Ownership Matters study: Better the director you know on board

There is zero correlation between Australian board tenure and company performance, according to a study by proxy advisers Ownership Matters.

This century’s leading director in terms of years of service is Soul Pattinson’s Robert Millner with 149.2 years service on 10 companies. Pictures: Adam Yip

There is zero correlation between Australian board tenure and company performance, according to a major new study by proxy advisers Ownership Matters.

Australian investors pay ASX 300 directors $400m a year yet they don’t hold them responsible for the $1.7 trillion in value they oversee.

The average director stays in the job for six years with those on two or more boards staying an average 10 years.

“Investors have to pull their weight if they want more competition and greater accountability from the pool of non-executive labour working in ASX companies,” OM director Dean Paatsch said.

“There is a huge performance dividend waiting for the Australian economy if we have the most competent boards possible deploying the capital of Australian investors.”

Mr Paatsch said there had to be a way to increase accountability and he urged introduction of UK rules where directors face annual elections.

This applies to two dual-listed companies BHP and Rio.

The study comes as the annual meeting season moves into full swing this week with Boral, Bendigo Bank and JB Hi-Fi holding their AGMs, among others.

The Boral vote could see changes after the three proxy houses at first recommended against Boral chair Kathryn Fagg, until her last minute change to drop one seat from shareholder Seven and advice that she would step aside next year.

Last week James Packer, while professing support for change at Crown, voted his 36 per cent stake in favour of incumbent directors and helped them win re-election.

Most directors are returned after elections with a 96 per cent vote in their favour.

While showing the clear preference to incumbents on board selection the study showed 74 per cent of directors sit on just one board, and 38.2 per cent of vacancies are filled from the existing pool. Fourteen per cent of directors have two or more seats.

When questioned about this tendency, Wesfarmers chair Michael Chaney told the Australian: “What would you expect, we choose from someone we know and understand their qualifications, (rather than) someone we don’t know.”

The average ASX 100 chair is paid $515,222 a year and the average director earns $290,422.

This century’s leading director in terms of years of service is Soul Pattinson’s Robert Millner with 149.2 years service on 10 companies, followed by Gary Weiss at 111.2 years at 15 companies, and Geoff Wilson with 84.2 years on seven companies. The top woman director is Nora Scheinkestel at 72.6 years from 15 companies.

Female directors account for 33.1 per cent of all directors but just 6 per cent of executive directors. In all there are 399 female directors out of 1362. Just 22 women are chairs of ASX 300 companies or 7.3 per cent of the total.

The average board turnover is 12.75 per cent a year and for those in the bottom decile of the top 300 it is 19 per cent, which shows there is no meaningful change for underperformers.