Lessons from ABC's recent board crisis

The recent high profile exit of ABC's chair and MD leave clear lessons for boards and directors in times of crises.

The recent high-profile exits of Australian Broadcasting Corporation (ABC) managing director Michelle Guthrie and chair Justin Milne FAICD underscore the traps for the unwary in governance, particularly in a highly charged public environment.

Wendy McCarthy AO FAICDLife, a former deputy chair of the ABC, says all boards are risky in their own way and would-be directors have to weigh up those risks before agreeing to join. She doesn’t think government boards are more or less risky than public or NFP boards.

“The capricious issues facing directors of government boards are control of funds, changes in ideology around the purpose of the board, and appointment of directors,” she says. “The role of the chair is pivotal in determining the culture of the board and establishing the boundaries for non-executive directors. To be effective, this needs to be a consultative process.”

Chair v CEO

The relationship between chair and CEO is crucial in every board, McCarthy says. “When trust breaks down, no-one wins and then the strength of the other directors is called upon to resolve matters.”

David Nathan FAICD, a chair and non-executive director, says most organisations take steps to test how members are performing individually and collectively through regular performance reviews, and discuss CEO performance. “Few explicitly test the effectiveness of the CEO and chair’s relationship, and even fewer discuss the chair’s performance.”

McCarthy suggests new directors query before committing:

1. Can I be part of a team working with the chair?
2. If I discover matters are not as they seemed when I accepted the role, will I be confident in the integrity and commitment of my board colleagues to face up to these challenges?
3. Do I have a shared understanding of the roles/responsibilities of the chair, CEO and board?

On government boards there needs to be a clear position on the voice of the board publicly and to the bureaucracy and minister. McCarthy believes that currently “there is less respect for the authority of boards and an assumption that we (government) appointed them, so they must do as we ask or, worse, direct. A useful guide is to imagine you’re answering questions in the Senate or exposed on the front page of a paper. Are you up for it?”.