‘A board must be a team’ were the words spoken by David Gonski, AC, in the auditorium of the Melbourne Convention Centre at the Australian Institute of Company Directors (AICD) Governance Summit in May 2023.
In his keynote address to an audience of over 1000 Directors, Mr Gonski shared his lessons from 40 years as a professional company director. In his lifetime, Mr Gonski has served on more than 40 boards, including the likes of the ANZ Bank, ASX Limited, Morgan Stanley, and Singapore Airlines. He is currently the Chancellor of the University of New South Wales and continues to serve both executive and non-executive directorships.
Mr Gonski warned that “group performance is something we don’t spend enough time on cultivating and improving”, and that “without respect and trust, there’s a danger of unpleasantness and suspicion, and that the debate, rather than assist the company, becomes those wishing to be the standout at the meeting.”
In Australia, board culture has received intense scrutiny in the wake of Royal Commissions into the Banking and Financial Services sector, Aged Care, and Disability sectors.
Justice Kenneth Hayne led the Royal Commission into the Banking sector. In his final report he found the entities, their boards and senior executives as primarily responsible for corporate misconduct, and that boards should as often as possible, take steps to assess their organisation’s culture and governance to identify and deal with problems. This includes assessing the culture of the board itself.
A similar story played out for the board of Crown Resorts, where an independent inquiry led by Former Supreme Court judge Patricia Bergin, deemed Crown unfit to run a new Sydney Casino at Barangaroo, alleging that failings in leadership at the board level had ultimately facilitated money laundering and corporate misconduct.
These landmark rulings indicate that Directors are ultimately accountable for culture and indeed liable for corporate misconduct as a result of systemic issues in culture.
In light of these findings, the AICD released a Governing Organisational Culture paper to provide guidance on the ways boards can govern culture in practice. Their paper suggests four key mechanisms:
Through Board processes. Namely, through the appointment and management of a CEO who’s values and principles align with that of the organisation. These are reinforced by keeping culture and strategy as regular items on the agenda and through cultivating an open flow of honest communication with the CEO and executive team.
Through Board reporting; This includes the selection of performance criteria and measures chosen to review organisational performance – particularly non-financial measures that reflect culture and customer health.
Through Board sensing: By gaining first-hand experience of the culture through participation in board committees such as the remuneration and risk committees, attendance at organisation sites and events, and involvement in industry stakeholder interactions.
Through Board dynamics: This points directly to the culture in the boardroom and on various sub-committees; how board members interact with one another and with executives; sending signals about what is important and what is not.
The AICD paper asserts that “it is what is enacted around the board table – the dynamics of director decision making and discussions, their expectations and priorities, and how they hold management to account – that influences the culture that flows through the organisation”.
Board processes, reporting, and sensing mechanisms are all examples of ways boards can indirectly impact culture. But board dynamics – how they interact and whether they choose to work more as a team and less as a group – is how board members can directly impact culture.
It was this final point that was emphasised by David Gonski AC in his keynote address, and one I am keen to explore further whilst I’m researching and writing my second book on the dynamics of high performing teams.
If you’re a company director based in Melbourne, and keen to explore this topic too – then please sign up for my Melbourne Boardroom event at the AICD office on Collins street, Thursday 14 September, 10.30-11.30am.
Hope to see you there!