AMP and iCare have been in the news for all the wrong reasons, bringing into sharp focus their governance or lack thereof. Peter Wilkinson, there’s been failings in leadership on these boards. Do you believe this is a broader issue across corporate Australia?
Yes, I do. I think there are a lot of board or board directors who aren’t up to the task. Having said that the vast majority of them are conscientious and hard-working and they’re being brought undone by the few. And the difficulty is that board directors and their activities are largely hidden.
What went wrong with iCare? And should everybody on the board go now, or do you need somebody to stay that knows where the problems are and to be able to fix them?
Well, some people need to go. The short of it is that iCare’s job was to look after and pay people who had been injured and get them back to work and get them healthy as soon as possible. The second issue that emerged was that some of the executives, some of the management, were paid absurd salaries and a huge number of staff were paid incentives.
So there are two areas there that are direct board functions. The first is dealing with salaries, is something on boards called the remuneration committee. And clearly, the remuneration committee was not up to it. It wasn’t doing its job. And so, in answer to your question, “Should directors go?” Yes, look at the remuneration committee.
The second is there’s another committee on boards called the risk and audit committee. And the risk bit is about, in this case, getting people back to work as soon as possible. Because once people can’t get back to work the costs spiral. And so the risk committee, whatever it was doing, wasn’t dealing with that. And so the risk committee is a problem. And there is certainly some people on the risk committee have to go.
At AMP, Boe Pahari was investigated for misconduct and then promoted, political and community standards continue to rise. It appears at some corporate heavyweights have really failed to move with the times. It appears profits and dividends have ruled supreme over morals and ethics. Do you believe that to be true?
Yes. So again, there are board problems. And what happens on the AMP board is largely hidden from view. Some analysts have a better view than the rest of us, but it’s largely hidden. And what’s clear… And one of the features here is they brought in this new CEO. Well, not so new now, but Francesco De Ferrari, who’s job is and appears to have the credentials to fix the culture, to get things straightened out.
But he’s shackled if his board is thinking in the 1990s. And so, if the board is old fashioned, Francesco can’t achieve anything because he will simply get no when he says, “This is what I want to do, this is what I want to do. I want to do this.” And so on. So, old thinking upstairs, as they say, “Fish rots from the head.”
So, two people have gone from high up And that’s deserved. But there are more than four people on the board. So what happened to majority votes? Who was dissenting to the decisions that were made about Boe Pahari and the sexual allegations? Or the tolerance for sexual misbehaviour or for sexual inappropriateness?
It would be very hard to change the culture with a board that tolerated the behaviour that has caused the pracar. It’s worth noting we had a red flag on all this with AMP when David Murray was appointed because he poo-pooed the idea of social license to operate as being a key performance indicator for boards. At the time, a number of people remarked that he was a dinosaur. Very competent in the past, but old thinking for a company that needed very much new thinking and culture change.
And I might add but had the AFR and particular journalists there, not really stuck to it, none of this would have been exposed. And the same with iCare. If Four Corners and journalists at the Herald hadn’t worked so hard on that, that too would not have seen the light of day.
Peter, seats on these high powered boards are the envy of many. Do you find that there’s too many jobs for the boys in corporate Australia?
There’s certainly a network. It used to be called the old boys club. It doesn’t work anymore because we now have female representation, but there’s certainly a network of senior people. And for some of them, not all of them, it’s a cushy job.
And I believe the time is going to come when people start understanding how boards function and the purpose of boards. And getting better transparency on the misbehaviour or the laziness or the incompetence of some board directors. So that the behaviour that we’ve been watching, is less tolerated. I don’t understand how these people continue to do what they do at iCare and at AMP after the Banking Royal Commission. It just doesn’t make sense to me.
The other thing that I would say is that there are people who are board directors, who are turnaround specialists. Who go in and they clean out the old people and put in new, competent, modern thinking directors who are on the money and really work hard to fix companies.
We’ll watch both companies very closely. Peter Wilkinson, thank you.
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