Is it jobs for the boys (or girls) when it comes to recruiting new board members?
In our experience, when a company begins the process to find a new board director, social networks of existing board members are often the first port of call for recruitment.
In fact, ongoing surveys of Australia’s top 200 public companies clearly show there aren’t a lot of outsiders on boards. For example, ANZ chairman David Gonski is a mentor to ex-AMP Chairwoman Catherine Brenner. Gonski was also Chairman of Coca-Cola Amatil when Brenner was appointed to the board in 2008. Meanwhile Brenner’s relative, Maxine Brenner, is on the boards of Orica Ltd, Origin Ltd and Qantas Airways.*
We have also found that the recruitment process is often unstructured, featuring search criteria such as “reputation” and “background". This means that too often a new board member is categorised as a 'safe' choice and based around a desire to not make a mistake, rather than who is the right person for the future of the organisation.
Why is this unhealthy?
We are not for a moment saying the aforementioned directors are not qualified for the job. We have used their names and affiliations merely to highlight the cosiness of appointments on major Australian company boards.
What we are saying is that this cosiness can come at the cost of big strategic leaps for an organisation.
In our experience, directors who take on an independent, yet ownership mindset when they join a board have in-built passion for the company and a tendency to focus on the longer term strategy. They are more likely to question, challenge and vocalise opinions on issues and passionate debate is a necessary ingredient for driving any organisation.
It’s important to note that an ownership mindset is different to a vested interest. For all the benefits of a ownership mindset, it’s unfortunately all too common for conflict of interest to be seen in board selection.
In 2015, 58% of the directors in the ASX 100 and 49% in the ASX200 were connected personally to the companies. This means they were either a substantial shareholder, supplier, customer, former executive, founder, adviser or had a material contract with the company on whose board they served. This may motivate a director to serve their own interests and not look after the best interests of a company and its stakeholders, as seen with the failure of Enron and HIH Australia.*
There’s no doubt its tough to find a new board member that’s the perfect fit for any existing board and business, but it will be worth the effort if your recruitment criteria includes finding someone who has a genuine passion for it. Passionate debate means putting yourself out there from time to time. It’s a success recipe that’s as simple as that. Without it, you will struggle to really get the most from any board because passionate debate channelled against business issues, will generally drive better decisions.
New members who are more concerned with being liked and connected to a particular social group are rarely inclined to challenge the boundaries of debate.
* Source TheConversation.com May 4 2018