Why Corporate Governance does matter, Ramona.
Ramona Koval’s claim that she is an “independent director” of the ABC
is not quite right. She is the staff-elected director on the board of
the ABC so she represents the staff. She owes her position on the
board to being elected by ABC staff.
Unlike a public company, where an independent director represents all shareholders, Koval represents just one group of people.
In public companies, an independent director is appointed by the
chairman, and the board. They are then re-elected, at regular
intervals, by shareholders in general meeting.
There are no general meetings of the ABC and apart from her, all other
directors are either appointed by the Federal Government, or are there
because the relevant Act requires an executive representation on the
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Strictly speaking Koval is a non-executive director, as are all the
other members of the board, bar directors like the managing director,
Russell Balding, who is an executive.
She is required to act in the best interests of the corporation at all times, as are all other directors.
In his resignation statement, Maurice Newman refers to the “board’s
governance protocols”, Koval refers to a “code of conduct”. There is a
very big difference, especially on boards.
Governance is the hardest thing for boards to “get” and understand
totally. What’s not certain is just what was her “code of conduct” or
his “governance protocols”. What did they entail? Is it a
difference of interpretation, or was it a way of silencing boardroom
critics and keeping all dissent within the boardroom?
If that’s the case it is more of a gag rather than a “code of conduct”, or “governance protocols”.
Governance and its understanding was the issue, along with the more
financial-based risk management problems, that hurt the National
Australia Bank and split the board.
Former director, Cathy Walter decided that her objections and problems
with the board and its approach to the inquiry into the $360 million
forex option losses debacle, was greater than any corporate
“collegiality”, which became code for all the boys on the NAB board
Maurice Newman is on the ASX board with Cathy Walter. He has seen at
first hand the impact a director with their own views and standards on
boardroom behaviour can have on a company.
Newman has obviously had no worries with Walter remaining on the board of the ASX.
So why then has he quit over Koval?
After all, like Walter on the NAB board, Koval has her own views and
standards about behaviour in a boardroom and has applied them in the
case of the monitoring proposal that somehow became public when Media Watch highlighted it.
What was more important this time around? That the monitoring was his
suggestion, and she somehow stood up to him and wouldn’t sign off on
it? Isn’t that what Cathy Walter did at the NAB, even though her
argument was flawed by her lack of solid work on the bank’s audit
committee in the first place?
Newman did the honourable thing by resigning from the ABC board. If he
couldn’t work with a director like Koval, then he was entitled to make
Good governance demanded he go and make a statement. Contrast his
decision with the silence that greeted the departure of Caroline Hewson
from the AMP board almost three years ago.
Look also at the fuss and noise Walter’s decision to leave caused for the NAB, as she fully intended.
In the end that was the decision Cathy Walter took, but she added a
twist of her own. She forced some of the other, male directors, to
leave with her or in a staged departure, with chairman Graeme Kraehe
going towards the end of 2005.
In the end, Newman knew that his going and his resignation letter and
references to the core problem, would create media controversy and make
it political and put pressure on a director – Koval. That was his twist.
For an ABC director who believed in keeping it all in the boardroom,
Newman took the opportunity to make it very public after resigning.
Each director has the right to work out what is right for them on the
board. If Koval thinks that she is somehow above observing normal rules
on boardroom confidence, then she is not acting in good faith and in
the best interests of the corporation.
There are limits to the independence of directors, no matter who they
are. But, as Maurice Newman correctly divined, if you don’t like the
situation, don’t stay around.
That, Ms Koval, remains your final option as well.