A busy future

  • Date:01 Oct 2013
  • Type:Company Director Magazine
David Murray didn’t retire to a handyman’s cocoon after leaving the Future Fund. He tells Christopher Niesche how he’s reshaped his career to become an adviser and chairman of the Butterfly Foundation.

The latest undertaking of David Murray FAICD might at first seem a digression after his roles as Commonwealth Bank of Australia (CBA) CEO and Future Fund chairman.

In August, he became chairman of the Butterfly Foundation, a charity that aims to treat and ultimately prevent eating disorders in Australia, while supporting the people living with this mental illness.

The Butterfly Foundation might seem a world away from his chairmanship of the Future Fund, which he left last year.

The giant Australian government investment fund is responsible for tens of billions of dollars and aims to fully fund superannuation payments for public servants, which are becoming an increasing drain on the budget.

By contrast, the Butterfly Foundation – like all charities in the current environment – has very limited resources.

Nonetheless, Murray’s motivations for joining both organisations are similar.

“It goes to my view about the importance of intergenerational considerations by Australians, the notion that we should try to leave the place in a better position than we found it, for our children,” he says of his involvement in the charity. “Because this affects young people with such long-term dreadful consequences from these disorders, I felt the inter-generational benefit of doing something about this would be huge.”

While he hasn’t had any personal experience through his own family with eating disorders, Murray is aware of how devastating its effects can be. “I know just how bad it can get for people who don’t get the right sort of treatment and the right sort of family support earlier on,” he says. “The ages at which people have eating disorders are reducing and are increasingly more common in boys, not just girls.”

Aside from its effect on individual families, eating disorders come with a heavy societal and economic effect.

According to a Deloitte Access Economics report commissioned by the Butterfly Foundation, more than 900,000 Australians suffered from eating disorders in 2012, with a total socio-economic cost of $69.7 billion.

Murray acknowledges the charity is nowhere near as high profile as many other causes. He says the organisation’s task is to educate the public about the size of the problem and the benefits of addressing it, and then it is up to individuals as to which charities they decide to support.

Murray believes not-for-profit (NFP) and corporate boards are similar in that they share the same broad aim – to generate value.

The key difference between them in terms of governance is that in NFPs, directors are essentially dealing with volunteers. “They haven’t been screened and employed and you can’t just change them as shareholders can,” he says.
And, because resources are always stretched in NFPs, the organisation draws more on the specific skills of individual board members.

“On a corporate board, you want people to be across what’s going on. But really, supervising the CEO is its essential task,” says Murray. “On an NFP board, you want work to be done by each member of the board and then, whether it’s done well or not, you still have to remain a coherent team, so there is a trick to getting it right in an NFP.”

The former Labor government recently pushed through reforms of the NFP sector aimed at reducing the administrative burden so that NFPs can ideally focus on innovation rather than paperwork, and at improving governance in the sector. It created the Australian Charities and Not-for-profits Commission to oversee the sector.

Murray says he doesn’t want to be critical of attempts at reform, but he fears these will only increase the burden on directors.

“All the attempts I’ve seen tend to complicate the law more and have not dealt with the really fundamental issues of the treatment of directors,” he says.

“In Australia, directors of companies are treated as deemed criminals. There are so many areas of the law where there’s a reversion of the onus of proof that doesn’t apply to citizens or office-holders in other organisations. There’s been no substantive attempt to change this and that means we, as Australians, have a culture that we don’t trust business. And if you don’t trust business, you don’t trust value-adding, which only reduces the productivity of the economy.”

Murray notes that in recent years, regulators have dealt with corporate issues by increasingly making directors personally liable for breaches of rules and regulations, instead of enforcing compliance. The result is that corporate governance has become a standardised process across organisations, stifling innovation and creativity by boards.

“The objective in adding value in business is to compete, to be different and better than somebody else, and to formulate a distinctive strategy,” says Murray.

“And so, if the starting point in the culture of the organisation is to have the same old stock-standard governance models as everybody else, the signal that’s being sent to the organisation is ‘I’m not different to anybody else’.”

Organisations, be they corporations or NFPs, need “one clear, single, identifiable objective”, but this is made more and more difficult by the growing number of laws affecting corporate governance, says Murray.

As CEO of the CBA for 13 years until 2005, Murray has also witnessed corporate governance from the C-suite. The most important thing a board can do for its CEOs, he says, is to give them the authority to do their job.

“The delegations from the board have to be very clear and fairly easily applied so the board doesn’t have to look up the phone book every time it works out what the CEO can and cannot do,” says Murray.

“The board should expect the CEO to build a robust strategic plan of value and to be able to track the implementation of that plan. But what it must expect from a CEO is that there is nothing hidden and no surprises, and that comes from a constant dialogue between the CEO and the board, in private, about what’s going on generally.”

Murray says the no-surprises policy shouldn’t just apply to major issues, but also to small things, which can sometimes expose behaviour that is symptomatic of deeper issues in the organisation. These can be things as seemingly innocuous as the treatment of a staff member on a disciplinary matter.

An open dialogue, a no-surprises policy and a succession plan should reduce the chance of any tension between the board and the CEO. But sometimes friction is inevitable and Murray has a simple solution as to how boards should deal with this.

“You either deal with the CEO or discharge the CEO. It’s as simple as that. The CEO can’t discharge the board, although I think some believe they can,” he says.

To be an effective supervisor of the CEO, board members need some general business experience and financial literacy. And, while they don’t need to be experts in the company’s industry, they have to have a set of fundamental beliefs about the industry.

“That belief set, if built up well among members of a board, will help the board know if it has got a bad CEO on its hands or if it has made a bad CEO appointment,” says Murray.

It will help it see things coming down the line more clearly than if directors spend all day buried in governance issues at risk committees or understand all the micro-risks of an organisation, effectively getting involved in executive management, he adds.

Our interview takes place in the midst of the recent federal election campaign, with economic and fiscal credibility taking centre stage.

Murray says governments have failed to pull out what they should have from the mining boom, leaving them with increased debt and the economy more vulnerable to a downturn. The borrowing is also crowding out private sector borrowing and hurting productivity.

He also laments the standard of economic debate in Australia, which he says is being “dumbed down” by the 24/7 news cycle. “It causes people to not have sufficient grasp on what’s actually happening and this, in turn, allows governments to keep running this process of making more entitlement promises and funding them with more debt,” he says. “And then, the community gets trapped in a position where you can’t take away the entitlements without significant harm. And so, the work-out period gets longer and longer and longer.”

Murray worked for the CBA for 39 years, including over a decade as CEO, where he oversaw the privatisation and cultural transformation of the bank. That’s an impressive achievement by any standards, but particularly for someone who initially didn’t envisage a career in banking.

When he finished school at Sydney’s St Aloysius’ College, Murray didn’t want to go to university, so he joined CBA as bank teller at the Lindfield branch in North Shore to fill in time while he decided what he really wanted to do.

“I joined the CBA because my father, who worked for it, told me I shouldn’t work for the same bank as he did. He said I should work for the Bank of New South Wales. I said: ‘Well, you keep telling me what a great employer the CBA is so, if you don’t mind, I’ll join the CBA.’ And, it was as simple as that,” he recalls.

CBA was very supportive of its staff who wanted to do part-time study and as Murray learned more about banking, he became increasingly interested in the workings of the bank. “I found the study I was doing was reinforcing my work and vice versa. I actually got to enjoy it and the concept of banking and how it creates value in an economy,” he says.

As CEO, he enjoyed having a single point of accountability and the opportunity to make a difference to the organisation and help it add value. However, being at the top meant there was no longer any backstop when things went wrong, which Murray admits he found both exhilarating and terrifying.

“Most other senior executives in an organisation can say: ‘Oh, well, if this continues to go pear-shaped, you know, the boss is going to have to fix it.’ And they can sort of close the door and go home. But the CEO can’t,” he says.

When Murray retired from the CBA in 2005, he could have simply gone into a very comfortable retirement, but instead he kept working, joining the Future Fund as chairman.

“The notion of just stopping because it’s an expected retirement age doesn’t seem to be the right thing to do and I think it’s important to keep active. My mother was awarded a Ph.D at the age of 85 and I noticed what that mental activity did for her generally. It was quite amazing,” says Murray, 64.

“So, I think it’s important to keep active. It’s also important to keep adding value and that can be done in an NFP sector or in the business sector, and it’s the most enjoyable thing to do.”

Murray’s transition from CEO to the boardroom when he joined the Future Fund in 2006 was made easier, he says, because he had worked closely with some of Australia’s best directors at CBA.

Murray, along with his fellow directors, had to be very hands-on initially when they started the Future Fund because of the way government agencies work.

“We had to go and buy pens and pencils, find some premises and open the bank account. It had to be far more hands-on in the early days,” he says.

“And then, we had the build-up to the global financial crisis where there had to be a lot more hands-on work by the board in understanding what was going on and getting the portfolio set because, at first, we had to do it fairly simply ourselves.”

Along with his work on the Butterfly Foundation, Murray is also on the senior advisory board of global management consultancy Oliver Wyman and notes that its work in bringing more scientific management of financial corporations has impressed him. “I think consultants add value with short, high-impact assignments, not by taking over the management of corporations themselves,” he says.

He is also an adviser at Credit Suisse, dealing with the investment banking and private client areas. And, while his various roles give him a certain degree of flexibility, they also keep him very busy.

Outside of work, Murray spends time with family, tries to get onto the golf course occasionally and visits “the toy shop at Bunnings”.

A keen home handyman, he undertakes renovation projects at his own, as well as his adult children’s, homes, including recently working on a cubby house.

“I try to cover all the trades, but I stop short at electrical,” he says.