Diversity, proxy advisers and the Canberra vision vacuum: What’s the view from inside WA boardrooms?

A roundtable of WA directors believes boards should come clean on sudden departures that leave investors in the dark and potentially buying and selling shares in an uninformed market. The issue of abrupt, unexplained board exits is back in focus after the sudden exits of three Mineral Resources directors last month inevitably triggered speculation about the battling mining and services company’s public commitment to better corporate governance. But shareholders may never know what was behind the departures because there is no legal obligation for them to reveal the reasons behind their resignations, and Mineral Resources is staying quiet. Veteran director Jenny Seabrook told The West Australian at a roundtable in Perth hosted by the Australian Institute of Company Directors that the ASX should follow the lead of the Hong Kong Stock Exchange, which requires member companies and their directors to “clearly” explain departures. “I can’t see why we don’t have that in Australia. there’s a precedent, follow the precedent,” Ms Seabrook, the chair of Deterra Royalties and the Buckeridge family’s BGC, said. “There are a lot of occasions where directors resign and you can read the tea leaves about why they’ve resigned.” However, the reasons remained secret because of “gentlemen’s” pacts by boards and non-disclosure agreements. “But it would be good for people to be honest and upfront about the reasons,” Mr Seabrook said. Sally Langer agreed. “Shareholders want to know and should know,” the Northern Star Resources and Gold Corporation director said. “It can be completely a valid reason”, she said, but sometimes it was the result of boardroom tensions that remain undisclosed, despite shareholder pressure. Prominent resources company director Rick Crabb, however, issued a reminder that corporate law does not always prioritise shareholders. “It’s tricky ground. Under Corporations Law, the duty of the director is owed to the company, not to the shareholders,” Mr Crabb said. Likewise, former Woodside Energy director Frank Cooper, whose current board roles include South32 and Wright Prospecting, said continuous disclosure obligations “fall on the company”. “The onus is on the company to determine whether that director resigning would impact the share price such that they would have to disclose,” Mr Cooper said. The roundtable aired concerns that are mirrored in boardrooms across Australia, with WA’s directors increasingly frustrated with what they see as a lack of long-term political vision, weak policy settings and growing government regulation. Resources companies trying to develop projects are the most vocal, citing duplicated national and State approval regimes. “To get an exploration projects to the development stage and actually making money, the stars and the moon have to all line up - commodity prices have to be right, debt and equity and equity markets have to be there for you, native title, heritage issues, clearance from the mining department and environmental authorities,” Mr Crabb said. “We continue to get bogged down with dealing with all these agencies, and the economics (of the project) can change quickly. “It’s the layering of regulation ... it’s not a new thing, but it’s getting worse.” Russell Clark, a mining executive and director for 40 years, reckons the time delays are potentially fatal. “As a junior you’re living hand to mouth, so if you expected an approval in six months and it takes 18 months. you can go broke.” Mr Cooper says the growing load of regulation is perplexing. “Kerry Packer appeared before a royal commission and said he had no problem with new laws as long as they repeal for every new one they bring in. “The way it gets portrayed publicly is that the private sector wants no regulation, they just want free rein to do whatever they want. “Every company I know welcomes a focus on doing the right thing ... but it needs to be an effective set of regulations are not duplicated.” The AICD wants the re-elected Albanese Government to pause new regulation for 12 months, pending a review of “where we’re up to”, arguing business concerns about over-regulation is weighing on investment. “It does feel like Australia has lost sight of the bigger picture,” AICD chief executive Mark Rigotti said. “Regulation is a dry subject, but when you think about its impact on living standards and productivity, it’s not at emergency proportions, but it’s not far off.” Diversity rollback? Big US companies fell over themselves to rein in or scrap altogether their diversity, equity and inclusion (DEI) policies to abide with one of President Donald Trump’s first executive orders. However, the directors say their companies have no intention to follow suit by watering down their own practices. “It won’t happen,” said Alex Atkins, a comparatively new WA director who is on the boards of Perenti and mining services group Aquirian. “Everyone I speak to is on board; we’re not rolling back, financially, culturally, safety-wise, it’s (DEI) important for optimal decision making,” Ms Atkins said, adding that the next challenge is to get more women in senior executive and chair roles. However, there has been relief among directors that the ASX has pushed back contentious proposals for boards to disclose new diversity characteristics beyond gender, including sexuality, Indigenous heritage and disabilities. “I’m not sure that the need to state my religious status or what my sexual preference is adds any value,” Mr Clark said. Mr Cooper said the real focus of DEI policies should be on inclusion, because that was the ultimate catch-all. “The ‘D’ and ‘E’ are the means to get you to the ‘I’. A culture of inclusion gets you where you need to be; you’ll have people speaking up, you’ll have bona fide equal opportunity.” Proxy advisers There was not a love in the room for proxy advisers, with the directors hitting out at the perceived tick-a-box approach of some advisers and questioning their knowledge of the companies they cover, a lack of consultation and a failure to address errors in their reports. Mr Crabb said pressure from proxy advisers had no doubt improved remuneration reporting, making it more understandable for shareholders. “They’ve made companies more accountable but I’m just not sure they’re always focusing on the right things,” Mr Langer said. Ms Seabrook said that by blindly following the voting recommendations of US proxy advisers, some Australian investment funds were “absolving themselves of decision-making”. For Mr Clark, their key issue is whether the proxy advisers are always familiar with his companies. “I want to be talking to people that have some concept of the business I’m running. When you have to explain what a strip ratio is, there’s a problem. Where’s the vision? A particularly persistent concern at board level is the lack of long-term policy planning by government that is depriving business of the certainty it craves, often because of a shortage of bold vision. Ms Seabrook says too often political decision-making is driven by the media news cycle and sound bites. “We need long-term thinking for Australia to really advance, for our companies to progress, and we need our directors and investor to think longer term, not short term,” Ms Seabrook said. A recent AICD poll identified addressing Australia’s housing crisis as a key priority for the next Federal government, along with productivity growth, energy policy, skills shortages and taxation reforms. “Housing affordability is a big issue our generation has created, and we need our politicians into that,” Ms Seabrook said. Ms Langer said Australia’s short election cycles resulted in questionable, sometimes populist policy decisions that hurt business, “and our fiscal management worries me”. What’s independence? There were varying views on what was the right maximum tenure for directors, though Mr Cooper reckoned that “12 years as really being the outer limit”. The participants reckoned that a director should not be pushed out if they were still contributing, but cited the need for boards to be regularly refreshed with new and younger talent and different skill sets. “I’ve seen poor director behaviour when they’re hanging on too tight to that directorship,” Ms Langer said. And what do boards believe the new directors need to bring? “You need to have a strong moral compass, so you can call things out or walk away,” Mr Clark said. Mr Cooper reckons directors need “a bona fide sense of curiosity, where there is a genuine sense of interest in learning from others”. “That’s not as common as you may think. If you’ve got a board who agree all the time, you have too many people or the wrong people.”

Diversity, proxy advisers and the Canberra vision vacuum: What’s the view from inside WA boardrooms?

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