We ask a prominent director to share three important lessons from three different professional experiences.
John Stanhope AM FAICD has extensive experience in governance, finance, accounting and business strategy. He is the chair of the Port of Melbourne, the Bionics Institute, the Global Feel Better Institute and the Melbourne International Jazz Festival. He is also chancellor of Deakin University. He was formerly chair of Australia Post, Telstra New Zealand and CSL Ltd in Hong Kong. He was also a non-executive director of AGL Energy Ltd.
Stanhope spent six years as a member of the Financial Reporting Council, the peak body responsible for overseeing the effectiveness of the financial reporting framework in Australia. He remains involved in corporate reporting improvements on a global basis. In 2014, he was awarded a Deakin Alumni Lifetime Achievement Award. In 2016, he was made a member of the Order of Australia for significant service to the financial and national communication sectors.
The Lesson: Ask the right questions as a director
While I was the CFO of Telstra, I took up my first non-executive role at an ASX-listed company. As I was still carrying out my executive role, I had some difficulty in putting on a director’s hat versus a management one. I was asking the sort of questions I did in my CFO role. Given my finance background, I was starting to delve into the detail of budgets, asking the hard questions and getting down into the details. I recall somebody politely pointing out I was asking the wrong questions as a director.
A director’s role is to make sure the budget is adequate to implement the strategy and the funding is available at the lowest cost of capital. Wading into line-by- line issues was not correct. This is the distinction between the director’s role and the manager’s role — and applies to any board, in any industry. It’s about the behaviour of the person who goes on the board as the director and understanding the difference between the director’s role and management’s role. The job, as the title implies, is to give direction.
One of the lessons new board members need to learn is the difference between these two roles. I often see people come onto boards who delve into too much detail because they’re approaching it in the same manner as they would an executive role.
The Lesson: Work as a team with management
Notwithstanding the first lesson, another lesson I’ve learned over the years is that the board and executive are a team. Yes, you have different roles and duties, but if you’re really going to get things done, the board and executive must be in it together. This is the only way to truly advance the cause and purpose of the organisation and deliver outcomes.
Of course, robust debate with executives around the board table is good. You want this to happen as the chair. But when you walk out of that room, it’s important to be on the same page, even if there has been some disagreement. After discussions, an agreement is reached about what is going to be done. You close the boardroom door behind you and get on with it. You don’t want management walking out, saying, ‘The board made me do it’. That’s not the culture you want in your organisation.
I believe it’s important to ask two questions at the end of every meeting. Firstly, have we done things right? This question is about whether we have complied with all the relevant laws and all the things we have to do.
Secondly, have we done the right thing? That is an ethical question. I want board members to agree that what we’ve decided is in line with our social conscience and that we’ve considered the impacts on all stakeholders.
The Lesson: The chair and CEO should not get too close
I’ve seen occasions where the chair is involved in CEO selection, thus becoming less objective. If the CEO suggests something other board members don’t agree with, the chair may feel the need to defend the CEO. They feel responsible because they chose the person for the job.
I’ve also seen instances where the CEO and chair have had to go because there’s been board disagreement with both of them. There’s no alternative when independent objectivity is lost due to the closeness of the relationship. The moral of the story is that chairs and CEOs shouldn’t get too close. A professional distance maintains objectivity. Equally, if the CEO builds friendships with other directors, the lesson remains relevant.
There was a recent case with an NFP, where one of the senior people had a complaint about the CEO. The senior person would only speak to me about it, not to the chair of the people and culture committee, as they felt the chair was too close to the CEO. The moral of the story is to maintain a professional distance to ensure the smooth running of the organisation.
It doesn’t mean board members and the CEO shouldn’t talk to one another. It doesn’t mean you can’t socialise. It’s about taking a professional approach to roles. The relationships between chair, directors and management are important to get right so the focus is on the best interests of the entity and all stakeholders.
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