Directorships a risky business in the post-Hayne world

Directorships a risky business opportunity in the post-Hayne world


Ms O’Reilly is the former co-head of unlisted infrastructure at Colonial First State Global Asset Management. She says concerns about personal liability have been thrust to the fore for many directors after boards have been exposed for failing to sufficiently challenge executives.

“Some of these more-experienced directors are saying ‘Well I’ve survived and my reputation is intact and I’m proud of my career, this is a nice time to go out and why jeopardise that’, and that is a genuine and valid concern”.

She resigned as a director of Energy Australia in August before taking up the directorship at Stockland. She said her workload would prevent her from taking on more directorships. She also said she had declined invitations to join boards because of concerns.

“You do your due diligence and you may find there are diary clashes or there is no passion there but after you clear that hurdle you may find you don’t like the chairman or the CEO or the feel of the company. There are a zillion reasons and it’s really appropriate to do due diligence,” Ms O’Reilly said.

Shrinking pool

Former Western Mining CEO and Reserve Bank director Hugh Morgan said responsibilities of directors had continued to climb and left them exposed to considerable legal and reputational risk through no fault of their own.

“You may have happened to have done your job but something goes wrong elsewhere and you’re tarred with the brush,” Mr Morgan said. “The burdens have done nothing but increase.”

Mr Morgan said there was a significant difference between the risks presented by taking a board seat on a public company or another entity like the Reserve Bank of Australia.

“When I retired from WMC in 2003, I made a definitive decision to never again go on a publicly listed board because of the liabilities, which I feel I understood better than most directors at the time,” Mr Morgan said.

KPMG Victoria chairman Carmel Mortell questioned whether the enhanced responsibilities for directors will mean directors taking on fewer roles, leading to fewer experienced directors being available for the roles.

“People used to have seven or eight directorships and today it’s likely to be half that at the most. You are seeing directors taking fewer roles because the responsibilities are growing and they are becoming more time consuming,” Ms Mortell said.

“Older directors pull out because of the risk-reward equation but you still need that pipeline of good-quality directors coming through.”

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