One of Australia’s leading directors, Elizabeth Proust AO talks to Angela Faherty about her longstanding career and the key issues driving governance today.
One of Australia’s leading directors, Elizabeth Proust AO talks to Angela Faherty about her longstanding career and the key issues driving governance today.
In a career spanning three decades, Elizabeth Proust AO has an impressive resume. She has held numerous senior management and leadership roles in both the government and corporate sectors, including secretary of the Department of Premier and Cabinet and secretary of the Attorney General’s Department for the Victorian Government, as well as senior positions at BP Australia, BP International and ANZ Banking Group.
At a board level, she is chairman of Nestle Australia, the Bank of Melbourne and a member of the JP Morgan Advisory Council. She is also deputy chairman of the Catholic Church’s Truth, Justice and Healing Council and on 16 December 2015, was appointed chairman of the Australian Institute of Company Directors (AICD), after almost two years on the board.
Proust has often been described as “one of Victoria’s most powerful women”. She was made an Officer of the Order of Australia in 2010 and is widely regarded as one of nation’s most respected directors and a role model for many women.
Her push to achieve a 30 per cent female representation on boards was the subject of her first public appearance as AICD chairman and remains a top priority for the member association.
“When I started my career in the 1970s I never imagined that we would still be having this conversation 40 years later and the fact there has been so little change over time leads me to think there needs to be more action,” she says.
“With the exception of engineering, women have been coming out of universities in roughly equal numbers as men in most disciplines for more than 25 years now, so the argument that there are not enough qualified women just doesn’t wash.”
Ask Proust about her most enduring legacy and it is her work as CEO of the City of Melbourne of which she is most proud. “When I arrived in the organisation it was as close to bankrupt as a body in the public sector could ever be and it was borrowing to pay staff salaries,” she says.
Over the course of five years, Proust and her team brought about significant changes that involved privatisation, outsourcing and developing Melbourne as a cultural centre.
“That’s probably the one role that when I look back on my career, stands out more than others. With some jobs you know you’ve made a difference in quite intangible ways, but this was different; it was everything from the streetscape to the small lanes to inner-city housing. You can look at lots of things and see the impact that you’ve made. That is very rewarding.”
The long-term impact of Proust’s work sheds light on another key challenge facing Australia: short-termism, which is a key focus of the AICD’s recently released policy document, Governance of the Nation: A Blueprint for Growth (the Blueprint).
The biggest impact, Proust says, is being felt in infrastructure, where she cites the controversial East West Link connecting Melbourne’s Tullamarine airport and eastern freeways as an example. The link, which many say is desperately needed, was abandoned by Labor at a cost of $1 billion to taxpayers, but under current proposals, may be back on the agenda.
Infrastructure by definition has to be long term and should be bipartisan. What is party political about a road or rail link? If you look at the countries of the world that have got this right, they plan for the long term. That’s not the case in Australia. It has become party political. It has become short term.
Another key focus of AICD’s Blueprint is growth, which Proust pinpoints as a top priority for boards in the coming year. “I think most directors would nominate the state of the economy and issues around confidence and growth as a key priority; that is talked about a lot around board tables.”
Another is disruption. “It’s hard to think of any industry that isn’t potentially going to be disrupted. It’s happening everywhere whether you’re in financial services or fast-moving consumer goods. The competition is moving faster than it ever has and boards are focusing on what that means for their business,” she says.
Here is an edited version of her interview with Company Director.
Company Director (CD): You have had an extensive career in both the executive and governance space over the last 30 years. How did you get your first board position?
Elizabeth Proust (EP): My first board position was actually one that went with being in a particular job. After working for BP in both Australia and in London, I found myself back in government in the Premier’s Office in Victoria where I was the deputy director general of the industry department. Within the department was something called the State Electricity Commission of Victoria (SECV), which no longer exists, and I was appointed as its director. I was only on it for about two years because I changed roles and that meant stepping down from that role as well. I really didn’t get back into another governance role until 1992 when I was chief executive officer of the City of Melbourne, and the federal government invited me to chair the Federal Pipeline Authority, which also no longer exists, and is now part of AGL. That was a government-owned gas pipeline that ran from Moomba in Queensland down to Sydney. I was on that board until it was privatised and saw it through from business as usual through to the sale of the asset about three years later. That was around 1995.
CD: What would you say has been your most challenging role to date?
EP: I think in the governance space the most challenging was Sinclair Knight Merz, a private construction and civil engineering company, which also no longer exists as it was sold to an American company. I was on the board for seven years and during the last two of those we focused on selling the company. We went through a range of really quite challenging governance issues, including the nature of the shareholding and the fact that it was not a listed company. The company was owned by current and past employees, some of whom did not understand the role of a board, nor of the non-executive directors. We asked the AICD to run webinars so that all shareholders had a common understanding of governance issues and this helped to create the circumstances for a successful sale. The company was sold at the end of 2013.
CD: You have been chairman of Nestle Australia for over six years now. What have you learned during that time?
EP: It has been a real privilege to be involved in such a global company, which role models best practice, not only in its manufacturing processes, but especially in its value. Creating Shared Value (CSV) is an underlying part of everything that we do, with a special focus on nutrition, water, and rural development. In addition to chairing the board, I also chair the CSV board, which is comprised of equal numbers of Nestle people and externals. This is an invaluable way of ensuring that we are constantly challenged about a significant number of current and future issues of vital concern not only to us, but to the nation.
CD: Is there any role, in your executive or governance career, of which you are particularly proud in terms of the legacy you created?
EP: I think the one where I left the more enduring legacy would be as chief executive officer of the City of Melbourne. I came into the role in 1990 and I was there for five years. I single it out because when I arrived in the organisation it was as close to bankrupt as a body in the public sector could ever be and it was borrowing to pay staff salaries. The reason I was brought in was I had by then, in the public sector, developed a reputation as somebody who knew how to make tough decisions and turn organisations around. I was brought in specifically by the councillors to make a significant difference to that organisation.
A lot of people don’t remember how Melbourne was then because it’s very different today. In 1990 Melbourne was in recession, it had lost the Bank of Victoria, which had been bought by the Commonwealth Bank of Australia, a lot of jobs had been lost and it was very different from today both in terms of the dynamics and indeed in terms of how the place felt.
It was a very big turnaround process that involved privatisation, outsourcing and making some tough decisions about what we would do and could still afford to do. There was also a whole number of issues around the cultural life of the city. We refurbished and restored the Regent Theatre and the City Square, it was very significant on every level, even down to garbage services, childcare services, local libraries, as well as the whole cultural piece.
Like all things, it was a team game, it wasn’t by any means all down to me. But that’s probably the one role that, when I look back on my career, stands out more than others. With some jobs you know you’ve made a difference in quite intangible ways, but this was different, it was everything from the streetscape to the small lanes to inner-city housing. You can look at lots of things and see the impact that you’ve made. That is very rewarding.
CD: Revolutionising a city is no mean feat and requires a long-term strategic outlook. Do you feel that in today’s world, short-termism is a key failing of Australian business and government?
EP: I think it’s a key failing generally. In government, you just need to look at the Commonwealth government to see that short-termism is indeed reinforced. Most of the states now have fixed four-year terms, but in the Commonwealth, politicians have three-year terms that aren’t fixed and that means that, at most, they get two years in power before they are campaigning again. A key aspect of the Blueprint for Growth calls for the need for fixed four-year terms, in terms of the governance of the nation. That would help government to be more long-term focused.
CD: In what way do you feel short-termism is impacting the country?
EP: I think the biggest impact is in infrastructure. If you look at Melbourne, the decision after the last state election to end the East West project cost the taxpayer about $1 billion and also came at a significant cost in terms of sovereign risk and reputation. The new government had a preference for rail projects over roads.
Infrastructure should be bipartisan. What is party political about a road or rail link? If you look at the countries of the world that have got this right, they plan for the long term. Look at Singapore. There are train stations beyond where the whole network goes before there are actually suburbs. In Australia you’ve got suburbs a long way from any public transport. It’s not a great comparison in some ways because Singapore is a tiny place, so in one sense it’s easier, but there are many countries that do the planning for their road, rail and other infrastructure on a long-term basis. That’s not the case in Australia. It’s become party political. It’s become short term.
CD: What do you think has been the greatest achievement of the AICD to date and what would you like to see improve? Is the institute heading in a new direction?
EP: Of course, we cannot lose our focus on the key issues that immediately impact directors, but I think we have a key role to play on issues around board performance and company performance. You will see more from us in the future about what is it that helps companies perform. Diversity is part of that. We don’t argue diversity as an equity issue on its own, what we argue is that it is very clear from the research that genuinely diverse boards – I’m talking beyond gender diversity here – have better performance than boards comprised largely of people who are the same or similar. We want greater diversity on boards because we know it improves performance and avoids groupthink.
CD: The AICD has been very vocal about championing the need for a 30 per cent benchmark of women on boards. There is still some way to go however. What do you think are the obstacles to achieving this benchmark?
EP: I think the problem is that there aren’t enough women in key CEO or line roles in companies. There are a lot of women in HR roles and other support functions and there are an increasing number of women as partners in law and other professional services firms. It is still not equal, but the numbers are increasing. The issue still seems to be at the chief executive level and the lack of women who have had experience in major line roles, running key businesses within organisations rather than running key functions.
We want greater diversity on boards because we know it improves performance and avoids groupthink.
While that may be true, for those companies that do not have any women on their boards, I think it is ludicrous to assert that in 2016 they conducted a search and were unable to find any qualified women. There are increasingly talented women coming out of universities, coming into the professions and into organisations so it’s not at all difficult to find women who are qualified.
Another problem is women opting out of organisations too early to perhaps run their own consultancies or their own businesses and it’s very hard to get into the board space from that area.
CD: So how can these barriers be overcome?
EP: I think that research has a role to play here. There are some excellent people in search who have genuinely diverse lists; I am talking beyond gender. They’re asked to think laterally and to provide people with a range of backgrounds who are qualified to be able to constitute a board.
Similarly, there are still some search people, even when the board asks for a diverse list – and not every board does – that still come up with all male lists.
The other issue is when search is not used and boards use their own networks. If you’re on an all male board you’re probably reasonably comfortable with that and it may be that your network doesn’t extend to, or you don’t know, any qualified women who could take it on.
CD: You are actively involved in the AICD’s mentor program. Why did you get involved with the program?
EP: The program is great as it helps the mentee with everything they need to know about directorship; from shaping their resume to helping them think about where their career, skills and experiences sit with what’s available on boards. It provides a targeted approach, while the relationship with the mentor is important because it opens up networking opportunities. Often, the women who are on the program have had very good careers but they’ve either been focused on bringing up the family or getting ahead in their career and haven’t spent a lot of time and thought on making sure that their networks are in good shape.
I’ve learned an incredible amount from the women I’ve mentored; the challenges in their careers, the fact that discrimination still exists even though lots of people would like to think it’s in the past.
CD: Workplace culture is currently a hot topic for Australian business and establishing the right culture within an organisation is critical. What role do you think the board plays in this?
EP: The senior executives and, in particular, the CEO are directly accountable for the culture because if a board meets 10 times a year, then it’s very limited in terms of the day-to-day impact it has on the organisation.
However, the board does set the tone; what the board pays attention to, what the board puts on the agenda, how the board measures and rewards the CEO – all of those things are really, really important, particularly how much attention the board pays when there is a problem in the organisation. Here I’m talking about one that affects reputation and how is it dealt with. Whether it becomes public or not is irrelevant, how the board deals with the issue and what signals it sends to the organisation about the importance of culture is critical.
CD: What governance issues most concern you?
EP: I think probably the one that many directors would highlight is getting the balance right between growth in an organisation and necessary risk and compliance. Ensuring that we’re spending the right time on the right issues. There are others: the digital space, growth in the business. At the AICD, our focus is growth in membership, our courses and our revenue, but all businesses are facing growth challenges. There are also issues around ensuring that you’re looking within the organisations for succession planning.
CD: The AICD currently has 38,600 members, what are the plans for growth in membership?
EP: We have just approved next year’s budget and are looking to grow to about 42,000 members. We are the biggest membership institute in the world in the governance space, which given the size of the country, I find surprising. I’ve been a member for many years but when I joined the board I did not know that. We want to continue to grow because as our members retire as directors, they no longer want to join so it’s not just a matter of getting new members it is a retention issue as well.
We need to make sure that what we’re offering our members is suited to their needs and that we’re serving their interests and providing them with courses, conferences and other offerings that are appropriate to them. But we’ve obviously been doing things right because it’s a fairly healthy number and we have had healthy growth.
CD: What are top priorities for boards this year?
EP: I think top of the list would definitely be growth – ensuring profit growth. I think most directors would nominate the state of the economy and issues around confidence as a key priority; that is talked about a lot around board tables. Then I think there’s the whole issue of disruption, it’s happening everywhere whether you’re in financial services or fast-moving consumer goods. It’s hard to think of anywhere that isn’t potentially going to be disrupted. A big piece of board thinking and board work is focused on that; it might be digital, or for some it might be a new competitor. The competition is probably moving faster than it ever has and boards are focusing on what that means and what the business might look like in a very short space of time.
CD: What qualities do you think make a good leader?
EP: What I look for is people with the highest integrity; people who speak their minds. These days, there’s often a level of reticence, if not fear, about speaking out. People think that there might be retribution for doing so, so there are not a lot of people who will say it as it is.
I’m not sure we’ve got all that robust debate in this country in the business area. I think Catherine Livingstone at the BCA has been exemplary in putting some really key issues on the table, but there’s a lot of people who can contribute who don’t because they fear there might be some personal or business repercussion for doing so.
CD: You were made an Officer of the Order of Australia in 2010. How has this impacted your career?
EP: It goes without saying it’s a great honour. I’ve nominated people and I know there is a fair amount of work to do and acknowledge that people have taken considerable time and trouble to nominate me. Personally, I wouldn’t say it has been career changing, but it certainly gives you a level of recognition that is very pleasing.
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