A panel of Australian company directors has called for the new Coalition government to limit the circumstances in which they are held legally responsible for a company’s actions, arguing that the focus on regulatory compliance is keeping them away from strategic priorities.
Addressing the Australia-Israel Chamber of Commerce today, Future Fund and Coca-Cola Amatil chairman David Gonski welcomed various state government efforts to “turn back the clock” on COAG attempts to harmonise director liability laws across the country.
“When you are on the board of a multinational, to say that you’re going to be liable everywhere in the world for what happens … you’ll spend the entire time either there, looking at safety, or away from looking from strategy and so on,” he said.
“I think it’s time that we realise that there are others in big corporations who are responsible and it’s our job as boards to oversee that and create culture that they adhere to, but not to be personally liable because otherwise of course we’re going to spend time on it.”
One conference attendee, who worked in private equity, said the heavy burden of responsibility within Australian boardrooms was providing his industry with “a terrific line of executives” but was concerned that it deprived companies of the experience and expertise needed to make strategic decisions to do with innovation, outside of a balance sheet perspective.
QBE chairwoman Belinda Hutchinson agreed that regulatory concerns could distract directors or cause them to shy away from strategic decisions that were otherwise necessary for companies to innovate.
She called for some weight to shift to the shoulders of executives, who should be incentivised to stay with a company for the long haul: 10 years instead of the current average of 4.5 years.
“A lot of boards are thinking ‘we’ve got to meet all the compliance requirements’ [and focus on] all the regulatory parts of our job but really, we have to focus on the strategy,” she said.
“If we go out there and say ‘we’re going to be here and this is what we’re going to do’, without some form of protection, why would directors put their chins on the line?”
Panel moderator Simon Longstaff, executive director of the St James Ethics Centre, suggested that directors have the “moral courage” to overcome liability concerns, to which Gonski responded: “There is a fine line between being brave and being stupid.”
But Gonski remained very positive about being on multiple boards.
Besides his positions at the Future Fund and Coca-Cola Amatil, Gonski is chancellor of UNSW and holds a number of directorships and chairmanships including at Singtel, NEHTA, the Sydney Theatre Company ad Infrastructure NSW. He has also been approached to chair the ANZ Group from next year.
Here’s what he said about living in the public eye:
Shareholders and directors are human – I feel particularly human myself. Why do so many out there participate in so much now in society? I do it quite selfishly.
I find business and, indeed, one’s day-to-day existence very narrowing. If you look at the greats – be they surgeons or researchers or whatever – they’re all educated towards a narrow expertise.
The fact of the matter is, dealing with the outside world broadens your mind, and you suddenly realise that what you’ve been doing on a narrow plateau actually is needed and you realise that the true heroes aren’t around you at all – they’re out there doing amazing things.
And when you deal with these people it lifts you up, broadens your mind and I think you come back to the board table even more human than you left it.
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