David Crawford: Boys for the Jobs?
David Crawford, a non-executive director with five blue-chip companies - BHP Billiton, Foster's, Lend Lease, Westpac and National Foods - speaks about the pressure on company directors following the recent crop of corporate scandals
By Leon Gettler
So, why would anyone still want to be a company director? David Crawford acknowledges that people wanting to join a board have to think long and hard about the matter nowadays.
For good reason too: directors are being held accountable in a much more direct way as their exposure to personal vilification and legal action is increasing.
"Let me put it this way," Crawford says, "Are you happy to serve on company boards for $50,000 to $60,000 a year and have your personal assets put at risk and be subject to the kind of criticism and abuse we are seeing now?"
There was a time when getting a spot on the board was regarded as a comfortable post-retirement lurk. But those days are vanishing. It is open season on directors, and corporate governance is squarely on the agenda after a gala of corporate collapses, which in some cases have included allegations of appalling corporate behavior.
Some of the worst excesses have occurred in the United States. But the Australian corporate world has been shaken badly too. The reputations of non-executive directors Lachlan Murdoch and James Packer look tarnished after the two men were grilled by One.Tel's liquidators. Following the collapse, of HIH, the Australian Securities and Investments Commission (ASIC) barred Rodney Adler from sitting on boards for 20 years. Adler also faces financial penalties of about $7 million. Nicholas Whitlam has been barred from being a company director for five years for failing to ratify proxy votes opposed to a fee rise for NRMA directors. At the time of going to press, ASIC was also taking action against John Elliott and two other directors from Water Wheel Holdings, alleging that they allowed the failed grain and milling company to trade while insolvent. And Coles Myer shareholders watched as their board tore itself apart with internecine strife.
Crawford is a non-executive director of five blue-chips: BHP Billiton, Foster's, Lend Lease, Westpac and National Foods. And, he is no stranger to controversy. A former national chairman of KPMG Australia, he is one of the country's most respected corporate restructuring specialists. Among his latest jobs: heading up the government inquiry aimed at overhauling soccer in Australia. The extent of this task is enormous. There are more young people playing soccer in Australia than any other football code, but the game is in trouble at an elite level. Soccer Australia is plagued by internal tensions, pay disputes and financial dramas. Still, there are few better qualified to fix it than Crawford, who headed the eponymous review into the then Victorian Football League a decade ago that turned Australian Rules into the most powerful sport in the country.
It is tempting to assume that for someone like him the heat on non-executive directors is just grist for the mill. "People are concerned because many have taken on the role of non-executive director in the past as a post-retirement role," Crawford says. "But those people are now seeing that with the increased liability they are putting their life savings at risk. That is not something new for me, because as a member of a professional practice partnership, we have always had those risks. But if you are asking me whether a person who has just stepped down from being a CEO would be happy stepping into those situations, there wouldn't be that many now."
He believes that the days when non-executive directors could rely on the old-boy network for a spot on a board are over. He is also a strong believer in directors undergoing rigorous performance evaluations every year.
"The role of the non-executive director is a part-time role. To keep yourself up to date you need to be in the business community on a regular basis, not off playing golf two days a week and coming in for a meeting and going off again."
That said, Crawford believes that non-executive directors have been placed in an almost impossible situation. It is what he calls the "non-executive director expectation gap". The gap is created by conflicting priorities that come about when issues are not thought through. This results in an enormous mismatch in how people interpret the non-executive directors' role, and the realities of the market.
First, there is the call now for non-executive directors to be younger and more in touch with the business world. This means there is a push to have people taking it on as a career; younger people who are still putting bread on the table and educating their children. Related to this is the view that they should spend more time in the organisation and get to know more about the business.
Moving the other way are the controversies about remuneration. Despite the increased responsibility and liability, there is a limit on the fees shareholders are prepared to pay. Indeed, there is uproar every time it is proposed to increase fees, with proponents regularly lambasted in the media. Some go so far as to argue that non-executive directors should not receive retirement benefits or even superannuation.
And although there is an expectation that non-executive directors need to spend more time in companies, commentators and shareholder activists are critical of them sitting on too many boards. Crawford says: "There is no clear understanding of what the non-executive director is supposed to do, or can do. Nor does there seem to be a clear understanding of how boards perform their statutory role. The expectation gap is not assisted by what I call headline-grabbing, irresponsible reporting."
He does not agree with the call from some commentators to restrict chairmen to only one company. If they have the time and talent, Crawford says, they should be allowed to chair more than one board, particularly in a market the size of Australia in which the talent pool is limited.
"Whether you think Stan Wallis [AMP and Coles Myer chairman at the time of writing] has been a good or a bad chairman, no one would ever accuse him as not having put in the time and effort for the companies."
Companies will always collapse - that is a consequence of the market system. So this leaves us with a conundrum: are we expecting too much of directors? And is there too much of an emphasis on corporate governance, given that there are other reasons for management failure?
"You will always have the mavericks, whether they be the Bonds and Skases of the 1980s, or the HIHs and Harris Scarfes and One.Tels of today," Crawford says. "It comes back to the basics, and there has been a huge emphasis on what I just call greed in more recent times. If you see greed or ego starting to emerge, you can be sure you are going to have a problem.
"You will always have failures, but a lot of the criticism that has emerged in the past 12 to 18 months has focused not just on failures; a lot is aimed at what is perceived to be a breakdown in appropriate governance, although the companies are still operating and operating quite well."
The problem, he says, cannot be reduced to simplistic notions. Just as importantly, there is a risk of over-reacting and becoming too prescriptive, because it could produce boards that are risk-averse. "There are never clear-cut answers, but it is important to have the broader debate."
Boys for the Jobs? was published in the January/February 2003 edition of Management Today.
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