Do ex-politicians make good directors? Tony Featherstone discovers they could have much to offer, if only they would stop being politicians
What ex-politicians can bring to the boardroom
- The potential to lift the organisation’s profile and attract donations
- An ability to assess complex issues quickly
- The knack of multi-tasking
- Connections in government
- An understanding of government and regulatory processes
- Knowledge of and experience in dealing with the print and social media
- An understanding of how decisions affect the community and the likely response
The best advice for politicians who seek directorships after leaving public life is summed up in four words: "Stop being a politician." Yet too many former politicians cannot stay out of the public debate, resist meddling in party affairs or stop running towards the nearest TV camera or tape recorder.
In doing so, they badly damage their prospects of governing the largest companies and deprive boards of a potential talent source: former federal and state politicians. More politicians on boards, and more business people in politics, might also help rebuild the relationship between business and federal politics in Australia and limit the trend of career politicians, but it seems a long way off.
For all the talk about ex-politicians joining boards, the list of those with commercial directorships is skinny, relative to the number of politicians who leave office every few years. Look through the top 100 ASX companies and it is hard to find many ex-politicians on their boards. Only a handful of former politicians could claim to have a portfolio of prominent listed company directorships.
As former Queensland Treasurer Keith De Lacy AM FAICD notes in Company Director’s Q&A on p16: "The trend of ex-politicians joining boards is easy to overstate and it is the exception rather than the rule for politicians to have successful careers as company directors. Many politicians struggle when they leave public life and suffer from so-called ‘relevance deprivation syndrome’."
Egon Zehnder International managing partner Neil Waters says: "It’s hard to find many successful politicians who have become outstanding company directors. I’ve seen a steady stream of politicians over the past 15 years enquire about board roles, but am yet to see a board specify that it is looking for an ex-politician for a directorship.
"Boards worry that having a prominent ex-politician as a director could create a perception that the company is aligned with a particular political party and it will cause problems if there is a change of government. And, there is the risk that ex-politicians remain engaged in political debate. There are just too many natural biases in the system for lots of boards to recruit ex-politicians."
Waters adds: "In terms of practicalities, the days of boards looking for a well-rounded director are long gone. They analyse their skills and industry gaps, and want directors who can bring a certain function, experience or industry knowledge, and fill that gap on the board. Politicians usually have very good general skills, but lack the specialist knowledge that boards seek, often because they have been out of the professions they were in before politics for so long.
"Another problem is that some politicians have an inflated view of their capability on boards and indeed how easy it will be to make the transition. Some believe they can make a remarkable contribution to anything," says Waters. "I understand why politicians think the skills they gained in public life will work well on boards, although that is not always the case. Sadly for them, the number of politicians who are suited to boards of the largest ASX companies is low and the facts bear that out."
Many former politicians end up on boards of small listed companies, private companies or charities. Other ex-politicians have government-related board roles – for example, former Federal Treasurer Peter Costello AC is on the Future Fund board.
Former Federal Opposition leader John Hewson chaired Signature Gold during its unsuccessful $10 million initial public offering in 2011. Dr Hewson had also been a director of two companies that went into administration: Elderslie Finance Corporation and People First Retirement Living (through its subsidiaries).
Former Federal Treasurer John Dawkins chairs Sovereign Gold Company and is on the boards of the micro-cap listed companies Archer Exploration, MGM Wireless and Integrated Legal Holdings. And, the main listed company directorship of former Victorian Premier Jeff Kennett is the small-cap financial services group Equity Trustees.
That is not to downplay the importance of government or small-company directorships or overlook the outstanding work ex-politicians, such as Kennett, Hewson and others, do on not-for-profit boards. Other former politicians have built successful careers on advisory boards, worked on arts, sporting or charity boards or founded and grown successful consultancies.
It is presumptuous to assume all ex-politicians want board positions after public life and that only the largest listed companies are befitting of their skills and profile. For some who loved the thrill of daily political life, a portfolio of mostly listed company directorships might seem as exciting as a Senate estimates committee.
Other ex-politicians, such as Kennett, thrive on having diverse board roles across charities, sporting organisations, listed and private companies.
Even so, it is hard to avoid a pattern of the best and brightest ex-politicians, who remain active in public debate through newspaper columns or TV appearances, or who keep a prominent role in their political party, being a tough sell for boards of ASX 100 companies.
Having a former politician on a board risks offending an incumbent government and is too big a risk for many listed companies.
In a small market such as Australia, the risk is amplified. Wide swings in state elections run the risk of boards losing favour with the new government if they are seen to have engaged in partisanship with the old one and if the new government seeks to "purge" past opponents.
Robert Webster, senior client partner and head of global board services at Korn Ferry International, has seen the problem from both sides. Webster, a prominent minister in the NSW Government for seven years, retired from state politics in 1995. After running the then International Banks and Securities Association of Australia, he became a leading executive search consultant at Korn Ferry.
To this day, Webster gets enquiries from current or former politicians toying with the idea of company directorships. "I give them all the same advice," says Webster. "When you leave politics, stop acting, talking and behaving like a politician because no matter how much admiration people had for you as politician, you need to convince boards you can cross over into business."
Webster adds: "You see some former politicians who are extremely talented and naturals for the boards of the big banks or other leading Australian companies. But they can’t stop fighting with people in their party or the opposition. The ‘big end of town’ sees them as too combative and won’t touch them as directors. It’s a terrible shame and waste of really good talent at a board level."
Webster says those politicians who become successful company directors immediately stop playing politics after public life, stop commenting publicly and demonstrate to corporate Australia they can become outstanding directors who recognise the most important asset of any board is collegiality and the ability of directors to put stakeholder interests ahead of their own.
Former NSW Premier Nick Greiner FAICD AC is a good example. He is often singled out for making the strongest transition from politics to directorships, having chaired or been a director on a long list of boards over a stellar governance career. Some of his current roles include chairing the Bradken Group, QBE Australia’s operations board and Infrastructure NSW.
Former deputy Prime Minister and Minister for Trade Mark Vaile AO has also built one of the strongest board portfolios after a political career. He chairs the multi-billion-dollar producer Whitehaven Coal and the listed clean-technology company CBD Energy, and is a non-executive director of Servcorp and Virgin Australia. Vaile’s trade skills have made him in demand in boardrooms.
Former federal minister Warwick Smith has also made a good transition from politics to boards and executive roles. Smith is ANZ state chairman for NSW and the ACT; past chairman of E*Trade; chairman of the advisory board of Australian Capital Equity, the private holding company of Seven Group Holdings; and is a former Macquarie Bank executive director. Like Greiner, Smith was able to leverage his skills and industry knowledge and stayed out of public debate after leaving politics.
Former NSW Premier and Federal Minister for Finance John Fahey has built a solid portfolio of directorships, having served on a range of charity, sporting, toll road and some corporate boards. Keith De Lacy was founding chairman of Macarthur Coal and helped take it from a $128 million explorer to a $4.8 billion producer before it was taken over last year.
Former Western Australian Premier Richard Court AC has also built a portfolio of directorships in mining and mining services boards.
Foreign companies might have greater demand for ex-politicians who understand international relations and trade and help lift the organisation’s profile in Australia. For example, former Minister of Foreign Affairs Alexander Downer and former Victorian Premier John Brumby sit on the Australian board of controversial Chinese telecommunications company Huawei Technologies.
Other ex-politicians are making the transition to boards: former Minister for Superannuation Nick Sherry was appointed chair of financial services technology provider FNZ Australia in August.
Former Senator Nick Minchin, who was Finance Minister and Defence Minister, former Federal Minister for Finance Lindsay Tanner and ex-Queensland Premier Anna Bligh also seem like logical board candidates in the not-for-profit or for-profit sectors.
But it is far too early to suggest the growing number of politicians taking on board positions is a trend or that Australia is finally following the approach in the US, where successful business people often go on to a career in politics, then return to business as a chairperson or director.
In the US, companies boast about having an ex-senator on the board, and the likes of former Vice President Dick Cheney blur the boundaries between politics and business.
It is not nearly as simple in Australia. Most ex-politicians seem incapable of commenting beyond party lines and the poor standard of political debate in Australia, with its vicious personal insults and pandering to 24-hour news cycles, could easily turn boards off nominating former politicians as directors.
The poor view of business towards the current Federal Government compounds the problem.
Boards might also be concerned that some prominent ex-politicians will upset boardroom dynamics by overshadowing other directors and being unable to resist always wanting to lead.
Right or wrong, some boards might base their perception of a politician on his or her combative TV or parliamentary appearances, and overlook that many politicians excel in small group settings.
Then there are practical matters, such as whether the ex-politician has genuine commercial skills, can form a view on complex and diverse business matters, can understand the challenges of executive life and "walk in management’s shoes", and function well without a large support staff.
Linda Lavarch, a former Cabinet minister and Attorney-General in Queensland, and now chairman of the Not-For-Profit Sector Reform Council, says some boards underestimate the skills ex-politicians can bring to directorships and overstate the risk of moving from politics to directorships.
"It’s not until you leave politics after serving a few terms that you realise you have developed a really interesting set of skills," Lavarch says.
"Politicians are used to soaking up and assessing lots of information quickly and staying calm under pressure. And the connections you get in government, and just the understanding of government processes, are valuable assets. It’s surprising how many in the corporate world are oblivious to how government works and are not even sure how to approach government and work with it on issues."
Lavarch recalls working in a never-ending stream of government committees and as a government representative on boards of state-owned corporations or universities.
She says: "You forget that 95 per cent of all matters that go through parliament are done on a bipartisan basis and that state MPs, in particular, spend all this time working in committees and, as a result, develop very strong group skills. Those in Cabinet also get very good at making decisions in groups, which translates well to boards."
Lavarch says the transition from politics to boards is manageable.
"Leaving politics can be very hard, because you rarely get to choose when you want to go, and if you leave with your reputation and health intact, it is a double bonus," she says.
"In my case, I was ready to put politics behind me and move to another chapter in my life. Ex-politicians who are serious about building a portfolio of directorships know they have to transcend their political ‘badge’ and are capable of doing so."
Boards, too, might share some of the blame for the lack of ex-politicians holding high-profile listed company directorships.
Some smaller public and private companies seem to hire ex-politicians for their profiles rather than their governance or industry knowledge. Leveraging an ex-politican’s profile for a small charity board makes sense if it encourages more donations and lifts the organisation’s standings, but it is not good enough for a listed company that needs different director skills.
Another board trap is hiring ex-politicians only for their government connections.
Recruiting ex-politicians who deeply understand government and regulatory matters makes sense. But boards that want an "in" with government departments should hire a lobbyist rather than a director, who needs to be able to consider a range of governance issues, not just government relations.
Some politicians interviewed for this article say their knowledge of print and social media is another advantage for boards, although it makes more sense for boards to recruit media consultants than media-savvy directors.
Perhaps boards need to take more calculated risks in nominating ex-politicians for directorships.
A stronger representation of ex-politicians on boards would help broaden the pool of directors in Australia, bring different perspectives and potentially be a source of new female directors. For all the risks, some ex-politicians seem a natural fit for boards.
Kennett says the same broad principles apply when running a government or a board.
"You have to be collegiate to work well in government," he says. "You have to listen to people, think about issues from different perspectives and be across a lot of complex matters. I don’t see how that is hugely different from being on a board. I didn’t find it hard to be a board member after leaving politics."
Kennett believes the big advantage of politics is the incredible training people get in a short period.
"I recently had a reunion for all my political staff over the years and an overriding theme was people saying how much they learnt during that time. They said it was the making of them. In very few business environments do people work as hard or as quickly, or take on so much responsibility."
Although there are similarities between politics and boards, Kennett says political appointments are much more challenging than running boards.
"Most boards are not subject to intense public scrutiny and directors don’t have to worry about opinion polls or today’s news cycle. That’s not to say boards are not challenging in their own way, but it is a very different challenge from politics."
Kennett believes more companies would benefit from having ex-politicians on their boards.
"I see companies make silly mistakes because they don’t understand how government works, or how the community thinks, or how the media works. Successful politicians are very good at understanding how decisions affect the community and the likely response."
Former NSW Opposition leader John Brogden has built a solid portfolio of board and executive positions since leaving state politics in 2005, following health problems. He ran Manchester Unity Australia from 2006 to 2008 and was a director of the Australian Friendly Societies Association and Australian Health Insurance Association.
He was also the independent chairman of Abacus Australian Mutuals and a director of Lifeline Australia and Sydney Ports Corporation.
The 43-year-old is the chairman of Landcom and is best known as CEO of the Financial Services Council, which has raised its profile under his leadership over the past three years and has presumably made him a candidate for directorships of large listed finance companies in coming years.
Like others, Brogden says an ability to assess complex issues quickly, understand regulatory matters and comprehend community attitudes are the biggest skills ex-politicians bring to directorships and executive roles.
"Politicians come from a world of regulation," he says. "In my experience, business is generally finding it harder to deal with the increases in federal and state regulations, so it makes sense to appoint ex-politicians to boards if they bring additional regulatory skills. I’m not suggesting boards recruit ex-politicians to lobby against regulation; rather that they use their politician’s knowledge of the regulatory environment and process to deepen the board’s skills in this area."
Brogden says the ability of politicians to multi-task is an often overlooked skill at board level.
"The absolute stock-in-trade of any successful politician is knowing how to deal with 10 issues at once. You get very good at jumping from one complex issue to the next. Boards, too, have to deal with an increasingly broader range of issues and need directors who can be across myriad issues at short notice."
Brogden says politicians who choose when to leave public life have better prospects for a board career.
"If you lose an election or are forced out of politics, boards can be very wary of taking you," he says.
"Of course, it depends on your age and how long you have out of politics, but it’s much better to plan the transition to company directorship and leave politics at your own choosing, if possible."
Like others interviewed for this article, Brogden says politicians who join company boards need to put their public life behind them.
"The worst thing a director can say at a board table is: ‘When I was minister I did this or that ...’.
"Boards don’t want ex-politicians sitting at the table. They want directors who bring a range of skills and understand good governance. They don’t want a former politician who still wishes he or she was in politics or won’t let go of the past."
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