Care needed not to make directorships too intimidating

Regulators have been warned not to increase scrutiny of bank directors to the point where executives shun appointments.

NAB Chairman Ken Henry after resigning in the wake of the banking royal commission. Picture: Britta Campion

Regulators have been warned not to increase scrutiny of the nation’s big banks’ non-executive directors to the point where business leaders start to shun appointments to their boards.

A roundtable of top financial advisers has heard that the banks need to be able to attract the highest calibre of directors as the ­sector grapples with the regulatory and political fallout from the royal commission.

The Hayne commission’s final report, delivered last week, said bank boards had the ultimate ­responsibility for controlling the culture and risk of an organisation and directors should not favour investors over customers.

The report said: “The primary responsibility for misconduct in the financial services industry lies with the entities concerned and with those who manage and control them: their boards and senior management.”

Bank board positions have been considered the plum ­dir­ector­ships for business leaders, given the high-profile nature of ­financial services. The big four banks make up about 25 per cent of the value of the sharemarket and the financial sector accounts for about 32 per cent.

The roundtable took place ­before National Australia Bank chairman Ken Henry declared he would leave the bank once a new chief executive was appointed to replace Andrew Thorburn.

Credit Suisse managing director Jean du Plessis said potential board candidates would consider more carefully before taking on the role now than they would have in the past.

“I don’t think it’s going to be a problem but I certainly think that post the royal commission people taking on those roles will give it considerably greater thought as a result of what’s transpired for a number of directors,” Mr du ­Plessis said.

“There will be different views as to how much a director would know or should know, but either way I think it does change the ­perceived risks and rewards of those roles.”

Macquarie Capital’s head of ­financial institutions, Marianne Birch, said the royal commission’s findings could give directors more certainty, given its recommendations, especially on culture within the banks.

“The report remarks on the ­expectations of the board and the desire for the board to be monitoring compliance and culture, and so I think that gives us some ­clarity,” Ms Birch said. “We had the report on the CBA board last year, which was well-read and that sort of had people possibly thinking, ‘Well, what was the role of the director?’ and asking that question.

“We’ve now seen what the royal commission has to say about that, but we shouldn’t forget there’s a huge, deep talent of people here in this nation, and I have no doubt that they can find good quality candidates.”

However, Minter Ellison financial services leader Rahoul Chowdry said a director’s responsibilities were becoming more onerous, particularly on high-profile companies. An increase in those duties, he said, could dissuade some directors from joining bank boards.

“Some talented people will ask themselves the question, ‘Do I want to be a director? Do I really want the risk and the hassle?’ So, yes, there is a chance that the pool will potentially get smaller,” Mr Chowdry said.