Company directors face pressure to cut board positions

Directors holding more than three board seats across our biggest companies are under pressure to quit amid inquiry fallout.

Westpac and Transurban chairman Lindsay Maxsted. Picture: Hollie Adams

Directors holding more than three board seats across Australia’s biggest companies are under pressure to sharply scale back their commitments, given the rising tide of regulation and increased workloads in the boardroom.

An analysis of the top 20 listed companies by The Weekend Australian reveals Lindsay Maxsted, Gordon Cairns, Sam Mostyn and Neil Chatfield are among the nation’s busiest professional directors, with multiple board roles and commitments as chairmen.

This week’s report by banking regulator APRA into the Commonwealth Bank’s culture, as well as revelations made at the bank royal commission on the role of boards, has put corporate Australia on notice, according to former Australian Competition & Consumer Commission chairman Graeme Samuel.

“The royal commission is a serious wake-up call for directors,” he told The Weekend Australian. “It has acted as a tremendous wake-up call to corporate Australia to examine their corporate governance and culture of their organisations.

“You can’t take your role as a director lightly. Being a company director cannot be a sinecure. It ­involves both legal and moral ­expectations by the broader community in terms of governance.”

Mr Samuel, a former managing director of investment bank Greenhill Caliburn, was one of the three authors of the damning report into Commonwealth Bank.

The report, compiled under ex-APRA chairman John Laker’s leadership, found cultural failings at the banking giant extended right up to the board, with a “widespread sense of complacency, a reactive stance in dealing with risks, being insular and not learning from experiences and mistakes”.

GRAPHIC: Busy business leaders

Ian Ramsay, who heads up the Centre for Corporate Law and Sec­urities Regulation at the University of Melbourne, said this week’s APRA report was a “clear call” for directors to consider whether they had sufficient time to devote to positions they held, particularly for complex businesses such as large financial firms.

“Expectations of directors have increased, along with criticism of those who hold too many board positions,” Professor Ramsay said.

The Australian Shareholders Association says the maximum number of directorship of listed companies should be five, with a chairmanship of a company equal to two directorships.

On that measure, Mr Maxsted hits the limit, given his role as chairman of Westpac and toll road operator Transurban as well as a director’s role on the BHP board.

Similarly, Mr Cairns is chairman of Woolworths and Origin Energy and sits on the Macquarie Group board. Mr Chatfield is chairman of two companies and director of two major companies.

Wesfarmers chairman Michael Chaney in recent weeks retired from his other role as chairman of Woodside Petroleum.

The Weekend Australian analysis shows Transurban is Australia’s busiest big company board, with seven non-executive directors sitting on three or more boards.

While others in business say the number of boards someone can hold depends on the size of the company and its specific circumstances, issues raised by the royal commission and the APRA report have added pressure on company directors to be more active in inquiring into the activities of their companies, including challenging senior executives. The APRA ­report says company boards are responsible for setting the public culture of a company.

Mr Samuel said all companies needed to read the APRA report into the CBA as it raised governance questions that could apply to other companies.

He said there also needed to be more criminal penalties, including jail time, for white-collar crime: “A short time in jail would give executives plenty of time to reflect on their misdeeds.”

Australian Institute of Company Directors chairwoman Elizabeth Proust said people taking on board roles needed to be confident they could fulfil their duties and obligations, including taking the time to understand the company and interrogate management about its performance.