Coronavirus (COVID-19): advice and support for the Bond community. Read more

By Adjunct Professor Dr Stephen Van Der Mye

The words Governance, Culture and Accountability (GCA) must have become the most used words in both the academic, business and not-for-profit sectors of Australian society in the last three years or so. Unfortunately, this has not come about through having a robust approach to these concepts but to a series of reports into a wide range of associations and enterprises which revealed a less than robust approach to these concepts.

As I am writing this piece the 2019 Annual General Meeting (AGM) of Westpac Banking Corporation, Australia’s oldest bank’, is taking place against the background of a move by AUSTRAC, Australia’s financial intelligence agency, against the bank claiming more than 23 million breaches of anti-money laundering and counter-terror finance laws, including allowing a number of transactions consistent with child exploitation in the Philippines.

So far this scandal has caused the resignation of Mr Brian Hartzer its Chief Executive Officer, Mr Ewen Crouch its Chair of the Risk and Compliance Committee who will not seek re-election at today’s AGM and its Chairman Mr Lindsay Maxsted who has indicated he will bring forward his retirement from the Board to mid-2020.

However, there might be more to follow with a likely second strike against the Bank’s Remuneration Report which could lead to a call for a complete spill of the Board. At this time the first action is extremely likely to occur while the second is unlikely to get the support of the major holders of shares in the Bank being the large Superannuation Funds who would prefer a staged approach to Board renewal.

Besides the obvious damage to the reputation of those mentioned above the Bank is likely to receive a fine of in excess of $1 billion being more than the Commonwealth Bank suffered at the hands of AUSTRAC several years ago as a result of its breach of anti-money laundering and counter-terror finance laws.

I am often asked by aspiring young accountants, lawyers and others how do they build a portfolio of Board positions over time? The first answer to that question is quite obvious in that Board positions do not suit everyone just as going to university does not suit everyone. In addition, it needs to be remembered that it can take a lifetime to build a reputation and only one poor decision to leave that reputation in tatters.

Prior to taking on a Board position it is important to do an extensive due diligence of the body that you are being asked to join and this does not just mean checking to see that the body has funds in its bank accounts to meet its liabilities as and when they fall due. Here is where you need to act on those often used words GCA as follows:

Governance, does the body have the appropriate processes in place to make decisions that are well thought through including the risks of implementation or non-implementation? Does the Board and management have a well-documented business strategy and is it being implemented? Does the Board and management have an extensive Risk Register and is it regularly up-dated? There are many more questions to be asked and these are just a taste of a few.

Culture, does the body have an open and questioning culture supported by the Board and management meaning can staff at all levels put forward ideas that may not be consistent with current thinking? Does the body have policies that reflect best practice in employment and workplace and safety law not forgetting environmental practices as well?

Included in culture could be evidence of an appropriate remuneration arrangement that takes into account the management of both financial and non-financial risks when determining matters such as short and long-term performance payments.

Accountability, does the body have an accountability map reflecting who is responsible for making decisions throughout the organisation and is it signed off by all relevant staff? This is a relatively new practice introduced by the Australian Prudential Regulation Authority and applies to all entities supervised by them.

Now, one can obviously expand on the listing above but these points have been given as an indication of what to look for prior to joining a Board.

Finally, comes the matter of climate change and here former High Court Judge and Royal Commissioner Kenneth Hayne has taken directors to task saying they have a legal duty to act on climate change risk, include it in corporate strategies and report on it to shareholders.

As indicated earlier Boards are not for everyone and joining a Board carries with it a weight of responsibility that needs to be fully appreciated remembering possible reputation risks not to mention the financial ones.

Master of Laws in Enterprise Governance

Bond's new Master of Laws in Enterprise Governance which is delivered as a combination of intensive two-day workshops and online modules. The program is available to both law and non-law graduates and has been designed for those who aspire to a governance role.

Learn more