Carol Schwartz AM FAICD occupies a seat in Australia’s most exclusive boardroom, the Reserve Bank. She talks to Damon Kitney about transparency, financial rigour and gender equity.
Carol Schwartz AM FAICD admits she didn’t know what to expect when she walked into the Reserve Bank of Australia (RBA) boardroom on the first Tuesday in March last year. It was her first formal meeting as a director of the bank after she had been chosen to replace Heather Ridout AO MAICD on the most exclusive board in the country.
“When you go on a board like that, you don’t know what is going to happen. The discussions around the table are incredibly respectful, very inclusive and draw on everybody’s skills and observations in a really effective way,’’ says Schwartz.
While the RBA has long had something of a mystical aura — its activities, until recently shrouded in secrecy — Schwartz says the mood inside the boardroom is very much “real world”.
“It doesn’t have a sense of exerting power and influence at all,’’ she says. “On the contrary, it is incredibly focused. What we are doing is looking at what’s best for our nation. We always ask, ‘How are we taking into account all the citizens of this country?’ The governor, deputy and assistant governors are individuals of such excellence that we as a country are in very safe hands. The work they do on preparing the monthly board papers is absolutely superb. They aren’t caught up in jargon; they are clear and concise. And they are the best possible briefing one could get on the global and domestic economic environments,’’ she says.
One of the main reasons Schwartz was chosen for the role was her ability to bring a real-world perspective to the RBA board, especially from the property sector. For many years she ran Melbourne’s Highpoint shopping centre for the Besen family (she is the daughter of retail king Marc Besen and the niece of Chadstone mall owner John Gandel), then became the first woman to hold the national presidency of the Property Council of Australia.
Now, Schwartz is a director of the country’s largest listed residential developer, Stockland, and sits on the board of Qualitas, a real estate investment management company she founded with her husband, Alan Schwartz AM, and their partner, Andrew Schwartz. She has also been on several government boards and authorities, including Victoria’s Docklands Authority.
While Schwartz won’t comment on the deliberations of the RBA board around cooling the overheated property markets in Sydney and Melbourne over the past year, she does say it has been extremely cognisant of the work done in the sector by the Australian Prudential Regulation Authority (APRA) and other regulators. APRA, for instance, has been cracking down on interest-free loans to both owner-occupiers and investors to prevent speculative activity and to force home owners to pay off their loans faster. It’s one of the reasons the board was able to keep interest rates on hold last year, despite property bubble concerns.
“The RBA’s decisions are incredibly well considered in the context of everything that is happening around us,’’ she says carefully.
Schwartz also brings a powerful philanthropic, entrepreneurial and community mindset to her RBA role. In 2006, she was awarded an Order of Australia for her contribution to business, commerce, community and the arts. At the time, she and her husband set up the Trawalla Foundation, a fund that invests in the arts, ideas and innovation.
As someone with a background in family business, Schwarz brings a different perspective to board deliberations and oversight of management.
You’d be surprised how many private companies don’t have a formal governance structure.
She has previously said that she comes from an “entrepreneurial family of self-made people; people who took risks”. Today, this gives her a unique viewpoint that spans both the listed and private company sectors in Australia.
“Having been on both public and private companies, I know how important governance is. I have taken my learnings [from] listed company boards into the private world. You’d be surprised how many private companies don’t have a formal governance structure. I really believe they can benefit from these processes,’’ she says.
“All companies can benefit from strong governance structures. When I talk to young entrepreneurs setting up businesses, my strong advice to them is to set up an advisory board and have people around them who can guide them.’’
Financial rigour is the element Schwartz has appreciated most from watching a listed company board in action.
“The process of, and the rigour around, financial outcomes of publicly listed companies is absolutely superb,’’ she says. “Rigour around financial issues is necessary in private companies, too. You don’t want to destroy the entrepreneurial spirit, but financial rigour is very important, especially when you’re investing other people’s money.”
But there’s one vital element public companies can learn from the private world: the spirit of risk-taking. “It’s always an interesting balance around opportunities and risk-taking. That’s why many private companies choose not to list — they worry they’ll be held back in the context of opportunities because of the regulatory environment.”
Questions of culture
Last year marked a turning point in corporate Australia’s accountability to the community at large as many major companies openly acknowledged the importance of addressing issues of trust and reputation in the wake of a string of scandals.
Embarrassing revelations by whistleblowers at 7-Eleven, Commonwealth Bank, Domino’s, Caltex and Aveo stimulated media interest and hit the share prices of these listed companies and led to investigations by regulators, as well as the resignations of some CEOs and key executives.
Scandals within the CBA and other parts of the financial services sector recently prompted the Federal government to cave in to political pressure to call a royal commission.
In commenting on the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Schwartz chooses her words — as a company director and businessperson, rather than as board member of the Reserve Bank — very carefully.
“I found it very interesting, the initial call for a royal commission. Banks, like all organisations, have issues around culture. Because banks are such important institutions for citizens’ lives, transparency is absolutely paramount. Ordinary people and the regulators believed the banks were not being as transparent as they possibly could be. Transparency is the big issue.”
While the inquiry will be “distracting” for the sector, Schwartz is unsure what constitutes a “good” outcome. One thing is for certain, she says: the impact will be felt across the community.
“If you look at the ownership structures of the banks, a lot of the super funds hold shares in the banks, which means the population holds shares in the banks.’’
More broadly, she believes non-executive directors have a responsibility to reflect on and give feedback about culture and values to the chair and even, where appropriate, the executive team.
“They must ensure there is a culture of transparency and that it is valued,” she says, noting that it’s up to the chair to decide the circumstances in which non-executive directors may speak directly to managers. One key test of a company’s culture is how it deals with bad news, she says.
“It is essential that it comes through the organisation and is revealed very quickly — that there isn’t a culture where anything negative needs to be suppressed. It’s really important that bad news rises.
“Unfortunately, it’s rare,” she adds. “There is a fear factor involved when the news isn’t good. It will depend on the circumstances, but the chair should potentially take a public role in dealing with those issues.”
However, Schwartz notes that a company’s culture evolves over a long period.
“I ask the question: can you blame a current CEO for an embedded culture that has probably been developing for decades before they assumed their position? Unfortunately, they’re the ones bearing the brunt. It’s a really interesting issue for individuals who take on the CEO role of large publicly listed companies. How do they ask themselves the questions: what is the culture, how do I change it and how long will it take to change?”
Champions of change
One aspect of cultural change that Schwartz finds frustrating about the listed corporate world is the slowdown in appointments of women to executive and director roles on company boards.
The latest AICD Quarterly Gender Diversity Progress Report data reveals the proportion of women on ASX 200 boards was at 26.7 per cent at 28 February, up only marginally from 26 per cent in late 2017. The percentage of female appointments to ASX 200 boards spiked to 47 cent cent in early 2018, up from 36 per cent in 2017.
AICD chairman Elizabeth Proust AO FAICD says that in 2018, the AICD is calling on all boards making an appointment to have at least a 50/50 candidate list. “All directors should be looking around their board table and asking themselves: how diverse is this group of people and am I putting this organisation in the best possible position for the future with those present?”
“I am completely baffled,” says Schwartz. “We have many well-qualified women who can take on senior roles within organisations, yet very few women run our top 200 companies.” Schwartz is on the public record supporting quotas for the appointment of women to boards. “We all know about the myth of merit. Directors are often appointed because of pre-existing relationships as opposed to getting the right person for the job,” she says.
Her message to recalcitrant chairs, especially those who still do not have women on their boards, is simple: “Their companies are not being optimised. They are not performing the best they could be if they’re not addressing gender diversity. Many business and political leaders say we need to have boards that reflect our communities,’’ she says.
Schwartz is passionate about gender equity, founding the Women’s Leadership Institute Australia and Chief Executive Women, a networking group and forum for female leaders. In 2015, she also convened the property sector’s Male Champions of Change (MCC), a group of senior leaders formed to drive gender equality in this male-dominated industry. It was the first industry-specific MCC to flow from the original program established in 2010 by Australia’s former Sex Discrimination Commissioner, Elizabeth Broderick.
The promotion of women in business and society also happens to be the only subject on Schwartz’s Twitter account, which at last count has more than 15,000 followers. She says the work of the Property MCC has created genuine momentum towards “acknowledging there needs to be real shifts in the way society operates, the way we view men and women and what their roles are”.
But she concedes Australian society is still mired in unconscious bias. “We still have stereotypical views of what men and women can do,” she says. “The role women play within families, the amount of time they spend on family and domestic [work] as opposed to men. And if men look to take time off for family responsibilities or parental leave, it’s viewed as a sign they are not serious about their careers. Men are victims of unconscious bias in the same way women are. As long as that prevails, we won’t have the paradigm shift to move the dial on any of that.”
Schwartz believes the inertia in the workplace extends beyond diversity to important issues such as work practices and the seeming inability of many companies to move with the times — which could well have damaging consequences for Australia in the future.
“Why is it, in this age of disruption, that we are doing things in the same way we did them 20, 30, even 40 years ago? In a lot of organisations, there is still an expectation that you are in the office from 8.30am to 5pm. There is still a perception that you have to be at your desk, otherwise you’re not working,’’ she says.
“Here in Australia, we are still very much entrenched in the old-fashioned ways. And there are so many mixed messages. Really absorbing the changes and accepting them is harder for human beings than we think.”
The RBA board
Since taking over as governor of the Reserve Bank in September 2016, Philip Lowe has pushed for greater transparency among RBA officials and promoted more women to senior ranks, even allowing them more freedom to speak in public. He has also reportedly set up employee resource groups to encourage greater diversity within the bank, focusing on gender equity, Indigenous people and those in the LGBTI community.
- Chair Philip Lowe
- Governor since 18 September 2016
- Present term ends 17 September 2023
- Deputy chair Guy Debelle
- Deputy governor since 18 September 2016
- Present term ends 17 September 2021
- Mark Barnaba AM FAICD
- Member since 31 August 2017
- Present term ends 30 August 2022
- Kathryn Fagg GAICD
- Member since 7 May 2013
- Present term ends 6 May 2018
- Treasury Secretary John Fraser
- Member since 15 January 2015
- Ian Harper FAICD
- Member since 31 July 2016
- Present term ends 30 July 2021
- Allan Moss AO
- Member since 2 December 2015
- Present term ends 1 December 2020
- Carol Schwartz AM FAICD
- Member since 14 February 2017
- Present term ends 13 February 2022
- Catherine Tanna
- Member since 30 March 2011
- Present term ends 29 March 2021
Carol Schwartz’s lessons for getting the most out of your private company board
- Establish a formal governance structure. Consider setting up an advisory board and surround yourself with people who can guide you.
- Never underestimate the importance of financial rigour. Entrepreneurial spirit is important, but it should never play second fiddle to financial rigour, especially when you’re investing other people’s money.
- Don’t just appoint family members and friends as directors — look for independent, experienced directors.
- Ensure directors have defined terms for their appointment and make the terms shorter than those in the listed space; that is, two years rather than three, to be reviewed at the end of two.
- Appoint an independent chair that everyone on the board believes is objective and can be approached to discuss things confidentially. It must be someone board members feel they can trust and have confidence in.
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