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Good corporate governance and the Kama Sutra

Twigger’s Tales delves into the dynamics of the boardroom. Credit: File

Board dynamics remain a fascinating combination of personalities and business where the best interests of shareholders meet with a mix of agendas and egos under the overarching obligations for good governance and share price performance.

Being a director of a listed company is becoming more complex and less attractive, with infinite expectations and limited resources. But that said, the role has never been more important.

In the 1990s, I was a young investment banker and cut my teeth pitching funding ideas to boards. Invariably, you could quickly determine who was calling the shots in the boardroom and where the power resided.

I remember one key pitch where a managing director was sitting at the head of the table and was flanked either side by four non-executive directors all wearing similar style ties and jackets. When the MD leant back in his chair and played with his tie, one-by-one, each of the other directors slowly rolled back on their chairs and fiddled with their ties, too.

When the MD leant forward and rested his chin on his fist in contemplation, like a troupe of monkeys in training, the other eight followed suit – each oblivious to the farcical sight that would have been better placed in an Olympic synchronized swimming team. I knew then and there where to focus my delivery and on who’s sole decision my pitch rested.

Any experienced CEO will understand the challenge a modern non-executive director (NED) faces when trying to hold management and the CEO to account. The odds are stacked against the NED, as working one to two days a week – or even less – on a role just doesn’t compare with the intimate knowledge that someone working full-time in the business has.

The challenge is that if a NED asks for more detail, inevitably it comes by way of significantly more information and when you add that to industry norm of huge board meeting packs and bursting agendas, there is little time for debate. Back in the day of Jack Welch, who was the charismatic CEO of US giant General Electric, a new GE director was exhausted after getting through the board pack and the board meeting and asked one of the senior directors, “What’s the role of a GE board member?”, only to be met with the experienced retort, “Applause”.

Hence the value of an experienced NED, who understands the business, has a nose for trouble, good ethics, independence of thought, strong interpersonal skills and who knows how to escalate matters. None of those skills are on the ubiquitous corporate “Skills Matrix”, but all are crucial for good governance.

Fred Hilmer in his seminal book “What’s Wrong with Boards” tackles the problem with current-day governance and a focus on best practice, which is the first point of reference for any director asked to solve a difficult corporate problem. The challenge in meeting best practice, is that best practice is often a point of view – with its origins not clear, but more than likely created by management consultants at the dawn of time.

A better approach is to consider what exactly is most appropriate for the circumstances and likely to deliver the best outcome, while still recognising what might constitute best practice. That’s easier said than done, however, with a NED’s respective butt cheeks squeaking as they clench in response to the potential of personal liability should they dare to step outside what is deemed best practice and consider how flexible their approach should be.

The result is inevitably, “Lets stick to what’s safe and expected” rather than exploring the best solution in the circumstances and the outcome will be what the outcome will be. It is a little bit like a committee trying to design a horse, but doing so while being inclusive of every single competing opinion and point of view – in which case the outcome is often a camel!

During WW11, British fighter planes would come back from battle with bullet holes. The Allies found the areas that were most frequently hit by enemy fire and sought to strengthen the most commonly damaged parts of the planes to reduce the number that were shot down.

A smart leader at Bomber Command suggested there was another way to look at the data. Perhaps the reason certain areas of the planes weren’t covered in bullet holes was that the planes shot in those areas didn’t return. This insight lead to armour being reinforced on the parts of the plane where there were no bullet holes!

Following the Royal Commission into the Crown Casino in 2021, the global corporate response to COVID and more recently the Juukan Gorge disaster, a further strand is being added to the banner of corporate governance – community expectations. Boards are faced with activist shareholders and being asked to balance the interests of shareholders, customers and now the broader community.

Corporate statements are now commenting on a range of community concerns including climate change, human rights and more recently and somewhat controversially, the Voice to Parliament. Twigger’s Tales thinks it’s a slippery slope getting involved in community issues and once you become enmeshed, it’s very hard to get out. I believe companies should support the democratic process where people have the right to vote and have their say and let democracy do its job.

The complexity and expanded remit of maintaining good corporate governance remains a difficult challenge for all concerned. And the definition of exactly what constitutes “good corporate governance” is continually twisting and contorting, almost to the point where someone, somewhere can always accuse you of somehow not complying.

Twigger’s Tales reckons good corporate governance is a bit like pornography. It’s difficult to describe, but you know it when you see it!


Liam Twigger is the deputy chairman of Perth stockbroking, funds management and corporate finance firm Argonaut and he draws from more than 30 years of experience in corporate finance to regale you with his market tales. After starting his career as a professional soccer player in the UK, before working in the 1980s for corporate raiders Robert Holmes a Court and Alan Bond, he moved into investment banking when he established Macquarie Bank’s Bullion and Commodities division in WA before establishing PCF Capital, which later merged with Argonaut. While he is an executive director of Argonaut (AFSL 221 476) this column is for information and entertainment purposes only and is not intended to constitute financial advice. The views and opinions contained within are those of the author and do not necessarily represent those of Bulls N’ Bears, this media outlet or Argonaut.



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