CEO Report Towards making a difference

  • Date:01 May 2010
  • Type:CompanyDirectorMagazine

Towards making a difference

One of the important roles of the Australian Institute of Company Directors is its contribution to major public policy debates. While you may be familiar with our work on issues such as director liability and executive remuneration, we are also active in other areas.

One important area is board diversity. Another is health-sector reform, which is emerging as a key issue in this election year.

The debate around hospital reform has mainly focused on funding. While this is vitally important, another crucial aspect of reform is the governance model of public hospitals.

All states, except Western Australia, recently agreed to give Prime Minister Kevin Rudd control of 60 per cent of public hospital funding and to hand direct management to local hospital networks run by community-based boards. Likewise, Federal Opposition leader Tony Abbott has proposed replacing the current system of the states running large regional health services with local hospital boards.

It is vital that both sides of politics carefully think through how these boards will be selected and how they will work. Unless they get the governance structures right when applying this “cure” to our ailing system, the health sector could quickly catch a new set of ills.

The people who make up these boards must have the appropriate skills and knowledge of governance principles, the boards must collectively bring together the right mix of skills, background and experience and they must have the proper governance structures and processes in place.

Who selects the boards, and how they are selected, are vital questions to be resolved, as is establishing the appropriate selection criteria.

The process should be as transparent, independent and free from politicisation as possible. There should be no political appointments if the devolved system is to work.

Likewise, these boards should not be seen as “representative”. The selection process should focus on achieving the appropriate skill matrix for individual directors and for the board itself, balancing clinical expertise, finance, strategic management, administrative and other skills, to ensure it has the capabilities to do the job.

In addition, directors should also have knowledge and experience of best practice corporate governance and the need for professional development in this area through governance education should be recognised. It is here that the Australian Institute of Company Directors can make a contribution through our suite of world-class director and board education.

We will be delivering these messages vigorously to both sides of politics and in the media. We will also be offering tailored education courses for the health sector and conducting a number of events focused on the sector around Australia. Only by setting the highest standards of governance, and ensuring high-quality directors are in place, will the benefits of this new world of hospital management be delivered.

Board Diversity

On another important policy front for us, it is wonderful to see that another 15 women have been appointed to ASX 200 boards since our media release in November 2009, which announced a range of new measures focused on the value of a diverse board and increasing the pool of women available for board positions.

One of the key initiatives was a mentoring program bringing together senior listed company chairmen and experienced directors of ASX 200 companies with qualified and talented board ready women. I am pleased to announce that this program is now underway.

The mentoring program consists of 56 mentors and 63 women mentees from a broad range of backgrounds. These include not-for-profit, government, proprietary and ASX-listed boards, as well as senior executive women of top publicly listed companies or from other professional and advisory backgrounds.

The aim is to assist the mentees with developing connections with influential business leaders; gain knowledge and skills that will help them achieve director appointments and develop their careers generally; increase their understanding of governance issues; and to gain valuable insights and guidance on the process of selecting and appointing new directors. It is anticipated that the mentors and mentees, who have been matched in pairs, will meet for at least one hour every two months over a period of 12 months. Praesta Australia will also be supporting each mentee by providing executive coaching over the course of the 12-month program.

In the long-term, we anticipate that the program will assist these women in achieving their professional goals of becoming executive and/or non-executive directors of ASX-listed companies and that it will also improve the retention of talented senior executive women.

Diversity remains a key focus area for us throughout 2010. We are optimistic that the concrete measures we are encouraging companies to implement will continue to have a positive effect on the level of female representation on boards.

John H C Colvin FAICD
CEO, Australian Institute of Company Directors