Australian corporate governance is the envy of many nations.
CORPORATIONS are conferred a statutory licence to operate, with general acceptance that the "miracle" of the limited liability corporation has delivered profound benefits to mankind and its standard of living.
During recent decades, the role of the corporation, as compared with the role of government, has increased significantly in the proprietorship, control and operation of vital social infrastructure, including communications, transport, utilities, education, health, community savings and security.
Governments have encouraged this process in order to gain for the community advantage not only from investment in social infrastructure, but the proven benefits of the governance structure and practices of corporations, which are free of the pressures of political expediency.
Yet corporations are notional statutory creations, and it is their boards and directors that are the tangible manifestation of a corporation's 'heart and mind'. Directors are duty bound to act in the best interests of the corporation, with severe consequences for those found to have strayed from what in many circumstances is an ill-defined pathway of righteousness - although perhaps more readily identifiable in retrospect with the benefit of hindsight.
Boards of directors are not self-appointed. They are usually appointed by majority vote of shareholders, in the case of a commercial corporation, or in the case of a statutory authority, often on the recommendation of the responsible government minister. They are usually chosen for their relevant skills, knowledge and experience to best deliver strategic outcomes consistent with their governance mandate. They are accountable to those who appoint them.
Boards are not omniscient or infallible. However, their corporate governance structures and practices are designed to assure the best prospect of sound decisions being made through due and proper process, and the application of acumen, consistent with the information available, advice taken (as appropriate), assessment of the potential risks and rewards involved and the corporation's strategic objectives and values.
Contemporary Australian corporate governance is the envy of other nations, with boards comprising a majority of independent non-executive directors who accept oversight responsibility for a corporation's actions, discrete from management and the corporation's executive team.
At this fragile time of hopeful economic recovery, Australia's dependence on the corporate sector to deliver its 'miracle' is heightened.
Regrettably, there are some in our society holding leadership positions, or offices of influence, who act in a manner that tends to denigrate the vital role played by the independent non-executive directors of our nation's corporations and statutory authorities.
Last week's attack on the Gesb board, its CEO and its chairman by Treasurer Troy Buswell, and its sensational reporting in the local daily newspaper, are cases in point.
The October 1 article headlined: "Gesb board had junket paid for by members", which criticised Gesb directors for attending the Association of Superannuation Funds Australia annual conference in Auckland, New Zealand, last November, is naïve. Any informed commentary on governance best practice for independent non-executive directors recognises the value of increasing their governance credentials and relevant industry expertise through continuing education and training.
It is through such continuing professional education and development that Australian boards have been able to cushion our nation from the worst of the global financial crisis, and to give impetus to our strengthening recovery at a rate ahead of other economically developed countries.
Fortunately an opinion article in the same October 1 edition by the newspaper's former editor, Paul Murray, was more insightful, suggesting that Mr Buswell's: "grandstanding on Ms Dolin's pay rise is simply inexplicable other than if he is viewed as just another in a long line of politicians grabbing headlines at someone else's expense". It went on to correctly advocate that "Ms Dolin's pay is a matter for the board of Gesb" - a body which has been charged with that, among other more significant responsibilities for Gesb and its members.
A later article was equally misguided in its implication that the cost to a corporation of a chairman's salary could be measured by the number of board meetings attended. As if the role and responsibilities of a board chairman were that simple.
It is not disputed that there have been some examples of "extreme capitalism" (to adopt the emotive terminology used by our prime minister) that have contributed to the recent financial downturn and have resulted in economic loss to Western Australians.
It is not disputed that, as a consequence of those actions of a few, Australian corporations and their directors need to regain the trust and respect of the community, and earn the authority and legitimacy that will enable them to continue to deliver the fruits of sound corporate endeavour and governance practice to Australians generally, in the form of job growth and economic prosperity.
It is also not disputed that the great majority of Australian independent non-executive directors who provide their services and time to commercial, statutory and not-for-profit organisations (often for no fee, or on a nominal basis, in the case of the latter two), are not only competent, diligent and professional in the discharge of their responsibilities, but also apply the highest ethical standards in doing so.
These people, on whom the future of our society and its economy is very much reliant, warrant better treatment than denigrating commentary by some in our society holding positions of leadership or influence. With those positions come responsibilities.
n Steven Cole is president of Australian Institute of Company Directors (WA Division).
