There needs to be cultural change around the types of people considered for board director roles, with age and experience not necessarily good indicators of capability, according to a company director.
Speaking to Lawyers Weekly, Gary Brady, the program director of Bond University’s master of laws in enterprise governance, said the lack of a formal structure to board selections could be a reason why there have been so many issues with governance in recent history, as evidenced by a number of royal commissions.
“There is no formal structure, it’s basically you are chosen by your peers on the board to join the board,” he highlighted.
“That’s where some of the diversity issues have come from,” Mr Brady noted, adding that it’s why there’s still a lack of women on boards.
But, while noting the lack of gender equality, Mr Brady considered diversity as “much broader than that”, and requiring a “cultural change”.
Companies are now grappling with a whole suite of challenges associated with IT and social media, with Mr Brady stating that “we need 25-year-olds on boards”.
While he said that people equate experience with age, “maybe we just need to say, actually, experience and age don’t count in that world”.
“We actually need modern thinkers and I think diversity needs to be seen more deeply than just gender”, the director explained.
“It’s got to be young people, [and] it’s got to be dependent on your stakeholder groups,” he further clarified.
Mr Brady stated that it is okay to “accept that they don’t have experience in whatever else that you think you need in the skills matrix” as there’s an argument to suggest that diversity “should drive up the board’s skills matrix outside of the sector”.
“It’s important to actually have a divergence of opinion around these board tables, and you need to try and avoid what’s called ‘group think’.”
One of the issues of governance, according to Mr Brady, “is basically the representation of the shareholders and key stakeholders… but it’s also now back to social licence to operate and representing the interests of the community”.
Mr Brady believes the banks, in particular, will struggle with representation, because “if you look at their stakeholders, their stakeholders are mortgagees and they are people in the suburbs”.
A key question going forward for board make up, according to the director, will be whether “the board [is] being adequately fed information relative to the people that that organisation serves?”
“The people you serve… are they adequately represented?”