Agenda

A round-up of recent governance news.

Governing a global company

The current era of broader and faster globalisation presents new questions and challenges for corporate governance and oversight. But what are the implications in terms of boardroom composition, practices, and the necessary skill sets for directors? What constitutes an effective global board?

With a rise in international corporate business activity in nearly every industry and the fact that 55 per cent of global gross domestic product growth will come from emerging markets by 2019, according to the International Monetary Fund, the US National Association of Corporate Directors has released a report that considers the challenges of governing a global organisation and the unique issues facing the current and future global board.

The report sets out to answer a core question: Does a global company need a global board? The answer, based on the feedback and insights of directors interviewed for the report, is
an unequivocal “yes”.  However, the report found that such an answer only served to raise further questions such as: what is a global company, and how should a global board be defined?

The report found that there is no firm science separating global firms from multinationals, nor is size alone a determining factor. However, it did identify that truly “global” companies usually have a physical presence in many countries, offer a full range of services across operating regions, and have a majority of employees and revenue outside the country of the company headquarters.

The organisational structure is typically a matrix, with country-level lines of business, products and brands or manufacturing centres, and functional coordination at a global or regional level. In addition, the organisational structure may include joint ventures and partnerships with other local, regional, or global organisations, and composite governance structures, such as subsidiary boards.

In addition, the report found that certain non-measureable characteristics truly set global companies apart:

• Culture and mindset: Directors said the distinguishing characteristic of global companies is that they work with the assumption that they are operating in the world. Beyond simply selling a product or service in a foreign country, they seek to gain a deep understanding about the business environment, including customers, suppliers, regulators, and other stakeholders within the unique context of each country or region of operations.
• Global talent: Virtually unanimously, the directors interviewed also noted that the transformation to a global company is marked by a different-in-kind approach to talent strategy. At the most senior level, global companies do not hesitate to place executives from outside the home country in key positions, as opposed to having an executive team dominated by expatriates, and are comfortable with top leaders residing in various countries, rather than being centralised. This approach helps break the headquarters-centric view.
• Complexity: The strongest common theme to emerge with global board directors was the notion that the governance of the global company is essentially an exercise in the oversight of complexity. Interviewees noted that as the oversight role stretches beyond borders, the director’s role becomes increasingly complicated, incorporating considerations of social and cultural issues, variances in governance frameworks, and the necessity for director engagement on a broader range of key issues.

Directors noted that boardroom conversations about risk and strategy are often deeper and more intellectually challenging in the global company context and rules should be applied in businesses and operating environments as companies strive to “think globally and act locally”.

Queen’s Birthday Honours List

Congratulations to the following members who appeared on the Queen’s Birthday Honours list this year.

• Australian Fire Service Medal (AFSM)
• Alex Scott AFSM MAICD
• Australian Police Medal (APM)
• Stephen Leane APM GAICD
• Bar to the Conspicuous Service Cross (CSC and Bar)
• Georgeina Whelan AM CSC and Bar MAICD
• Companion (AC) in the General Division
• Anthony Beddison AC FAICD
• Kerry Sanderson AC FAICD
• Glenn Stevens AC MAICD
• Conspicuous Service Cross (CSC)
• Captain Justin Jones CSC GAICD
• Susan Stothart CSC GAICD
• Distinguished Service Cross (DSC)
• David Mulhall DSC AM CSC GAICD
• Medal (OAM) in the General Division
• Tania Chambers OAM FAICD
• Professor Stewart Gill OAM MAICD
• Peter Laurence OAM GAICD
• Theresa Moltoni OAM MAICD
• Sean O’Toole OAM FAICD
• Geoffrey Rodgers OAM FAICD
• Debra Schaffer OAM MAICD
• John Wauchope OAM FAICD
• Robert Wilson OAM MAICD
• Member (AM) in the General Division
• Michael Byrne AM GAICD
• Ronald Cohen AM FAICD
• Malcolm Crompton AM FAICD
• Debbie Dadon AM MAICD
• Hon Cheryl Edwardes AM GAICD
• Ian Fletcher AM MAICD
• Kenneth Harrison AM FAICD
• Dr Geoffrey Hirst AM GAICD
• Member (AM) in the General Division (continued)
• Robert Logie-Smith AM FAICD
• Michael Pratt AM FAICD
• Anne Robinson AM FAICD
• Naseema Sparks AM FAICD
• John Stanhope AM FAICD
• Dr Vivienne Thom AM FAICD
• Christopher Wharton AM MAICD
• Kristine Whorlow AM FAICD
• Member (AM) in the Military Division
• Christopher Field AM CSC GAICD
• RADM Mark Purcell AM RAN GAICD
• AVM Catherine Roberts AM CSC MAICD
• Air Commodore Philip Tammen AM MAICD
• Officer (AO) in the Military Division
• Simone Wilkie AO AAICD
• Officer (AO) in the General Division
• Alan Birchmore AO FAICD
• Peter Duncan AO FAICD
• Dr Vincent Fitzgerald AO FAICD
• Professor Nalini Joshi AO MAICD
• Julian Knights AO MAICD
• Warren Mundine AO DUniv MAICD
• The Hon Dr Kay Patterson AO GAICD
• Commissioner Andrew Scipione AO APM MAICD
• Trevor St Baker AO MAICD
• Marelle Thornton AO FAICD
• Public Service Medal (PSM)
• Robyn Foster PSM MAICD
• Elizabeth Kelly PSM MAICD
• Paul Miller PSM GAICD

Note: While much care is taken to include all members honoured, we apologise in advance to anyone who may have been overlooked.

Q&A - The big question

Question

We have a small private company owned by two couples. These four shareholders comprise the board. We would like to appoint an independent director. Our company accountant has been instrumental in helping resolve past issues and providing the company with excellent advice. We think that he would be a great asset as an independent director. He is not an employee of the company, but is a consultant, i.e. we send him our company tax etc. Is it possible to have him as an independent director of the board and as the company accountant?

Answer

Your accountant sounds like a very suitable person to have as an independent director, but if he joins your board he would have a conflict of interest in remaining as your accountant.

No doubt he could suggest a person or firm to take on that role. As a director he will be well placed to see that you get good accounting support, but the accountant should be independent of the board.