Five attributes of a good director
Michael Hawker FAICD has been a director on various boards for the past 26 years. But despite all his experience, he says he is still learning and what’s expected from his boards from the outside is constantly changing.
Nonetheless, he was still able to list five abilities that make a good director when addressing an Australian Institute of Company Directors’ NSW Fellows Lunch in Sydney in October.
According to Hawker, who is chairman of the George Institute for Global Health, Australian Rugby Union and SANZAR (South African, New Zealand and Australian Rugby), these crucial core skills and attributes are:
1. The ability to focus on material issues and not “sweat the small things”.
“As both a CEO and a director, too often I have seen individual directors chase down a rabbit hole, not because of any particular concern about a material risk, but primarily to demonstrate their competence and area of expertise,” said Hawker. “This is a burdensome process for management and a time waster for the board, and can deflect focus from more critical issues.”
2. The ability to see the “big picture”.
“One might argue that the collapse of some financial services companies recently was due to the inability for boards to see the big picture. For example, should the Royal Bank of Scotland have continued to purchase ABN AMRO when asset prices were at long-term trend highs, the cost of credit was at long term trend lows and it was dramatically leveraging the balance sheet?” asked Hawker, who is also a director of Aviva Plc Group and Washington H Soul Pattinson and Company.
3. The ability to deal with pressure from external sources.
“Directors need to be ‘comfortable in their own skin’,” said Hawker. He noted companies could face pressure from activists, short-term focused shareholders, the media or competitors and that this typically happened when short-term company performance was perceived as poor or when the company was making a strategic structural change or faced an unfriendly approach from an acquirer.
He said keeping cool in the face of pressure was particularly critical for directors of public companies because competitors, acquirers and so on would use the media and other avenues to extract value.
“Directors need to be able to withstand these pressures and be comfortable in their own capabilities and reputations to do the right thing and not to fall for populism,” said Hawker.
“Doing the right thing may cost you a board seat, but that is the price a good director is willing to pay for providing good governance.
“Sometimes tough decisions take courage. Some examples include Qantas’ recent challenges with its employees led by CEO Alan Joyce and the waterfront challenges faced by Patrick Corporation under the leadership of Chris Corrigan.”
4. The ability to influence effectively at the board table.
“I always think this is the most interesting challenge for new directors,” said Hawker. “How do you get yourself heard at the board table? There are two bookends to this problem: One is not speaking at all and the other is speaking all the time. Both generate the same outcome – that is, not being heard at all.”
According to Hawker, the most effective directors (where effective was measured by influencing outcomes) were those that spoke infrequently, but when they did speak, were able to articulate the key issues and provide a critical insight.
“I have also observed that the most effective directors are those that attack the issue and not the person. One way of creating board disunity is to rubbish another director’s perspective or point of view.”
5. The ability to respect alternative viewpoints.
Hawker told the audience that there were “many ways to skin a cat” or execute a given strategy. There were also many strategies to deal with competition. But he added: “The value of a diverse board is critical in providing multiple perspectives on any particular issue, which if corralled well, provides an excellent input for organisations to find successful solutions.”