Q&A with Deborah Page

Investa Office Fund chair, Deborah Page, is one of eight women to chair an S&P/ASX 100 company. She talks to Tony Featherstone about her grassroots in governance and her journey to the top.

The journey to chair a top listed company often starts near the top: a prominent CEO joins a prestigious board and within a term or two leads it. Deborah Page AM MAICD’s governance journey began in the grassroots of junior cricket, professional bodies, and other not-for-profit (NFP) roles.

Today, Page chairs Investa Office Fund, an ASX-listed Australian Real Estate Investment Trust (A-REIT) that owns office assets worth more than $3 billion. She is one of eight women who chair an S&P/ASX 100 company, by market capitalisation. Page joined the BT Investment Management and Brickworks boards last year as a director, serves on the Service Stream board, and retired from the Australian Renewables Fuel board in October. In the NFP sector, she chairs Wesley College Council (a residential college within the University of Sydney) and until recently umpired hockey matches.

In some ways, Page’s lower-profile appointments over the years say as much about her as the listed company roles. She has volunteered for dozens of NFP committees or associations and those who know her say she is among the more active contributors – someone who joins and inevitably leads committees to get the job done, not only to be seen. Her governance trajectory has a linear feel. She left the accounting firm Touche Ross in the early 1990s after becoming its first female partner, to pursue executive careers at Lend Lease Group, Allen Allen & Hemsley and the Commonwealth Bank of Australia (CBA).

The former CBA CEO, David Murray AO FAICD, encouraged Page to pursue directorships and she joined the board of the New South Wales state-owned power provider, Macquarie Generation, in 2000. Murray’s support showed how important it is for CEOs to encourage and help female executives who have an interest and aptitude for governance.

Over the next 15 years, Page chaired the Cancer Council of New South Wales, served on various Commonwealth Bank subsidiaries, other government boards, then smaller listed company boards, and now large listed companies as a director and chair.

She worked her way up from one board to the next, across multiple industries and the government, NFP and commercial sectors.

“I left my executive career early in my forties to pursue an interest in governance,” Page says. “It was a gamble at the time, but I suppose I was in the right place at the right time to make the transition. It would be much harder today for someone to give up their executive career so early and work their way up through smaller boards as I did.”

That is a shame. Page’s experience shows the benefits of giving back to governance through committees, associations, NFPs and government boards. It gave her deep and broad governance skills, helped her stand out, and prepared her for more complex roles.

It is a useful case study for emerging directors who struggle to get their desired board roles, to be noticed in the governance community, or who become disillusioned after being rejected for directorships. Page’s journey shows the benefits of being active in the governance community and prepared to help organisations through lower-profile roles at the start.

She will need to draw on all her governance skills this year. In February, Morgan Stanley Real Estate Investing announced its intention to sell its investment in Investa Property Group, the parent company of Investa Office Management (which manages Investa Office Fund).

Investa Property Group acquired Investa Office Fund’s management rights from ING Office Fund in 2011 and under Page’s leadership (she was appointed Investa chair in 2011), set about reshaping the fund’s strategy and restructuring the portfolio and debt book.

Morgan Stanley’s sale process for Investa Property Group precluded Investa’s managed funds from participating in the process. Investa Office Fund subsequently announced a strategic review and it was not clear how the sale process for this complex, critical transaction would be resolved as Company Director went to press, or how Page and the board would maximise value for the fund’s unitholders.

Page’s other key board roles on Brickworks and BT Investment Management (BTIM) have challenges. Brickworks was the subject of an aggressive shareholder activism campaign last year as Perpetual Investment Management and MH Carnegie & Co teamed up to take on Washington H. Soul Pattinson and Brickworks over their long-time cross shareholdings – a stoush that will be fought in court.

Westpac Banking Corporation’s selldown in BTIM in July, from 59 – 31 per cent to raise capital, has been a key issue for the BTIM board. The selldown improves BTIM’s share liquidity and gives it greater autonomy.

Page seems a good choice to deal with difficult governance issues. She is not afraid to speak out on topics ranging from politics to gender and skills diversity and governance. The Coalition Government’s first term in office, Page says, has been a wasted opportunity and she bemoans the state of politics prior to Malcolm Turnbull’s elevation to Prime Minister.

She says an age limit on directors would help create much-needed opportunities for female directors and “resolve gender diversity in the near term”. And that chairs need to consider whether their oldest directors have sufficient skills in technology, given it is becoming a ubiquitous management and board skill.

“I suspect many boards are struggling with the impact of digital technology on their organisation, partly because they have some directors who are not familiar with it,” Page says. “Chairmen will have to ask tough questions in the next years on whether their board is as capable as it should be on technology.”

Page has an obvious passion for governance. One senses that her willingness to participate and give back stems from a country upbringing in the Blue Mountains in New South Wales, where she spent much of her childhood in a sport-mad family watching, scoring or playing cricket, or with a hockey stick or whistle in hand. She was treasurer of Barker College Cricket in 2010 and 2011 as she juggled a portfolio of directorships.

“My dream job is being on the Cricket Australia board,” jokes Page. In cricketing parlance, Page has built a long, measured innings in governance rather than go for the quick runs. The hard work is paying off as she builds a reputation as one of Australia’s leading directors.

Here is an extract of her interview with Company Director:

Company Director (CD): How would you characterise the government’s first term in office and what should be its biggest policy priorities?

Deborah Page (DP): The first term has been very disappointing and a case of lost opportunity. There has been no clear message, no exciting vision for the country, and poor communication on both sides of politics. The big concern is that no one in government or the opposition has enough understanding of the urgent need to think differently about our economy and what will drive it in the future. We need politicians who are true leaders, sufficiently skilled at what they do, able to clearly communicate a vision, and show real resolve and strength in what they believe. We haven’t had that in the last three prime ministers [up to Tony Abbott].

If you think back to Paul Keating or John Howard, they rose to the challenge of leadership and the public listened to them. Contrast that with Abbott, Kevin Rudd and Julia Gillard; at times it seemed like they thought the public were idiots. People felt like their views were not needed, valued or were continually put down by politicians.

CD: Are you more optimistic towards Malcolm Turnbull’s leadership?

DP: Very much so. It’s early days, but there has been a noticeable lift in optimism. He has two great attributes: he is not a career politician and he is an exceptional communicator. If he can communicate at the right level, Australia has an opportunity to have at least a two-term prime minister – something we badly need.

CD: Why don’t we see other senior business figures join politics?

DP: It’s a good question. Unfortunately, the main political parties are dominated by processes that favour career politicians. I suspect it’s very hard for someone who has had a senior business career to break into that process, which all too often seems to be about electing people who then pay back favours. If one did a meaningful skills assessment of parliament – much like the assessments that boards go through – there would be glaring gaps in skills and composition.

CD: What attracted you to the chairmanship of Investa Office Fund?

DP: I always had some association with property during my accounting career and several property clients. I’m interested in property and the opportunity to chair an ASX 200 company and work in a supportive environment appealed. I’m fortunate to lead an excellent board and work with two very good independent directors [Peter Rowe and Peter Dodd].

CD: What’s the biggest challenge of chairing a large listed property company?

DP: Similar to most organisations, you have to balance the desires of your various investors. With property, you must help the executive team adequately balance the quality of the property portfolio, while ensuring an attractive yield and sensible gearing [debt to equity]. Knowing when to approve executive decisions to buy and sell property is another challenge, given the size of the transactions. The board needs to know that any acquisition fits the organisation’s strategy and have clear processes to assess potential deals.

CD: How has the listed property sector changed since the 2008-09 global financial crisis (GFC) and how has governance played a role in its transformation?

DP: The Investa Office Fund is a good example. Under the previous owner of its management rights (ING), the fund invested in Europe and the United States, had Australian commercial and suburban property, and was quite messy. It was also very highly geared and got into trouble when the GFC struck. When Investa Property Group bought back the management rights and I became chair, the board put in place a clear strategy of what we were going to be: a fund that focuses on Australian commercial property. We decided to exit our offshore investments and have completed that only recently.

Many property funds before the GFC had a similar experience: too much growth, too much debt, and poor focus. The GFC taught the boards of listed property organisations many hard lessons, which are now playing out in two ways: first, boards are much more responsible about their organisation’s gearing level; and second, are much more focused on the organisation doing what it does best and not straying from the strategy.

Financial risk management across the listed property sector is far superior today. Boards are more mindful of the spreading of debt maturities, the type of debt used, and much more conservative towards debt. With record low interest rates, the temptation is to borrow and grow through acquisitions, but boards, generally, are resisting it.

CD: How do you see the listed property sector evolving over 10 years?

DP: The sheer weight of superannuation money and retirement savings will continue to influence the property sector. We have seen large inflows of foreign capital wanting to buy Australian property and they will only get bigger. Traditionally, those funds have come from Europe and the United States, but increasingly are coming from China. This wave of foreign capital is putting more upward pressure on property prices, which in turn makes it harder for listed property companies to buy assets because competition for them is so great.

As a director, you know you have to govern through the cycle as property prices go up and down. But this cycle feels unusually different: the Australian property market is very strong at a time when the economy is soft. It normally doesn’t play out like that.

CD: What advice would you give a director who joins an A-REIT for the first time?

DP: Understand your obligations as a director of a responsible entity and ensure you have a reasonable understanding of the property industry. Ideally, you should have been around long enough to have gone through a few property cycles.

Know what a risk-adjusted return is and stay true to the organisation’s strategy. If I think back to my first listed board role in property [Investa Property Group], there was a lot of pressure in 2007 from the analyst community to work the balance sheet harder, diversify into development activities and grow offshore. I learnt that you cannot let the market dictate your strategy: fund managers have varying investment objectives and styles, and can be quite forceful in their views. You have to listen to them, but be very measured and egalitarian with your investment communication at the same time.

CD: You have spent many years on boards or committees of financial service companies. Do you favour proposed legislation that the chair and a third of all directors on a superannuation board be independent?

DP: I do. Independence is a critical, fundamental principle on any board, and especially so in organisations that manage other people’s money. How can you get the right skills on a superannuation board if directors are drawn from the fund’s membership or related entities, such as unions? I don’t see how anybody can argue against greater board independence for the big industry super funds.

CD: What are the biggest challenges in Australia’s retirement savings framework and how can the government best address them?

DP: : One issue that hasn’t had enough attention is generational change in self-managed superannuation funds (SMSF). What will happen to all the SMSFs and the hundreds of billions of dollars invested through them when trustees are too old to manage them? It could become a very messy, complicated situation given generational change. The effect of an ageing population on SMFS will be upon us sooner than we think.

CD: Brickworks was the subject of shareholder activism in 2014. Do you expect shareholder activism to be a bigger issue for listed company boards generally in 2016, and how should they best prepare for it?

DP: Social media will drive greater stakeholder activism in the next few years. That’s a given. Investors and other stakeholders now have tools, via social media, to get their message out faster than ever. Boards must accept stakeholder activism is here to stay and prepare for it like they do any other risk. Ultimately, the best way to manage activism is to perform for shareholders, be transparent and do the right thing.

Demographic trends will also influence activism. I spend time with students at the University of Sydney through my work on the Wesley College Council. I’m constantly amazed at the questions they ask about the College’s Foundation: where it invests, how it invests, whether it should make a surplus, and so on. They can have quite aggressive views. This generation’s concept of social justice, and doing something about it, is so strong. As a director, you have to listen to their concerns and force yourself not to dismiss them too easily.

CD: You were a founding member of the AICD Urgent Issues Group almost two decades ago. What are today’s most urgent governance issues?

DP: Having come from an accounting/audit background, it dismays me that financial accounts have become unreadable. I don’t know how we got there, but we are there and the accounting profession has a lot of explaining to do. The average investor would struggle to make sense of financial accounts, and as a result they may make decisions based on advice from a financial intermediary rather than being able to understand the fundamentals.

The global move towards more commentary in audit reports is promising. Requiring auditors to provide greater commentary in their audit report on how they treated a particular accounting issue, such as impairment, will open up discussions between boards and the organisation’s auditor and create some interesting conversations about why the auditor chose an approach.

Another area of concern is being able to talk to key investors while maintaining the organisation’s continuous disclosure obligations on the ASX. As chair, you have to be so careful that you are not providing selective disclosure to investors, which practically is difficult to do when you need to access investors and engage their view on important strategic initiatives.

CD: Are you satisfied with the progress of gender diversity in boardrooms?

DP: The progress will never be fast enough. The proportion of female directors in ASX 200 companies languished at 7 per cent for years, but the progress in the past few years has been encouraging [it is now 21 per cent]. We need to be more aspirational in lifting female representation on boards. Believe me, there are many, many qualified women who would make excellent directors if only given the chance.

CD: Should boards be more prescriptive on board tenure?

DP: Absolutely. I know there are many older directors who have been on boards for several terms. They have done, and still do, an excellent job. I also know from experience that eight or nine years on a board is the right time to retire from it. Unless you are involved in an organisation that is rapidly changing, the directorship can feel like too much of the same at the end of three terms. Well-planned turnover is healthy for a board: the dynamic changes when a new director joins and other directors refocus and step up a bit more.

CD: You’ve been on a long list of NFP boards or committees over the years. Should NFP boards be a training ground for private sector roles?

DP: Every board experience in some way prepares you for your next role. And no board experience is a bad experience. My journey towards company directorship largely started through the NFP sector. It was very sequential: one committee role led to another, then to an association board, then to a government board, then to listed company boards. I found my experiences with NFP committees and associations were invaluable for bigger board roles.

CD: Do you aspire to chair more boards in coming years?

DP: I do. I especially love chairing a board because of the relationship you form with the CEO. It’s a unique, critical relationship. As chair, you need to be close to the CEO but far enough away to stay impartial. I enjoy mentoring people and helping others around me succeed, which in many ways is what a good chair does.

CD: What do you love most about being on boards?

DP: As a director you get to do all the good stuff, but not in a day-to-day executive capacity. You know what is going on in the organisation, are involved in guiding its strategy and work across a range of complex issues, with good people. Some directors complain about too much compliance on boards, but that complaint is overemphasised. I find directorship is constantly interesting and engaging.