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.

The ConversationA 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.

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ONE KILLED, 11 INJURED IN PAKISTAN CHURCH ATTACK BY GUNMEN


As violence continues to spiral out of control in Pakistan, ANS has received news that indiscriminate firing by a group of Muslim men on congregants of a Presbyterian church in Gujranwala district on Monday, March 2, left a woman dead and 11 others injured, reports Dan Wooding and Sheraz Khurram Khan, special to ASSIST News Service.

Several Muslim men, identified as Amjad, Balal, Zeeshan, Azam and others whose identities could not be ascertained by ANS, opened fire on worshipping Christians at the Presbyterian Church in Songo, which is a town that is some 7 kilometers from Gujranwala city, a week after two Muslim men robbed a Christian resident of the area on gunpoint.

On February 25, two Muslim men intercepted a Christian man, Imran, on his way home and robbed him at gunpoint of 3,000 Pakistani Rupees ($37.3506 USD), a mobile phone and a wrist watch.

Bleeding, Imran, after going home, he then went to the local police station to report the incident. The matter was “resolved” after Muslim notables brokered reconciliation between Imran and the accused.

However, the patch-up proved short-lived, as several armed Muslims made forcible entry into several homes of Christians on March 2 and allegedly harassed and threatened Christians.

Another group of Muslims, who were carrying iron rods, clubs, and guns, entered into the church. They opened fire at the congregants. The culprits allegedly also smashed the windows of the church and desecrated Bibles. They removed the cross erected at the roof of the church and left the scene shouting at the Christians that they would face worse attacks if they did not leave the town.

Talking to ANS by phone, Pastor Patras of the Presbyterian church, said that moving the inured Christians to the local hospital was not without a struggle. Elaborating on this, he said the Muslims had blocked the road leading to hospital apparently to stop Christians from going to Gujranwala District Headquarter Hospital. He said they were eventually able to shift the injured to the hospital after police intervention.

”Police vehicles ferried the injured to the hospital,” he said.

Commenting on the death of Christian woman, Shakeela, who succumbed to her bullet injuries, Shahzad Kamran of the Sharing Life Ministry Pakistan (SLMP) called for her post-mortem.

He alleged that the police “are not taking any action to arrest assailants.”

Mr. Sohail Johnson, Chief Coordinator of SLMP, who visited the scene of incident, condemned what he called “a brutal attack” on Christians and urged prayer partners of the ministry to pray for protection of Pakistani Christians.

“Fundamentalist Muslims are targeting Christians as they cannot tolerate their existence in Pakistan,” he told ANS.

Pastor Patras claimed that the attitude of the nursing staff and medics at the government-run hospital was “callous and indifferent” toward the injured Christians. He said the gunmen had “exercised their influence over the hospital staff” after failing to “stop injured Christians from arriving at the hospital.”

“The medics at the DHQ Gujranwala asked us to take Shakeela to Lahore. It took us a long time to arrange an ambulance as we had no resources,” said Pastor Patras, who believes, Shakeela’s death could have been averted if multiple odds were not stacked against them.

Asked if the police had made any arrests, he said they arrested a couple of people but said “the real culprits are still scot-free.”

Pastor Patras described the situation as “extremely tense”, adding, “Fearing attacks, Christians have shut themselves in their houses. We are scared and are praying for our safety.”

He said Muslims had also attacked Christian residents of Kotli Sahvo, a village in Gujranwala district on February 28. “Police did not even file a report, let alone take action against the culprits,” he alleged.

“Even if a report was lodged. We would lose it in the court as we would not have resources to hire a lawyer,” he said.

ANS has discovered that local Christians have protested against the incident and have demanded immediate arrests of the culprits.

Report from the Christian Telegraph