Activist pleads to ‘bust open’ directors club after mounting backlash to ASX principles

Tanarra Capital founder John Wylie advanced his commonsense approach to board diversity, asking, ‘Where are the people from the western suburbs?’.

John Wylie has lamented that the average age of most directors of Australian public companies is over 50. Picture: Louis Trerise

Australia’s boards need to promote millennials and find directors from the Western suburbs of Sydney and Melbourne, according to Tanarra Capital founder John Wylie, who led a backlash against the ASX’s proposed corporate governance remake.

“There’s a bit of a directors club in Australia,” Mr Wylie told a business conference in Sydney on Tuesday. “I would like to see a busting open of the doors of the directors club to a broader range of people, so the diversity discussion becomes a broader one.

“Where are the people from the western suburbs... Where are the younger people on the boards of listed companies?”

He said the average age of most directors of Australian public companies was over 50.

“They are not digital natives,” he said. “Taking a broader view of diversity would be a good thing.”

Mr Wylie last month opposed a new set of corporate governance principles promoted by the ASX, which underscore the expectations around diversity and independence in boardrooms. He went as far as saying the market operator’s corporate governance council should be dismantled for trying to mandate prescriptive rules around the reporting of sexuality and disability.

The activist investor also hit out at the increasing regulation of listed companies, warning that the number of companies listed on the ASX would continue to shrink unless the current “paternalistic approach” was cut back. “We need to get out of this paternalistic mindset around public companies,” he said.

“There is a structural issue going on in capital markets where we are seeing the rise of private capital.

“There is $4 trillion in our superannuation system which is going to be $7 trillion. But on the ASX there are now fewer listed companies than there were 10 years ago.

“The listed market is going to continue to shrink. It’s bad thing for investors.

“We’ve got to try to get the ASX rules back to what is going to drive value for companies. With these prescriptive rules, there is a mindset of compliance in Australian boardrooms. Many of the boards of companies we talk to are just fed up with the compliance burden.”

Mr Wylie said the ASX itself needed to take back control over the development of its corporate governance principles.

He said the ASX had set up a corporate governance council around 2002 in the wake of the collapse of HIH Insurance that was a “well-intentioned attempt” to improve the governance around listed companies.

But he said the ASX Corporate Governance Council had since grown to a group that now had 19 different organisations around the table. “There are quite a lot of disparate agendas around the table,” he said.

The proposed draft for the latest set of corporate governance guidelines was more than 63 pages.

“By contrast, if you look at a company like Berkshire Hathaway, its governance principles amount to four pages,” he said.

“It has managed to be a pretty successful company over a very long period of time.”

He said it was important for the economy to have a thriving listed stockmarket. “We would like to see a few simple principles in terms of allowing companies to determine their own corporate governance,” he said.

The Tanarra investor said many company founders tended to be “misfits and nonconformists and people who don’t fit in nice boxes”.

But he said the Magnificent Seven companies leading the US stockmarket which had produced “incredible value” for investors, were all founder-led companies.

“The ASX needs to encourage founders,” he said. “That is not to excuse every particular thing which happens in every company, but we need to encourage founder-led companies on the ASX.”

“We also need to have a greater ownership culture on Australian boards generally with non executive directors also owning more shares in companies.”