 knots (100 kilometres per hour). He helmed another boat that held the outright world sailing record between 1993 and 2004. Now he has an opportunity to get big business, government and the NFP sector working more closely together to innovate and create value.

That truly will be extraordinary.

Here is an edited extract of McKeon’s interview with Company Director.

Company Director (CD): How has being Australian of the Year changed your life so far?

Simon McKeon (SM): The obvious thing is you become incredibly busy. Barely a day goes by where I do not receive an invitation to speak at a function, meet people or talk to the media. I have to balance these invitations to ensure I can meet with groups that may not have a lot of resources or the ability to put on fancy, high-profile events. I try as best I can to understand the enterprise I speak to and its issues. It has been an extraordinarily steep learning curve and a role I feel very privileged to have this year.

CD: What do you hope to achieve as Australian of the Year?

SM: Several of my predecessors who have been Australians of the Year have been distinguished professors or giants in their own field or vocation. They have had a very strong focus on a particular issue, such as mental health, whereas I am more of a generalist and hardly a global authority. My central message is to encourage Australians to take an interest in this country’s amazing NFP sector and to volunteer and donate. This could range from someone helping a local charity through to a company director joining the board of an NFP enterprise.

CD: You have done much for the NFP sector since you moved from a full-time to a part-time role at Macquarie Group. Where does your passion come from?

SM: I grew up in a working-class suburb in Melbourne where there was a lot of need. My mum and dad were always involved in various community activities and they seemed to have a lot of fun working in a group helping others. I could see how the experience enriched their lives. I never wanted to let go of what my parents did to help others. My message to others is: don’t volunteer for a charity merely out of a sense of obligation, let alone guilt. Do it because you ought to receive a special experience not found in normal daily life. Do it because of the wellbeing it provides to us.

CD: How do we strengthen the relationship between big business and the NFP sector?

SM: All too often we see the corporate, government and NFP sectors as distinct tribes. We need to tear down the walls that divide these sectors and show how each can gain from working with others. I have seen great things happen for charities when companies provide some of their resources and skills to a particular cause. And, equally, I’ve seen companies gain so much by helping a charity and drawing on its expertise. Companies should get more involved with charities, not out of a sense of altruism, but because it’s good business and it helps build a great culture.

CD: Should company directors lead the effort to better engage the NFP sector?

SM: Yes. Obviously the actions of the CEO and his or her leadership team have the greatest influence on shaping an organisation’s values. But as custodians of organisational culture, boards need to think about how a closer relationship with certain charities can strengthen their company, not only in terms of corporate reputation but also in attracting and retaining the best talent. Generation Y and Z want to work for companies that make a difference. They want to be heard and they want to see their organisation stand for something and to see its leaders making a conscious effort to support causes that appeal to staff. I would really encourage company directors to meet with some younger staff in their organisations and understand their views on this issue.

CD: How do we develop the next generation of social entrepreneurs and innovators?

SM: I have immense hope for the leadership capabilities of our younger generations. I find them quite spectacular. I have sat on the Victorian Rhodes Scholar selection committee in recent years and every time I went to those meetings I left with a spring in my step. Outstanding young leaders do not need any motivation about the need for business to help charities. They get it – they absolutely understand how helping a particular cause is smart business because there’s a tremendous return on investment.

Over time, we will see more of this younger generation helping charities through the companies they work for, or leaving business to work for, or start, charities.

CD: How do we foster more Indigenous entrepreneurship in Australia?

SM: That’s such an incredibly complex issue. I have come to realise that helping Indigenous communities is not really a money issue and not about getting more cheques from Canberra. The issue is more about attitudes and that is what makes it so confounding and at times dispiriting. It’s about really trying to understand what it is like to be the original people of this country and the connection they have with this land as its original owners.

An important aim should be to promote Indigenous leadership, especially among young people, at every opportunity. We need to do everything we can to help young Indigenous people go to university and other Indigenous leaders become outstanding role models for their communities.

It is less about telling young Indigenous leaders what to do and more about ensuring there is enough support to help them develop their leadership skills and choose their own path.

CD: Are you optimistic about the long-term prospects for Australia’s charity sector?

SM: Three big trends will have a profound influence on the charity sector. First, as I mentioned earlier, we have an outstanding generation of young people coming through who are more passionate about social causes. Second, I see more companies recognising that community engagement is about building sustainable competitive advantage, not just writing cheques. Third, this extraordinary elongation of our lives will have an enormous effect on the charity sector. As people live much longer than in previous generations, it is likely there will be more people, with more time, wanting to help the charity sector during or after their careers and to have a bit more variety in their lives. The NFP sector needs to get ready for an extraordinary resource that is coming its way relatively soon.

CD: Does there need to be more rationalisation among charities?

SM: Definitely. I saw the very strong benefits of consolidation through my work on the boards of MS Australia and MS Victoria. We realised about eight years ago that MS Australia could help more people with multiple sclerosis by streamlining its operations, while preserving its values and culture. There are simply too many charities in Australia consuming too many resources and too much energy.

We need people from business who can join boards and assist the charity sector with sensible consolidation or more cooperation if that makes sense. Yes, mergers are difficult for any organisation. But they are also the right thing to do for some charities that would be more effective as part of a larger group.

CD: You have been a non-executive director or chairman of several boards now. What makes a good director, in your opinion, in the NFP space?

SM: It starts with passion and commitment. Any company director thinking about joining an NFP board should first find a cause that really interests him or her. You will never be an effective director if you join a NFP board simply out of obligation, or if you perceive a need to have an NFP directorship on your CV.

The best directors I have seen are those who believe passionately in the cause and therefore have great commitment. Effective NFP directors also have capacity for fundraising. I’m not saying every NFP director needs fundraising skills, but it certainly helps, especially with smaller charities. But overall, once there is a sound understanding of the organisation’s objectives, the skills required are very similar to those required in the for-profit space.

CD: How would you describe your style as a director or chairman?

SM: My starting point is that the board and management have to move in the same direction. So I always try to break down any barriers that may exist between directors and executives and bring people together for the good of the organisation. Of course, boards must be independent and there has to be clear separation of the role of directors and management. But within the bounds of strong governance, there is still scope for a close professional working relationship between these two groups.

CD: What skills do you bring to boards?

SM: Frankly, I’m a jack of all trades. I’m no longer a practising lawyer, but I take a continuing interest in corporations and governance law. I’m an investment banker so I have to be able to add and subtract. But today, building on those basic foundation stones, I’m more focused on creating the right environment for people to produce superior performance, having the right infrastructure, the right values, the right people structures and having a competitive advantage – I’m happy to ask "dumb" questions to ascertain that an organisation has these elements.

CD: You were on the board of World Vision for many years. Is Australia doing enough to help ease global poverty?

SM: No. Statistics show Australia is down in the bottom half of OECD countries in terms of our official aid program relative to gross national income. That is not consistent with the extraordinary prosperity this country has enjoyed or the generosity of many individual Australians. Aside from doing the right thing, it is in Australia’s economic interests to help its less fortunate neighbours, given our fortunes are increasingly tied to emerging economies through the mining boom.

CD: You became chairman of CSIRO in 2010. How did that role come about and what do you see as CSIRO’s big challenges in the next five to 10 years?

SM: I never thought I would end up chairing a wonderful organisation like CSIRO. I’m not a trained scientist or a technical person. But I am very passionate about some of the great challenges affecting mankind, such as climate change and reducing global poverty, and how science can assist. In a way, not having a science background is a strength. CSIRO has a vital role in ensuring science is important to all Australians, not just those with science backgrounds. And, the problems CSIRO tries to solve are increasingly multi-disciplinary that require the collaboration of experts from many fields. CSIRO has drawn out a new passion for science in me because I can see today how it can tangibly improve lives. And, CSIRO is ranked globally near the top in a surprisingly large number of scientific fields.

CD: How would you rate Australia’s response to the challenges of climate change?

SM: It is not appropriate for me to comment on the politics of climate change. But I will say that the research I see emanating from organisations such as CSIRO, the Australian Academy of Science and the Bureau of Meteorology continues to demonstrate the relationship between carbon dioxide emissions and global warming. The science appears to me to be quite clear cut on this point.

Both political parties have shown a willingness to tackle the issue, but there’s little time to wait. And, most importantly, I appreciate the importance for Australia of retaining a strong element of international competitiveness and acknowledge that we’re a tiny polluter globally (although massive on a per capita basis). But as a prosperous country, we must be a leader in this space, not a freeloader.

CD: You retired as founding president of the Australian Takeovers Panel in 2010. Do you expect a pick-up in mergers and acquisitions (M&A) activity in the next 12 months?

SM: As an investment banker, I see a present scenario that should lead to enhanced M&A activity. Certainly, our largest companies are historically undergeared, which means they will have to invest that surplus cash in acquisitions or give it back to shareholders. I expect more Australian companies to make offshore takeovers, given that the Australian Competition and Consumer Commission (ACCC) has made domestic consolidation much harder in recent times. The high Australian dollar also supports this.

CD: Where do boards that receive takeover approaches go wrong?

SM: Companies that receive an informal takeover approach should have a very strong reason if they choose not to disclose it to the market. The days of boards meeting a potential suitor, and keeping it quiet if the transaction does not proceed, are long gone, in my opinion. Shareholders have a right to know if somebody wants to buy their company.

CD: You were chairman of accounting software group MYOB when it was taken over 
by a US private equity firm. How did you find 
that experience?

SM: MYOB was and remains a wonderful company. It has its own intellectual property and has enjoyed numerous growth options beyond its original legacy product. Directors are always supposed to be selfless when it comes to takeovers, to do what is best for shareholders, even if that means losing their board seats. I now know that is easier said than done. I really enjoyed chairing MYOB; it was the only listed-company board seat I had allowed myself to have. It was unfortunate to see MYOB sold at the bottom of the global financial crisis but the price was a very good one at the time and our institutional shareholders were happy with the transaction.

CD: You were diagnosed with multiple sclerosis 10 years ago. How has that affected you?

SM: I don’t talk a lot publicly about my condition. It is not that I’m trying to hide anything. It’s just that there are a lot of people with MS much worse off than me. I hardly notice my MS these days. I was diagnosed with it 10 years ago and the first few episodes I had were somewhat disturbing. But there have been positives too; being the founding chairman of MS Research Australia and watching the great research it is funding in this country has been very rewarding.

CD: Can we expect to see you break more world sailing records?

SM: My syndicate has had to put its current world-record attempts on hold for a while as I work on my Australian of the Year duties. But hopefully we’ll be back trying to break the speed record again.

CD: What else do you do to relax away 
from work?

SM: Essendon Football Club is having a much better year and it’s also nice to get away from it all out in the bush or even out on the ocean.