Across the ASX 300, almost 80% of NEDs are confident in their Board’s ability to attract new directors, many of which expressed satisfaction with the recent recruitment of both domestic and international directors.
Despite this, the weight of free-text commentary to the contrary, pointed to a concern that attracting top people to listed Board roles is getting increasingly harder, particularly in highly regulated industries.
“The effort and risk are not recognised in director fees, and the liabilities that directors open themselves to are becoming increasingly problematic, especially as the cost of D&O increases.”
“I believe that we need to relook at the directors role. Previously it was seen as a retirement role, it’s now another career for people. Accordingly, we need to look at continuous education, time being spent on Board work, reward vs risk.”
The talent trap is particularly revealing in financial services, with only 62% of those NEDs confident their Board can find the talent it needs; compared to 83% across other sectors.
Close to one-third of all NEDs surveyed fear that the higher expectations being placed on directors could be a deterrent for future talent. Almost a quarter believe that the increased risk for directors, relative to reward, would also put top executives off joining a listed Board.
“The community is being guided to more accountability for directors on issues for which they often have little visibility. I am concerned this will discourage future directors from joining ASX-listed companies.”
“I am concerned that the expectation gap is widening and the consequent risks (penalties) of directorship are far greater with the outcome being that many thoughtful individuals are actually deciding to retire from NED roles as their rotation comes up. This is of great concern as the orderliness and balance of good rotation, ensuring enough memory and experience, will be tipped to a newer, less experienced cohort. This will not be in the best interests of the long term.”
“I fear senior business executives coming to retirement will not want NED roles so we will lose their experience and input. The risks to reputation are becoming too onerous.”
“Directors assess the risk/reward/effort. As more and more time is required, and there is more and more risk to being a director, if reward does not increase it will be very difficult to attract and retain directors.”
A number of NEDs commented on the relative attractiveness of private company Boards.
“I expect we will see more companies taking more control of their affairs by delisting."
"I have found unlisted Boards much more fun”
In the past, a seat at the Board table of one of Australia's top companies was the equivalent of an Olympic gold medal for a high performing executive. There is some evidence that this may now be shifting, with directorships on the Board of innovative private companies emerging as a more attractive prize for many directors.
"If Australia wants a future as an innovative and successful country, this can only be achieved by a dynamic and successful private sector, enabled by government. This requires our top ASX listed companies to be able to attract the best and brightest directors to their Boards to steer them to success. Indeed, it is in the public interest that this occur."
Partner, PwC Australia
Tel: 612 8266 3034
Senior Executive Advisor, Risk Consulting, PwC Australia
Tel: +61 421 056 456
Partner, People and Organisation, PwC Australia
Tel: +61 (2) 8266 2420
Partner, Strategy& Australia
Tel: +61 (2) 8266 1299