Company boards are stacked with friends of friends so how can we expect change?

Sherene Smith, RMIT University

Social connections drive board appointments and more than two-thirds of directors in the 200 largest public companies are on the board of multiple companies. So whoever replaces ex-AMP chairwoman Catherine Brenner will likely be drawn from a small pool of people.

Brenner resigned after the Financial Services Royal Commission heard AMP had misled regulators, among a number of other scandals.

Treasurer Scott Morrison expects more resignations at the Commonwealth Bank following a damning report from the banking regulator.

I’ve interviewed directors, as well as looked at data from ongoing surveys of Australia’s top 200 public companies, and found there aren’t a lot of outsiders.

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We can see this anecdotally as well. 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 sister-in-law, Maxine Brenner, sits on the boards of Orica Ltd, Origin Ltd and Qantas Airways.

The corporate governance crisis in Australia will not be solved by greater gender diversity on boards or director independence given how many directors sit on multiple boards and how important social connections are to get there. It shows there truly is no diversity or independence on Australian company boards.

Board diversity is barely improving

Women held just 18.1% of the board seats in ASX100 companies in 2012. This improved marginally to 25.2% by 2015.

In 2015, 58% of the directors in the ASX100 (the 100 largest companies on the ASX) and 49% in the ASX200 (the 200 largest) were personally connected 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 which board they served.

Having a vested interest in a company can impair a director’s judgment. It 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.

Excluding outsiders

My interviews with directors suggest that board members are recruited in a fashion that excludes qualified “outsiders”. For instance, one director told me that identifying the most qualified person was not necessarily the focus of recruitment:

What was decided was that those of us who were at the board could look at who we knew … I was not comfortable with that process and I fought that process and didn’t win. My preference was that we advertise for appointed members, but the feeling around the table was we would rather have people we know rather than people who come from an ad, and I didn’t get far pushing that change. I felt it was a boys’ club and I wasn’t happy with it. Being honest, it wasn’t casting the net wide enough.

When I pressed my interviewees on how they achieved board membership, many reflected on skills, qualification and experience. However, when the interviewees spoke about recruiting new board members the process is unstructured, featuring factors such as “reputation” and “background”. One interviewee said:

The background of the candidate is very important so you feel comfortable, or you feel there’s less chance of making a mistake if you choose this person.

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My research found that the social identity of candidates is a significant criterion in the selection of Australian company boards. Closed social networks are the primary means of identifying new board members.

What attempts there are to increase diversity and independence are narrowly focused on eliminating the “boys’ club” by having more females on boards.

This violates discrimination legislation that states recruitment should be open and accessible, based on clear assessment of skills, training and relevant experience.

The use of closed networks in the recruitment and selection of board members also creates other problems related to “group think”. Group think creates a situation where board members are more concerned with being a liked and connected member of a particular social group. As a result members will conform to the status quo, which guarantees them membership perks such as highly paid directorship roles.

A direct outcome of the group think mentality are boards signing off on questionable business practices as we currently see in the banking sector. Coupled with a self-regulated system this is a recipe for disaster.

Sherene Smith, PhD student, RMIT University

This article was originally published on The Conversation. Read the original article.

Despite Court Victories, Church Building in Indonesia Blocked

Islamists attack, issue threats to halt construction of worship center in West Java.

JAKARTA, Indonesia, September 22 (CDN) — A year after a church in West Java won a court battle over whether it could erect a worship building, Islamic extremists have blocked construction through attacks and intimidation tactics, church leaders said.

A mob of 50 Muslim extremists on Sept. 12 attacked construction workers at the Batak Christian Protestant Church (Huria Kristen Batak Protestan, or HKBP) site in Cinere village, near Depok City, in Limo district, eyewitnesses said; the 24 workers, who were on break, fled from the attackers, who chased them brandishing wooden boards studded with nails. Cinere village police arrived to restore order, but the mob left behind seven banners opposing the construction.

Three days later, Islamic groups demonstrated near the construction site on Puri Pesanggarahan IV St., demanding that all Christian activities in the area cease. About 70 Muslims participated in the demonstration, trying to approach the construction site until hundreds of police repelled them. Police have continued guarding the site.

The church won a case in West Java State Administrative Court on Sept. 17, 2009, rescinding a local order that had revoked the church’s building permit. The Supreme Court later upheld the Bandung court’s ruling, but threats have kept the church from proceeding.

Betty Sitompul, vice-chair of the church building committee, said she has received many intimidating text messages from a group opposed to the construction.

“They demanded that the church construction be halted,” she told Compass.

Sitompul added that some of the messages were intensely angry, and that all were aimed at stopping construction.

She said she an official of the Depok municipal government contacted her requesting that construction be delayed two months in order to discuss it with area residents. With a Supreme Court decision backing their case, church leaders declined and continued building.

Sitompul said she never yielded to threat or intimidation because the church construction project has a firm legal basis in the Supreme Court decision.

“There was no need to worry any longer,” she said. “I felt the problem was solved. It is normal for some to be dissatisfied.”

The Muslim Defenders’ Front (Front Pembela Islam, or FPI) reportedly participated in the Sept. 15 demonstration, but the FPI leader for Depok City, Habib Idrus Al Gadhri, denied opposing the area HKBP church.

“The rejection is from the Cinere Islam Solidarity Forum [FSUM] not from the FPI,” Al Gadhri told Compass.

He said that the HKBP church in Cinere is not facing opposition from the FPI but from the entire Muslim community.

“If FPI members are involved, I’m not responsible,” Al Gadhri said. “My advice is for the entire Muslim community in Cinere to sit down together and not demonstrate.”

The church had originally been granted a building permit in 1998. Applications for church permits are often fraught with difficulty in Indonesia, leaving many congregations no choice but to worship in private homes, hotels or rented conference facilities. Such gatherings leave churches open to threats and intimidation from activist groups such as the FPI, which in recent years has been responsible for the closure of many unregistered churches.

 

Congregational Concern

Despite having the law on their side, church leaders said many in the congregation are haunted with dread amid outbreaks of Islamic ire at the presence of churches in West Java, such as the Sept. 12 attack on the HKBP church in Ciketing, Bekasi, in which an elder was seriously wounded and a pastor injured.

Peter Tobing, head of the Cinere HKBP church building committee, said that some in the congregation and building committee feared that the outbreaks of Islamic opposition will lead to chaos.

The church is planning to sue the Depok municipality based on the allegation that its actions were illegal and caused deterioration at the site. When Depok Mayor Nur Mahmudi Ismail revoked the building permit for a multipurpose building and house of worship on March 27, 2009, it led to losses for the church as the congregation had to leave it unattended for a year, according to Tobing.

“Because of this, construction began with the clearing of weeds and building materials [such as paint] that had degraded,” Tobing said.

Sitompul said the bases for the lawsuit are the court decisions declaring the Depok mayor’s revocation of the building permit to be illegal.

“The Depok municipal government must take responsibility for the losses incurred when the building permit was revoked,” she said.

The lawsuit will seek compensation for damages incurred over the last two years, she said.

“We are going to submit all the data to the Depok government,” Sitompul said. “Then we will file our suit in the Depok Municipal Court.”

The church plans to construct its multipurpose building on a 5,000-square meter lot. Construction was halted in the initial stages, with the bottom floor 30 percent completed. The church had spent some 600 million rupiahs (US$66,000), with total costs projected at 2 billion rupiahs (US$220,000).

Report from Compass Direct News

Johnny Hunt expresses urgency about Great Commission

Encouraged by attendance exceeding 8,600 registered messengers on the first day of the Southern Baptist Convention annual meeting June 23 — twice as many as he expected — SBC President Johnny Hunt said there is a “sense of urgency” among the brethren, reports Baptist Press.

Hunt attributed much of the interest at this year’s meeting to his Great Commission Resurgence initiative. In a news conference following his re-election to a second term, he also addressed questions ranging from his opinion of controversial Seattle pastor Mark Driscoll to his view of Calvinism among Southern Baptists.

“I feel there’s a lot of energy in the halls,” said Hunt, pastor of Atlanta-area First Baptist Church in Woodstock. “Everybody’s talking the same talk: ‘We need this Great Commission Resurgence.’

“We are saying times have been desperate,” Hunt added. “Now I really do sense fellow Southern Baptists are saying we need to get serious.”

Asked about Driscoll, Hunt responded: “I don’t know him, never met him. A lot of young men like to follow his blogs and podcasts. It’s just been interesting.”

Referring to motions from the floor placing Driscoll and the network he founded, Acts 29, in a bad light, Hunt said, “[T]he entire premise of being a Baptist is sort of thrown under the bus when you start telling someone who they can or cannot fellowship with.” He said it is a matter that it should be left to the conscience and the priesthood of the believer.

About church methodology, Hunt said the SBC is a “great family fellowship” using varied methodologies which provide a healthy balance.

Hunt said it might be that some of the perceived tension across generations of Southern Baptists is rooted in several things, including methodology, dress and music.

Encouraged by what he said is the turnout of younger Southern Baptists, Hunt said, “[I]f we can move beyond our perceptions” and begin to “listen to heart of some of these young leaders,” Southern Baptists might be encouraged “to catch their passion.”

Hunt relayed his experience at a recent International Mission Board appointment service in Denver where 101 mostly young missionaries were sent out, with the “majority going to extremely hard and dangerous places.”

“With that type of commitment to Jesus Christ that they’re willing, many of them, to write their will before they leave with the understanding some of them will probably never return, I have a very difficult time spending my time talking about their jeans, whether hair is spiked or colored” or their musical tastes, Hunt said.

By building relationships with younger leaders, “if we see some areas of concern, at least we have earned the right to speak into them.”

On the continuing banter between Calvinists and those critical of the doctrine that attempts to describe God’s work in salvation, Hunt said the debate has raged for more than 400 years and is part of Baptist history.

“We have wonderful men and women on both sides. I think the Baptist tent is large enough for both,” he said.

Asked by a reporter if an invitation was made for President Barack Obama to address the SBC, Hunt said he knew of no such invitation.

But Hunt, the first known Native American SBC president, said, “I feel like we will have a resolution to really honor our president, especially in the context of being the first African American to be elected. We have much to celebrate in that.”

Hunt said he had ample opportunity to invite Republicans to speak, “but we felt that would send a wrong signal because we wanted to send prayer support to the new president and we are mandated to pray for our president.”

Speaking to proposed federal hate crimes legislation that some say could infringe on biblical preaching, Hunt said he was not overly worried as long as pastors “stay in the context of preaching biblical truth. And if the day comes that we would be imprisoned for the proclamation of the Gospel becoming that much of an offense, we would join about two-thirds of the rest of the planet.

“God forbid that I would travel to the Middle East to encourage those already in hostile settings while at same time being afraid to proclaim the message that I encourage,” Hunt said.

Returning to the Great Commission Resurgence, Hunt answered a question regarding media access to the meetings of the proposed GCR task force. He said media presence would be “counterproductive because we want people to be at liberty to share their heart.”

It could be “embarrassing where we’re just seeking wisdom,” Hunt added, “but we would love to have any and all of you at the meetings and as soon as it is over we’d be delighted to share what we came to by way of context.”

Hunt said he has “no desire whatsoever to touch the structure of the SBC and the truth is, I couldn’t if I wanted to. It would violate policy.” Hunt said perhaps more clarity in his early statements about the GCR document could have helped ease fears of drastic change.

Even if the GCR task force were rejected, traction already has been gained by efficiency studies at the Georgia and Florida conventions and at the Southern Baptist mission boards, Hunt said.

In responding to the first question asked at the news conference, Hunt predicted if the GCR were to pass that evening, he likely would name the members of the task force June 24 and it would include several seminary professors, a college president, an associational director of missions, pastors of churches of varied sizes spanning the country and ethnically diverse members.

“I don’t have all the names so I’d probably miss some,” Hunt said. “But I’d be quick to say it will be a very fair committee.”

Report from the Christian Telegraph