Episode 9: Bruce Cowley - Advice for your first board role, improvements for the Corporations Act, and the importance of stakeholder engagement
Bruce Cowley FAICD is the Chair of the Queensland Trust for Nature and a board member with the Australian Retirement Trust. He’s also one of the speakers for this year’s AICD Essential Director Update (EDU). We talk about advice before taking your first board role, potential improvements to Australia’s Corporations Act, and the importance of stakeholder engagement. Plus, we discuss some of the topics Bruce will address at the 2023 EDU, including: greenwashing, resilience, and directors’ “best interests” duty.
Transcript
Welcome to boardroom conversations, a podcast from the Australian Institute of Company Directors. My name is Bennett Mason, thanks so much for joining us. And each episode will have candid conversations with some of Australia's leading directors delving into their background journey to the boardroom and some of the challenges they face to with the way. Our guest this time is chair and company director Bruce Cowley. Bruce was a lawyer with Minter Ellison for nearly four decades and spent six years as their global chair. Since then, he's taken on a number of board roles. Bruce is the chair of the Queensland Trust for Nature, plus a board member with the Sunshine Coast Hospital and Health Service, as well as superfund the Australian Retirement Trust. He was previously the chair of non-for-profit CPL and the Children's Hospital Foundation in Queensland. Bruce is also the author of a new book from the AICD: Directorship in Context A Practical Guide to the Governance Landscape. And that's not all. Bruce is also one of the speakers delivering this year's Essential Director's Update for the AICD. And we'll have links to all of that in the show notes. Bruce, thanks so much for joining us on boardroom conversations. Let's get to our first questions. What was your very first board role and how did it come about?
BRUCE COWLEY
My first board role was on the board of Minter Ellison, which conducted a board pretty much like a public company. Elected board members, had a chair who was actually elected by the partners as opposed to the members of the board, but otherwise ran on a similar basis. So, we had a CEO reporting to us, monthly board meetings and so on. My first board meeting though, I recall, was in Sydney. I was so well prepared for it. I got on the plane, I read all my materials. I was feeling very, very confident. We got to the beginning of the meeting, and our CEO was called out to take a phone call. And he came back looking very grim faced to tell us that 12 partners had just handed in their notice and were going to another firm. For me, I was feeling: “This is terrible, I’m about to ruin the firm in my very first board meeting!” But there were some older and wiser heads to provide that. I learned a lot about resilience and the importance of taking decisions carefully, taking your time and thinking things through. It was a great lesson for me.
BENNETT MASON
Bruce, you had a long and successful legal career before you focussed full time on being a company director. How do you think your time in the law prepared you for the boardroom?
BRUCE COWLEY
I think I was fortunate to be a corporate lawyer and so one of the things I did was give advice on governance matters to clients. And I did spend a lot of time over the years in boardrooms with directors giving them governance advice. But I spent time with some very, very good company directors and heard how they operated, the way they made decisions, the way they thought through difficult, thorny issues. And I found that really, really helpful. And I think I've learnt a lot from that experience.
BENNETT MASON
Now we mentioned previously that you have the Chair of Minter Ellison, and you talked a little bit about how that board functioned at the firm. Could you talk a bit more about the governance structure of a law firm? And what is the role of the chair at a firm like Minters?
BRUCE COWLEY
I think one of the main differences, and I can really only speaker for Minters, but the main difference between the chair of a law firm and say, chair of a large company, is that, well, first thing is that the chair of the law firm is elected directly by the partners. As opposed to the boards. The boards, kind of get lumped with whoever the partners choose as the chair. But that aside, the role is very similar, I think, in many ways to being the chair of a large corporation. In the sense that you have to create that relationship with the CEO. You have to take responsibility for the setting of appropriate agendas, take leadership in strategic matters, and generally ensure that boards function well, that everyone's performing, and indeed everyone gets an opportunity to have their say. I think the one difference is in terms of stakeholder management, because in the law firm, in our case we had over 200 partners and they were all owners of the business and they all like to have and should have their say. And that's a very important aspect. And I think it's one, a role that is important for the chair to play, in the sense that the chair needs to liaise with, spend time talking to the partners, hear their views, hear their concerns, hear ideas that they have because you've got a group of very intelligent people who have great ideas, lots of innovative thinking, and you shouldn't disregard that.
You actually need to listen to it. And I think that's an important aspect of the role of chair in the law firm. I think it's different in a large company.
BENNETT MASON
After leaving the firm, you could have very happily retired, worked on your golf game, bought a boat, whatever you like. But instead, you decided to pursue a board career. What made you do that and what do you find so rewarding about board work?
BRUCE COWLEY
I love that opportunity to work with companies of all different sizes and just see their progression across time. I think perhaps for me, one of the most rewarding things is to work on the development of strategy and then oversee the implementation of the strategy, hopefully successfully. And yeah, but you always have to tinker and see where things are going off the rails and adjust. But I think, for me, that’s really a particularly fulfilling part of being a board member. But also, I like the stakeholder engagement because it's an important part of being a board member these days, engaging with and understand stakeholders and their interests.
BENNETT MASON
Now you've served on boards at many different types of organisations. There's ASX-listed companies, massive super funds and also smaller NFPs. What are some of the factors that you consider when you're deciding whether to join a new board or not?
BRUCE COWLEY
I think you always need to do appropriate due diligence and find out what are the major issues confronting the business, to understand what the drivers of its success are. And in terms of understanding the challenges which it faces, I'm not necessarily going to be put off by those challenges, but I need to know what they are. Because even if they’re financial challenges, I'm interested in how they can be resolved. So for me, it's getting a lot of information upfront and understanding the nature of the business. But I think overall, perhaps the most important thing for me is to ensure that I'm joining a board where there are a group of people that I know I can work with, and we’ll get along. We won’t always agree, we’re going to challenge one another, and I like that aspect very much. But it's got to be a group of people who I think have the capability and capacity to lead and with whom I can fit in.
BENNETT MASON
Some of the people listening to this might be in their very first board role, or they might not have even become a company director yet. What's your advice for them before they before they take on their first position in a boardroom?
BRUCE COWLEY
It's important, I think, that they get to know the business of the board that they’ve been asked to join. Because we all need to have a thorough understanding of a company or entity before we join. Because we want to know what we're walking into, as I say, whether it's challenges, what kinds of things are important. If it's a not for profit, and often many new board members, their first board is a not for profit, understand who their stakeholders are, who they trying to look after. Are they doing that effectively? If not, why not? How can those challenges be addressed? Get to know probably the chair first of all and feel that you're comfortable with the chair and ideally with other board members. Meet the CEO. Don't be afraid to ask questions. Ensure that you’re given a proper induction pack, not just the pack, but have the opportunity to meet with the chair and meet with the CEO and talk through issues. Get them to give you a verbal briefing of things that are on their agenda. Read the recent minutes of meetings and the recent board packs. So, you get on top of all those kinds of things.
BENNETT MASON
You mentioned NFPs a moment ago, you've served on a number of NFP boards. Is there something you find particularly rewarding about that sector?
BRUCE COWLEY
I love sitting on NFP boards and I think one of the reasons is you can add so much value in most cases on the board. If you come with a bit of experience, either having served on the board or having worked in commerce or a professional services firm, you know things and you have experiences which aren't necessarily known to other board members or to the executives. And to me, I just think that ability to help that organisation move forward using those skills and that value is perhaps one of the great through thrills of being involved.
BENNETT MASON
I wanted to talk about a few governance issues now but linked to that I also wanted to touch on something In your career. You helped to craft the Companies Act for Fiji. Could you tell us how that came about and what was the process like? I mean, was it challenging to create a set of directors’ duties from scratch?
BRUCE COWLEY
Yeah, it was fun. I have to admit. As a corporate lawyer, I think there would be few greater enjoyable things than writing a companies act for a country. The first-year government had decided that it was time to review the Companies Act, and that went out to tender. And I was successful. They felt that the resources they had within-house in the parliamentary council were probably fully taxed at the time, and they thought it best might be to go outside with someone who had some experience in corporate law. So that was great. I really appreciated that opportunity. One of the challenges in writing a companies act in a jurisdiction such as Fiji is that the first thing you need to understand is the sophistication of the market that you're writing to. So, the Fiji Companies Act at the time was based on the 1961 Australian Companies Act. This is 2016 and was still based on the 1961 Australian Companies Act. And it was a truncated version of those acts. So, it was quite a simplistic document. Attempts had been made to kind of fill holes with various other pieces of legislation, which then became a bit of a patchwork. And it was pulling all these things together to meet a market which was not unsophisticated. I mean, you mightn’t have the same level of sophistication as the Australian market, but it was certainly at a level where we needed to upgrade what was in the legislation. I undertook an extensive programme of consultation and I think the first time I went to Fiji to consult there were I think 28 different bodies who came to consult with me over the case of a week. It's the Law Institute, the Accountants Institute, various listed companies, the Stock Exchange, Capital Markets Authority, Reserve Bank, heaps and heaps of organisations came to talk to us. And they all had different angles. And I learnt so much through that experience. And with that pool of knowledge, I was then able to go away and create a working model for the kinds of provisions which would go in the legislation. And I brought that back for a second round of consultation. And with the benefit of that knowledge, went off and drafted the new law. I think in terms of the directors’ duties, it was an interesting experience because Fiji, like Australia, has both common law duties and statutory duties. Common law duties if you breach them, of course, you don't go to jail, but there can be some financial remedies. And of course, the statutory duties, you can be punished under the law. So, the point for me was to try and make that arrangement because there were basically no statutory duties in the legislation prior to the 2016 Act. And for me, it was trying to bring together the common law duties and the statutory duties in a meaningful way. And the best model we could find for that, because we looked across most British jurisdictions, jurisdictions whose legislation had derived from the original British laws. And in the end, I think the 2006 Companies Act in the UK was a great model because it aligned in a step-by-step way the statutory duties with the common law duties. And we booked those duties specifically for Fiji but using the thinking which underpinned the UK model.
BENNETT MASON
And what you ended up putting forward, was it well received?
BRUCE COWLEY
One of the things that happened during consultation was, I asked a large number of the people who came to talk to us about what they thought about having some statutory company directors’ duties. And without exception everyone said we need some statutory duties. I think there was a consciousness that there was some bad behaviour going on in companies in Fiji. And everyone we spoke to and we’re talking about some people at the top end of the Fiji market, they all said this is something which is really important, we've got to drive better behaviour in the community. So absolute support for it.
BENNETT MASON
Let's pretend for a moment that you had a similar opportunity here in Australia, to create Australia's Corporations Act from scratch. What are some of the areas you'd look at? What are some of the some of the concepts you'd want to introduce?
BRUCE COWLEY
First of all, I would say completely rewrite Chapter seven, which is the financial product chapter. It is so complex, and a lot has been said and written about that. So that would be the place to start. In terms of other things, I'm not too critical of our legislation. It’s long and in certain aspects complex but if you take some of the key things which are important to the people in commerce. So for example, directors’ duties, they've been with us quite a long time now. They do their job. And I think most importantly, we have an extensive body of jurisprudence which gives greater certainty about how those directors’ duties apply. So, I don't think I'd do a lot with that. Takeover law, again, quite complex. But again, it's well understood in the market. There's a lot of jurisprudence. We have a Takeovers Panel which oversees how it operates. Again, I don't think I’d do too much with that. To me, probably trying to find ways to simplify it and shorten it would be the best thing. But in terms of areas, apart from chapter the seven that I’d go to town on, I don't think there are too many.
BENNETT MASON
You talked a lot about simplification then. Do you think the legislative and regulatory burden is perhaps too much on directors now? Is there too much complexity for boards?
BRUCE COWLEY
This is a really difficult question. Various governments from time to time, because you do hear a lot of complaints from the corporate community about the level of red tape. And they have inquiries and investigations and ask businesses to give them some examples of red tape they can remove. Ultimately, there's very little which comes out of that process. And I can't explain why, but that generally seems to be the case. The governments have been a bit limited in what they can do. But I’ll say this, I think the environment for directors is incredibly complex these days. So, we have things like the modern slavery reporting, we've got the anti-money laundering and counter-terrorism reporting, breach of which leads to the imposition of potentially massive penalties. We have the Women's Gender Equity Agency reporting, environmental reporting, privacy laws we've got data breach laws. No one would say any of those things are not important, but together they create a massive body of, and I don't want to use the word “red tape” because it diminishes the importance of those laws, but creates a massive body of regulation which corporations, larger corporation in particular carry the greater burden, have to comply with. And I don't know how we reform those things because they're all important. They're all things that we need to do, but gee, they create a great burden on corporations. And I'm not sure the Government quite appreciates sometimes the costs of compliance with those laws. And maybe all I could offer is that when the Government is seeking to introduce some of these laws which do create this corporate, significant corporate burden, they do a longer period of consultation with the corporate community to see how that burden can be reduced. Or at least brought in in stages, so Burden isn't so great that.
BENNETT MASON
Regulatory burden is certainly one of the issues for boards to grapple with. We've also seen a lot of new issues emerge over time. What are some of the key developments you've seen in your time as a lawyer and a director? And what are some of the issues going forward that directors need to be tracking?
BRUCE COWLEY
There've been huge changes, in the last 20 years particularly. And things like the HIH Royal Commission, the Hayne Royal Commission, some of the other Royal Commissions which we've seen in recent times, have all emphasised various parts of corporate leadership which are important. And I speak of things like stakeholder relationships, culture, ethics and so on, how to be a good corporate citizen, social licence to operate. They’re all sorts of concepts which emerged over the past 20 years. And I think, while boards originally pushed back on a lot of those notions, much less so now. And I think particularly since Hayne, for example, around stakeholder relationships, it's become obvious. And Hayne made the point that, in the long term, the interests of shareholders on the one hand and stakeholders on the other do ultimately converge in almost all cases. So, if you take a long-term view, the interests of stakeholders are really, really important.
BENNETT MASON
Sticking on that issue of stakeholders, as you said, it's now fairly broadly accepted that companies have to consider the interests of a range of stakeholders. That's often very challenging for boards. The group can include, that group of stakeholders can include shareholders, but also staff, customers, suppliers, the broader community. And those different groups are often not homogenous. And often those groups all have different interests that that might not align. They might contrast or clash with each other. Do you have any advice for boards on their relations with stakeholders?
BRUCE COWLEY
I think the boards should engage with them, hear all their views, listen to the competing propositions that many of them may bring forward, understand what they think. And then make the decision in the best interests of the company. Because they won't agree with all of them, all the time. And I think a classic example of this is the case of large grocery chains. And we've seen in their case that on the one hand, they have customers. They need to build customer loyalty. And in the grocery industry, the way you build customer loyalty is to have the lowest prices, on the one hand. But on the other hand, they have a lot of longstanding loyal suppliers who they had put pressure on to reduce their prices. And in some cases, that's been quite extreme pressure to reduce their prices. I'm going back a few years now, so I wouldn't say that's necessarily still absolutely the case. But you can see in that environment, Woolworths and Coles and other grocery suppliers were making the choice to give preference to their customers, one group of stakeholders, over suppliers, their other group. And that's the kind of decisions you have to make. I’m not saying whether that's right or wrong, I'm simply saying they’ve considered those issues and they’ve made that choice between which stakeholder group is better for the company in the long run.
BENNETT MASON
Stakeholder engagement is one of the issues you talk about in your new book, Directorship in Context, which we mentioned earlier. That's not the only book you've written about corporate governance, there's a few other titles as well. What is it that you like about writing these books?
BRUCE COWLEY
For me, I think I like to do research. I like to understand, get to the bottom of issues and in particular issues, because it's a passion of mine, around corporate governance. And then just thinking about that in a particular way, it's helpful for me and hopefully it'll be helpful for others, if I can put my thinking down about how I approach making decisions. And I think it’s a useful tool to look at how you make good decisions as a company director.
BENNETT MASON
Can you give us a bit of a spiel for the book? Why is it such an important resource for directors?
BRUCE COWLEY
Well, it’s nice of you to say it's an important resource, so thank you. I think for me, it's about how you approach a problem. The book isn't about telling you how to make right decisions and wrong decisions. It's about how to consider each issue that comes before you and whether it's got stakeholder implications or ethical implications or cultural issues, about how you make that decision. Gathering as much information as you can. Having as greater diversity around the boards as you can. So, you can think of the issue from different angles and making the best decision.
BENNETT MASON
One of the areas you touch on in the book is the board's role in setting culture. A lot of boards talk the talk here, but that might not walk the walk. Do you have any advice on how directors can practically set culture??
BRUCE COWLEY
It’s hard because it’s not something you can picture. You can't get numerical information, you can't get, you know, financial information which helps you solve this problem. And so, getting the information made is really challenging. I think the best piece I’ve read on this was the in the Hayne Royal commission report, in the final report, the commissioner reported on a discussion he had with Shayne Elliott, CEO of ANZ Bank. Where he talked about the ways that the bank tried so hard to understand culture in the organisation, about the nuancing of surveys that went out to staff. And the nuance of it in ways where you asked different staff, different questions. Setting what they called the “tone from the top” and the “tone from the middle. “And so, I certainly commend that to the directors to have a read. Because he's given a lot of thought to it. And a lot of work's been done in terms within the ANZ Bank about how they can try and identify culture and cultural trends. One of the experiences that I've had on the board of a healthcare organisation and at every meeting, or before every meeting, we go and meet with staff in particular different parts of the organisation. And hear from them. We have lunch with them. It's usually 20 or 30 people and our board. And it is amazing how much information you pick up just by having an informal conversation with staff in a kind of informal setting. We were all standing around eating a sandwich together. Because they just tell you things. You learn so much, and if you've got a board of all totally different people, you come back and we talk about it at the board table, about the things that we've learnt and how we might be able to use that information for the benefit of the organisation. So, I can't emphasise enough that need for boards to get out and talk, to talk to people in the organisation and talk to stakeholders as well.
BENNETT MASON
So, site visits and those informal interactions are still really important?
BRUCE COWLEY
Absolutely.
BENNETT MASON
Now there's another chapter of the book called “Could we, or should we? The ethical overlay of decision making.” And you got some great case studies in that chapter, but could you run through maybe a few of those and tell us what directors can learn from those stories?
BRUCE COWLEY
I think this is, again, a challenge for directors in terms of making ethical decisions. We all get challenged from time to time about decisions we've made. And I do think particularly in these days where there's a very active social media network and so on. And so, if you make a decision which can be questionable, or you can have some fairly strong views out in the community about, and you’re accused of being unethical, you really need to sort through the issue with such care. And I think one of the things I've learned over the years is that ethics isn't a black and white concept. Ethics is something that I think different organisations can come to different conclusions on the same question, depending on what your principles and your values are, depending on what your commercial and competitive environment is. And there are a whole lot of issues that create a different environment for the decision making for each board. I think the best way, and I've mentioned this before, is about how the directors can accumulate as much information as they can. And that might take time. Don't get rushed into making decisions. And, you know, sometimes we find executives want boards to make decisions quickly. And unless it's absolutely imperative, I wouldn't encourage that. I think take your time, come back, ask for more information, make the decision when you're happy. But have as much information as you can. Hear from the various stakeholders who might have concerns about what you're doing. Ensure that you have that diversity around the board table. It's not just everyone engaging a bit of group thinks saying: “Well, that sounds fine.” And different people will have different perspectives. Make sure you hold those discussions in a comprehensive way and then come to a decision. Because if you’re criticised later and you've done that, it's much easier to defend the decision against special interest groups, for example, who might not like the conclusion you've come to.
BENNETT MASON
Earlier in the conversation you raised that idea of resilience. Can you talk through why resilience is so important for boards? And are there times in your own career as a director where you've had to show resilience?
BRUCE COWLEY
Well, let me start with that. I was appointed to be chair of the Children's Hospital Foundation in Queensland around 2011. And at the time the Children's Hospital was an old facility but had some wonderful staff who did wonderful with children. And it was located at the Royal Brisbane Hospital in Brisbane. There was another children's hospital across the river at the Mater Hospital and the decision was made that the two hospitals, two children's hospitals would be brought together with a magnificent new facility. And decision was being made about where it was going to be located. There was a huge, huge amount of controversy, although it's hard to imagine, but there was a huge around a controversy about whether it should be located its present site at the Royal Brisbane Hospital. Or should be moved to the adjacent to the Mater Hospital? And there was a lot of political uproar about it. It was quite a difficult environment. And I came onto the board at that time with a couple of other new directors. On top of this, there was a big over-run on costs as well, as there often is with major projects. And so, this is a particularly fraught environment. The media was across all the stories and one of the things that the media criticised the Government for was appointing new board members and putting myself as chair on the basis that they were looking to ensure that the foundation, which receives donations from some wonderful people in the community who were really just wanting to do the right thing by the kids, that the funds that had been accumulated would be applied towards meeting the over-run costs. Then it was difficult because there was no way we were going to do that. I mean, these monies were given to the foundation for a specific purpose for caring for the kids, and it wasn't going to be applied to the cost of the new hospital, which was something that the government had to meet. But there was a lot of criticism in the media. And I found for myself that being resilient in that kind of circumstance, you just had to ignore the media noise, answer questions that were asked of you, of course. But don't make a fuss. Just get on with it. Get on with doing the thing that you're there to do, which is in our case, helping the kids and their families. So, resilience can be really important in that circumstance.
BENNETT MASON
That sort of public scrutiny does happen to directors, whether they're at large listed companies or NFPs or other organisations as well. That sort of public scrutiny and media attention will happen. Do you have any advice to other directors on how to weather the storm?
BRUCE COWLEY
For me, I think it's just keeping your head down. I've had other experiences not dissimilar to the one I mentioned where the media is making a lot of noise. Sometimes you have to engage with the media. Absolutely. And of course, you should. And you should be absolutely fair and straight down the line and engage with them. But I genuinely think it's better for me to focus my attention on doing the job that I'm there to do rather than getting distracted by things that may or may not need to be dealt with in a public way. But of course, there are times when, and I can call to my mind the issue that Rio faced with the destruction of Juukan Gorge in Western Australia. There are times when that has to be your primary focus. Things go, things are just so bad that you actually have to get out there, you have to apologise, get on the front foot, and do everything you can. Well, you can’t fix the problem. But to remedy or to provide support to those who are being affected in a very meaningful and genuine way as quickly as you can. Sometimes you just have to do that.
BENNETT MASON
One final thing, Bruce, before we let you go. We mentioned that you'll be delivering the AICD’s Essential Director Update later this year. What are some of the issues and topics you might be eager to talk about?
BRUCE COWLEY
Well, it's interesting time to be a director, isn't it? I think some of the big topics that I'm really keen to get into this year: greenwashing is a very topical issue and something we all have to be careful about because I think most boards have an enthusiasm to be engaging in appropriate ESG conduct and to be saying and doing the right things. But it can also be easy to overexaggerate what you're doing. And I think boards need to be conscious of that. Cyber security, data security, these are big issues for boards. They’re challenging. Questions about if you're hacked, difficult circumstances by some of these actors from overseas jurisdictions who want to demand a ransom. I think we’d all like to say: “Absolutely no. No way we would ever pay a ransom.” But you can't. I don't think can be absolute about that unfortunately, as much as I'd like to be. I don't think you can be absolute about those things. And there are some issues I think that all boards need to turn their minds to. Director resilience is another one. The future of work, getting people back in the office, Do we want to get people back in the office? What is that? What does the future work look like? And I think all these issues play into what the best interests duty looks like today for board members. I think there's been some interesting cases in the last couple years about that.
BENNETT MASON
Great. Well, we look forward to hearing you speak more about those topics at this year's Essential Director Update. But Bruce, we might end the podcast there. Thanks so much for joining us today.
BRUCE COWLEY
Thanks, Bennett. It's been a great pleasure.
BENNETT MASON
Listeners, thanks for joining us on Boardroom Conversations. I'm Bennett Mason from the AICD. We hope you enjoyed the show, and you can find more episodes in your podcast feed. Please join us again.
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