A weather eye on director priorities Cover Story

The corporate governance regulation weather map may be cloudy with more rain expected, but former Austrade CEO Ralph Evans is determined to help Australian directors weather any storm through education, good policy and communication. He talks with John Arbouw, a weather eye on director priorities.

The corporate governance regulation weather map may be cloudy with more rain expected, but former Austrade CEO Ralph Evans is determined to help Australian directors weather any storm through education, good policy and communication. He talks with John Arbouw

Ralph Evans, new CEO of the AICD, is no fan of over-regulation, believing instead that the best way to keep shareholders happy is to improve the performance of the company.

He is absolutely right, but recent events and a Government in election mode will ensure that the emphasis on corporate Australia will be to toe the corporate governance line regardless of any potential to impact the bottom line.

With dodgy forex traders at the NAB, the head of Parmalat enriching himself at the expense of shareholders and ex-Fairfax aspirant Conrad Black caught out running a public company for his own personal benefit, the Government, the regulators, the Opposition and the media will have plenty of controversy fodder.

It is an inauspicious start to the new year and will make it hard for Evans and others to convince the Government, much less the Opposition, that corporate crime is not the same as street crime, requiring more cops and more laws.

"I think we need to get a better balance," says Evans. "There is a real danger that companies will become risk-averse and this will impact not only shareholders but also the Australian economy.

"I would caution the Government not to over-react because in trying to fix a perceived problem with new regulation there are always unintended consequences.

"The initiatives by the ASX Corporate Governance Council and its set of corporate governance recommendations were laudable. However, providing companies with a provision to opt out of a particular corporate governance recommendation, if they provide a reasonable explanation, is good theory but the practice in the real world and how the market and the media will react has still to be tested."

Evans brings a wealth of experience to his new role at the AICD.

Early on in his life he wanted to be an engineer and dutifully trudged off to university. However, having successfully completed a chemical engineering degree and working for CSR, he realised that calculating flux rates was never going to be a lifelong occupation.

It was when he went to Stanford to do an MBA that his future endeavours began to crystallise. In the US he met fellow Australians Colin Carter and George Pappas who were at Harvard Business School.

It wasn't only US university social life that drew the three Aussie expats together. They shared ideas and concepts at a time when business strategy concepts and management consultants were virtually unheard of.

Turning ideas and concepts into practical reality intrigued the young Evans and he joined the London office of McKinsey. At the time (the late 60s, early 70s) England was still very much a manufacturing and exporting nation.

"As a young consultant you had to grind your way through large amounts of data, analyse it and produce answers," says Evans. "My engineering background helped in the problem solving but the knowledge gained from my MBA provided the contextual answers."

Returning to Australia in the mid-70s was a bit like being the first man on Mars in that management consulting was virtually unheard of. But it was also an opportune time to become first movers in an undeveloped consultancy market.

Evans, along with former Boston Consulting Group (BCG) consultant George Pappas, Colin Carter and Maurie Koop, set up Pappas Carter Evans & Koop. While the consultancy was independent, it was started with the blessing of BCG which was more interested in Europe at the time.

"We were quite content to focus on business strategy and let larger firms such as McKinsey reorganise insurance companies. We started the business with a short amount of money and a modest client base.

"I am sure many AICD directors today can empathise with the fact that starting a new business is not only difficult but requires immense amounts of hard work."

As a domestically-based firm, Pappas Carter Evans & Koop reached the boundaries of its growth when Australian companies started becoming global and the firm did not have the reach or the international connections to follow its clients offshore.

Fortunately, the past relationship with BCG provided the opportunity to sell out to the larger consultancy and the three Pappas Carter Evans & Koop offices in Sydney, Melbourne and Auckland were merged into BCG.

"In 1991, I took the opportunity to do a management job and joined Austrade and I had a terrific run for five years," says Evans. "It was very demanding and very satisfying as well."

The Austrade experience will obviously serve Evans well in his new role. Learning to balance the expectations of government, industry and the media is no job for the faint-hearted.

"At the time I took the job, the Government had combined several agencies to form Austrade and had commissioned McKinsey to provide a strategy. Unfortunately, this was leaked to the media and when I took over I found myself in the middle of a political storm. It was an interesting experience to say the least.

"But we had a plan and I had a lot of confidence in the plan and in the people that were there to bring this to fruition.

"What also helped was the fact that the Austrade board functioned like a corporate board with recognised corporate players such as Paul Salteri from Transfield and David Asimus who was on the BHP board at the time.

"Bill Ferris was the chairman for a period and was eventually replaced with Bob Johnstone the former head of Toyota Australia from whom I learned a lot. Bob was a stern chairman but absolutely straight.

"I was also on the board of EFIC which, as you would expect, had people on it who had had banking and finance experience."

When he left Austrade, Evans had a portfolio of interests including his own investment activities and some consultancies. He was involved with a leading venture capitalist fund manager and was chairman of Medical Imaging for a period.

"Being involved with venture capitalist companies is always difficult because the information coming through to you is generally weak. Most of the financial information you receive is historical and it is tough for the people involved.

"One of the things that helped at the time was taking the Company Directors Course which I found very helpful.

"One of the reasons I took on this job because it is a little like Austrade and the content is interesting. Director education is an area that I am particularly interested in because there is a recognised need for directors to improve their boardroom skills.

"It seems to me that the AICD has a very strong position in terms of providing programs for both aspiring directors, current directors and for those who have been directors and chairmen for some time.

"If, through our educational and information resources, we can prevent the type of scandals that have occurred then we will well and truly have earned our keep.

"The AICD is in unique situation compared with similar organisations around the world which do not enjoy the type of support and membership that we have. I have just been reading Bob Garratt's latest book Thin on top: Why corporate governance matters and how to measure, manage and improve board performance (available from the AICD bookshop). He makes a very strong point that being a director is quite different to being a manager.

"The pressure on people to do this well is now greater than at any other time in history. This will require more learning and in a strategic sense what I want us to do is consolidate our position as the leading provider of director education and expand this to meet the emerging needs of directors."

Evans has also recognised the immense amount of untapped intellectual knowledge and experience of the AICD's membership base. He is keen to give the state councils and their presidents greater opportunity to become involved in communication and policy.

"I am also impressed by the calibre of the people who sit on the AICD's policy committees and our new board structure, will I hope, provide greater opportunity for policy to be developed and communicated to members, the government and the media.

"We will also look at ways to enhance the benefits of becoming a member of the AICD. We are a strong organisation and well represented on the boards of the top 200 companies. However, I want us to work toward ensuring that every board in Australia whether it is a small company, a government authority or a not-for-profit have directors on them who have completed our course and are members of the AICD."

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