Women on boards - calling Australia's top head hunters
January 31, 2011
Dear leading Australian headhunters for public company boards and executives (and a few other interested parties such as ASX200 directors),
It's the Australian journalist and shareholder activist Stephen Mayne here, hoping to enlist your support for an ongoing project to try and both improve and diversify the Australian public company directors' club.
The project primarily involves continuing to push for more women on boards, but has a broader aim of attempting to remove poorly performing directors and lift the overall quality of those on the boards of companies which manage the retirement savings of Australians through our unique compulsory superannuation system.
Australia has the fourth largest superannuation pool in the world worth $1.23 trillion, according to the latest APRA figures. When you consider that 60% of this is invested in equities, it is absolutely vital that the right directors are in place to protect these savings. No other country forces every working citizen to effectively invest 3% of their salary into local stocks.
With such a paternalistic system, surely it is unacceptable that the average Australian public company director is re-elected with 96% of the vote in favour. Whilst there are many great directors serving on boards, the average director is simply not that good and we clearly do not have a very strong culture of shareholder pressure when it comes to poorly performing directors.
Whilst I'm a strong critic of many of Australia's blokey boards, this process is also about promoting and rewarding good directors, as you can see from this list of the top 100 male directors in Australia published in The Mayne Report.
Should headhunters work more closely with investors?
One of the reasons for emailing almost 100 consultants who work for the "big six" global head hunting firms in the Australian market, is that the current system of director recruitment does not seem to involve any element of the investment community.
Headhunters rarely consult directly with big or small shareholders before recommendating new directors to the existing directors of ASX-lilsted public companies. Instead, we have a self-selecting system where boards choose the directors, not always through headhunters, with very little reference to shareholders. No wonder the gene pool is so shallow - the largely old, white, male directors continue to select people like themselves.
Asking AGM questions about board diversity
I've asked questions at almost 400 public company AGMs over the past 13 years and for the past 15 months have been regularly pushing the gender diversity question as you see from this package of audio files and transcripts from AGMs.
It's amazing how a little prodding can make a difference - as was explained in an item about David Jones and Seek about half way down this email edition of The Mayne Report from March 2010.
Last year saw more progress than ever before as was noted in this Crikey.com comment piece in December - 2010 a stand out year for women on boards.
Ranking the top female directors
In an attempt to further promote the debate, last year we started this list ranking the top 100 female public company directors. It's totally subjective and any feedback or suggested changes would be welcomed.
The challenge now is to rapidly lift the number of female directors on ASX 200 boards up from the present level of 10.6% towards at least 15%, but preferably 20%, whilst at the same time improving the overall quality of boards in terms of delivering for shareholders.
I was talking to a 70-something chairman of an all blokes ASX200 board last week and he trotted out the usual "merit", "lack of experience" arguments.
Shareholders do not want duds on boards and I'll be the first to get stuck into under-performing female directors. For instance, have a listen to these criticisms of Lyndsay Cattermole at last year's Tatts Group AGM given she is the longest serving Foster's director which has lost almost $5 billion on wine during her 12 years on the board.
How you can help
The reason for this email to request your help in identifying talented women who could serve on public company boards.
And so you don't think this is an attempt to undermine the great work headhunters do, please be aware I will be strongly supporting the use of headhunters for board searches at AGMs in 2011.
For instance, have a listen to these exchanges at the Incitec Pivot AGM in December questioning the process through which former PwC global chair Paul Brasher was appointed as a new director. It was re-assuring to hear that a head hunter was involved and no-one on the Incitec Pivot nomination committee had met Paul Skinner before the formal interview.
There is nothing worse than an old boys network of directors that relies on mates. At the very least, headhunters bring some independent perspective, even if boards do often end up going with recommended candidates who they already know.
Katey Lahey's appointment marks a milestone in Australia
In attempting to explain Australia's woeful record on board diversity, I heard one independent head hunter tell a group of women directors last year that in the past 40 years the "big five" global firms had never had a female in charge of their Australian practice.
This was a point repeated in this opinion piece in The Age last September, which sparked a strong response from the search industry.
Indeed, Chris Thomas from Egon Zehnder engaged forcefully about his firm's approach to women on boards as you can see from this email edition of The Mayne Report sent last year to many leading females in corporate Australia.
It was great to hear about Katie Lahey's appointment at Korn Ferry shortly after this exchange and it would be interesting to hear comparable statistics from other search firms as those explained by Egon Zehnder.
How to get in touch and future engagement
There's a fair bit to think about in all of this and some of you may be reluctant to engage. If you'd rather be discreet in any feedback you provide, please use our anonymous emails tips box. Alternatively, call me on 0412 106 241 and, again, feel free to remain anonymous.
I'd be more than happy to have a coffee with any of you, or present to your consultants on this project. It would also be great to hear some historical perspective on which firms, including the individual consultants, conducted specific searches for ASX200 public companies.
The Productivity Commission recommendations on executive pay are making remuneration consultants more public than ever before and a similar approach to public disclosure of search firms wouldn't hurt. For instance, look at the way APN News & Media identified Heidrick & Struggles in this announcement after making executive and board changes last year.
Encouraging diversity and accountability on boards through more transparent and independent recruitment processes is something that should benefit shareholders and head hunters alike.
Thanks for taking the time to read this and I look forward to engaging with you in the near future.
Best wishes, Stephen Mayne
PS. Fairfax has just published this piece examining the salaries paid to billionaires by public companies. It concludes by pointing to so-called independent directors on the respective remuneration committees to intervene on the ridiculous salary packages paid to Westfield founder Frank Lowy and News Corp executive chairman Rupert Murdoch, despite poor share price performance in recent years. This is a classic example of where Australia needs strong independent directors to protect shareholder value and curb executive excess.
It's the Australian journalist and shareholder activist Stephen Mayne here, hoping to enlist your support for an ongoing project to try and both improve and diversify the Australian public company directors' club.
The project primarily involves continuing to push for more women on boards, but has a broader aim of attempting to remove poorly performing directors and lift the overall quality of those on the boards of companies which manage the retirement savings of Australians through our unique compulsory superannuation system.
Australia has the fourth largest superannuation pool in the world worth $1.23 trillion, according to the latest APRA figures. When you consider that 60% of this is invested in equities, it is absolutely vital that the right directors are in place to protect these savings. No other country forces every working citizen to effectively invest 3% of their salary into local stocks.
With such a paternalistic system, surely it is unacceptable that the average Australian public company director is re-elected with 96% of the vote in favour. Whilst there are many great directors serving on boards, the average director is simply not that good and we clearly do not have a very strong culture of shareholder pressure when it comes to poorly performing directors.
Whilst I'm a strong critic of many of Australia's blokey boards, this process is also about promoting and rewarding good directors, as you can see from this list of the top 100 male directors in Australia published in The Mayne Report.
Should headhunters work more closely with investors?
One of the reasons for emailing almost 100 consultants who work for the "big six" global head hunting firms in the Australian market, is that the current system of director recruitment does not seem to involve any element of the investment community.
Headhunters rarely consult directly with big or small shareholders before recommendating new directors to the existing directors of ASX-lilsted public companies. Instead, we have a self-selecting system where boards choose the directors, not always through headhunters, with very little reference to shareholders. No wonder the gene pool is so shallow - the largely old, white, male directors continue to select people like themselves.
Asking AGM questions about board diversity
I've asked questions at almost 400 public company AGMs over the past 13 years and for the past 15 months have been regularly pushing the gender diversity question as you see from this package of audio files and transcripts from AGMs.
It's amazing how a little prodding can make a difference - as was explained in an item about David Jones and Seek about half way down this email edition of The Mayne Report from March 2010.
Last year saw more progress than ever before as was noted in this Crikey.com comment piece in December - 2010 a stand out year for women on boards.
Ranking the top female directors
In an attempt to further promote the debate, last year we started this list ranking the top 100 female public company directors. It's totally subjective and any feedback or suggested changes would be welcomed.
The challenge now is to rapidly lift the number of female directors on ASX 200 boards up from the present level of 10.6% towards at least 15%, but preferably 20%, whilst at the same time improving the overall quality of boards in terms of delivering for shareholders.
I was talking to a 70-something chairman of an all blokes ASX200 board last week and he trotted out the usual "merit", "lack of experience" arguments.
Shareholders do not want duds on boards and I'll be the first to get stuck into under-performing female directors. For instance, have a listen to these criticisms of Lyndsay Cattermole at last year's Tatts Group AGM given she is the longest serving Foster's director which has lost almost $5 billion on wine during her 12 years on the board.
How you can help
The reason for this email to request your help in identifying talented women who could serve on public company boards.
And so you don't think this is an attempt to undermine the great work headhunters do, please be aware I will be strongly supporting the use of headhunters for board searches at AGMs in 2011.
For instance, have a listen to these exchanges at the Incitec Pivot AGM in December questioning the process through which former PwC global chair Paul Brasher was appointed as a new director. It was re-assuring to hear that a head hunter was involved and no-one on the Incitec Pivot nomination committee had met Paul Skinner before the formal interview.
There is nothing worse than an old boys network of directors that relies on mates. At the very least, headhunters bring some independent perspective, even if boards do often end up going with recommended candidates who they already know.
Katey Lahey's appointment marks a milestone in Australia
In attempting to explain Australia's woeful record on board diversity, I heard one independent head hunter tell a group of women directors last year that in the past 40 years the "big five" global firms had never had a female in charge of their Australian practice.
This was a point repeated in this opinion piece in The Age last September, which sparked a strong response from the search industry.
Indeed, Chris Thomas from Egon Zehnder engaged forcefully about his firm's approach to women on boards as you can see from this email edition of The Mayne Report sent last year to many leading females in corporate Australia.
It was great to hear about Katie Lahey's appointment at Korn Ferry shortly after this exchange and it would be interesting to hear comparable statistics from other search firms as those explained by Egon Zehnder.
How to get in touch and future engagement
There's a fair bit to think about in all of this and some of you may be reluctant to engage. If you'd rather be discreet in any feedback you provide, please use our anonymous emails tips box. Alternatively, call me on 0412 106 241 and, again, feel free to remain anonymous.
I'd be more than happy to have a coffee with any of you, or present to your consultants on this project. It would also be great to hear some historical perspective on which firms, including the individual consultants, conducted specific searches for ASX200 public companies.
The Productivity Commission recommendations on executive pay are making remuneration consultants more public than ever before and a similar approach to public disclosure of search firms wouldn't hurt. For instance, look at the way APN News & Media identified Heidrick & Struggles in this announcement after making executive and board changes last year.
Encouraging diversity and accountability on boards through more transparent and independent recruitment processes is something that should benefit shareholders and head hunters alike.
Thanks for taking the time to read this and I look forward to engaging with you in the near future.
Best wishes, Stephen Mayne
PS. Fairfax has just published this piece examining the salaries paid to billionaires by public companies. It concludes by pointing to so-called independent directors on the respective remuneration committees to intervene on the ridiculous salary packages paid to Westfield founder Frank Lowy and News Corp executive chairman Rupert Murdoch, despite poor share price performance in recent years. This is a classic example of where Australia needs strong independent directors to protect shareholder value and curb executive excess.