• Date:01 Oct 2007
  • Type:CompanyDirectorMagazine

Elizabeth Bryan was the first woman to run a large financial institution in Australia. Moving into ‘the business of being a good non-executive director’ was a natural next step, but one not without its challenges. Giles Parkinson reports.

The business of being a good NED

Elizabeth Bryan finds there are few better ways to relax than to return to the family property in the rich farmland region of central western New South Wales.

Bryan’s family has several properties beyond Coonabarabran that run sheep and cattle. She says the properties are located in beautiful volcanic country and, while she doesn’t get there often enough, she doesn’t mind the seven-hour drive it takes from Sydney.

“It’s nice to get in the car and have a quiet, long drive thinking and listening to music,” she says. “I like the country area. I like the rural life. When you get back to rural areas and look at issues that country people deal with and the way they deal with them, it’s a very good antidote to the excesses of the city.

“[In the city], we take a lot of things for granted. Country people are pretty pragmatic and practical about things. They get on with what they’ve got to do and whatever is dished up to them. They don’t make too much fuss about the sort of things they have to cope with.”

Most of all, says Bryan, she likes the contrast between city and country. “I like learning how other parts of society work and I’ve always liked to experience and understand other areas and other fields.”

Bryan’s career is certainly testimony to that. She is one of the few executives and directors to successfully straddle the public and private sector –?she has been an advocate of shareholder activism as the head of a major institutional investor and a guardian of corporate governance as both an investor and a director of public companies.

“I do think that one side informs the other,” she says. “And, I think the debate about governance and other issues would be helped by institutions and corporates having a much closer dialogue and a much greater understanding.”

Bryan first came to prominence in the early 1990s when, as investment manager at NSW-based State Super, she achieved a rapid transformation in culture and performance that took the organisation from the bottom to the top quartile of the performance charts in a remarkably short space of time. Investment teams were rebuilt, investment procedures were re-engineered, and compliance controls established as part of her revamp of the organisation.

Later, as CEO of State Super – then the country’s largest wholesale funds management business Bryan was put in charge of its corporatisation, name change to Axiom, and eventual sale to Morgan Grenfell. She also took responsibility for all operations in Asia ex-Japan for Deutsche Asset Management, the ultimate owner.

Bryan is now chairman of UniSuper, which manages $24 billion on behalf of around 425,000 fund members. She is also president of the AICD’s NSW Division and is a director of Westpac Banking Corp, petroleum refining and distribution group Caltex Australia, and stock-feed producer Ridley Corp. Bryan describes the move from management to the boardroom as another of those important experiences that adds to her knowledge of the business community. “I started to get involved in boards a long time ago and have always had that overlap between the boardroom and management. [Becoming a full-time director] was quite a natural step for me after I had completed my stint as CEO.

“I sit on a variety of company boards and deal with a variety of issues. I’m still very busy, but it is a less structured time. As CEO, your time is extremely structured because of the people demands on you and you have to schedule all waking hours. With a board, there are things to do and places you’ve got to be, but there is more flexibility about how you prepare for those meetings.”

Bryan says the demands of a company director are often underestimated. Banks are notoriously demanding because of the complex nature of their businesses and the regulatory demands, as Bryan can testify since her appointment to Westpac last November.

“Any board you have just joined demands a huge amount of time to learn the ropes and I think that if anyone chooses to take on a new board seat, they can expect a pretty heavy workload in their first year,” she says. “Banks are well known to be complicated and a lot of work. As a new entrant, I can confirm it. Over the last eight months, I’ve had to put in a big effort to come up the learning curve.”

She says audit and compliance responsibilities are also a constant challenge to company boards and often require a technical background to effectively address the issues. But Bryan believes that it is important to attract members with a broad experience and perspective.

“It is an issue. To meet the requirements of the compliance side does require a particular level of technical knowledge. But boards do need the extra dimension brought by different skills, different experiences and different personalities.”

Bryan’s own experience as an investment manager and CEO of State Super, and her current role as chairman of UniSuper, makes her particularly well placed to comment on the Australian superannuation industry, which has experienced extraordinary growth in size and sophistication over the past decade and is now the fourth biggest superannuation market in the world.

One of the major issues is the changing patterns of investment. The Australian superannuation industry now has around $1.3 trillion in funds under management and while the domestic equities market has been experiencing strong growth in recent years, the ability to outperform and find suitable investments in an increasingly competitive pool has become more and more difficult. This, in turn, has forced many asset managers to seek investment in overseas or alternative assets.

“Money used to be invested in the Australian market, with a bit offshore. That’s now moved, and probably around 25 per cent, on average, is invested offshore,” Bryan says, noting that UniSuper has 33 per cent placed in international assets. “As the industry grows here, super funds will have to be global in their search for investments. You can no longer run a big fund and primarily look at only the Australian market.”

This, she says, requires a change in mindset and throws up new challenges. “It’s hard and it’s more expensive and you have to make sure you have found the right sort of managers and that they know what they are doing.” It also has implications for Australian companies, who now find themselves competing increasingly against global corporations for institutional capital. Australia accounts for roughly two per cent of the global stock market (excluding emerging markets) and only one per cent of the world’s bond markets, but is becoming increasingly globalised in terms of returns and opportunities.

Bryan says another major change over the past 15 years has been the demands on superannuation funds to take an active interest in voting their stock on company issues. She notes that this rarely occurred 15 years ago, but the expectation now is that you have a duty to vote your stock if you are a responsible institution.

This has presented a significant administrative issue, simply because of the number and spread of individual stock investments that any super fund would have. “It’s a difficult administrative task just to form a view for a vote on all these stocks.”

In the end, many super funds provide their asset managers with guidelines and rely on the manager’s judgment in individual votes.

Bryan notes, however, that super funds are much more interested in governance frameworks than short-term business issues. She says much of their lobbying has been focused on pushing for more disclosure, increased transparency and the construction of performance hurdles that are properly aligned with the long-term interests of the company. “These are the governance issues that will improve the market as a whole,” she says.

Bryan herself developed a reputation as a share market activist in the 1990s. In October 1996, Bryan’s State Super teamed with Bankers Trust and AMP and took the unusual step of going public with their concerns over the composition of the board of Coles Myer. The three investment heavyweights had pushed for a majority of independent directors on the board to allay governance concerns, but this had been resisted by then chairman, Solomon Lew.

At the time, Bryan said the public intervention was not taken lightly. But despite widespread press commentary, she and her institutional colleagues were not convinced that the issue had sufficient momentum to resolve itself. Meetings with directors had failed to resolve the issue and pressure for change was needed.

Bryan, however, believes that there has been a marked change in Australia since that time. “By and large we have a more transparent and more open governance environment, and a lot of that goes back to shareholder activism,” she says.

She expects member-based super funds, such as UniSuper, to continue their strong growth over the next 10 years and that industry consolidation will also continue. “I think that the industry funds can grow very large indeed,” she says. “But there is also no doubt that the growing pool of money will bring more competition to the superannuation industry along with new entrants.”

Bryan also believes that boards will be faced with another series of changes as a result of climate change issues and the monetisation of carbon emissions.

“That will create big adjustments for many companies,” she says. “It will cause changes to the way they think about them, how they absorb them into their culture and how they meet the regulatory challenges.”

In addition, Bryan says companies face big challenges in developing strategies. This can also place considerable demands on company boards. “In the long run, it is strategy that makes or breaks companies. It requires a huge amount of time, but it is essential,” she says.

Bryan says she has no plans to change her work commitments in the immediate future. “I’m in the business of being a good non-executive director at the moment. That is challenging enough for me. I’m enjoying this phase of my career. I’ve got good boards, good companies and good people to work with.”

She is excited by the recent appointment of Gail Kelly as the new CEO at Westpac. In February, Kelly will move accross from St George Bank, where she has overseen a remarkable transformation and growth story, to take over from long serving Westpac boss, David Morgan.

“She [Kelly] is a respected, successful and well liked CEO and has clearly established the track record to manage a large company like Westpac,” says Bryan. “She is a great role model for women. Our next challenge is to have 20 more women like her in the Australian business community.” Be that as it may, Bryan has already set an enviable and well-deserved benchmark, being one of the first to start the ball rolling for women in the finance sector.