A LACK of lawyers in the make up of most Australian boards is one of the contributing factors behind the current avalanche of legislative and regulatory changes being imposed on corporate Australia in an attempt to stem the flow of scandals, Caltex Australia chairman Dick Warburton told the audience of the Australian Corporate Lawyers Association’s national conference late last week.
Ironically, as former Clayton Utz managing partner Catherine Walter fought for her boardroom life at National Australia Bank, an unlikely ally for her cause in Warburton arose when he addressed the gathering of around 350 of Australia’s top corporate and government lawyers.
Pointing to what he saw as a blurring of the lines between management and boards, Warburton said that this had seen more and more line managers, often accountants, taking a place on Australian boards.
While he saw the role of the board to be to approve, monitor and study the strategies, he said that recent pressures brought to bear on corporate Australia though scandals had seen the rise of confusion between the role of the board and the role of management.
The recent exposure of corporate collapses, accounting manipulation and greed as well as excessive salaries and hidden benefits in the past two years have led to people saying that things have to change. “Many of those things that I have just described, tend to happen about every 10 years,” he said.
“Even with all of the regulations coming in, all of the corporate governance legislation coming in, I’ll lay London to a brick that in about 10 years time we will be bringing it right to the surface again . . . Changes are made, things get better for a while, then gradually people start pushing the envelope again, and gradually greed takes over and once again you have to go into a cycle of cleaning it all up,” he said.
There’s confusion from the board, as to how much they should be getting involved in the day-to-day business and there’s confusion in the management as to whether they are supposed to be doing things or whether the board should be studying the ledger.
“Unfortunately, you find yourself as a board member saying ‘Gee I’d better get into the detail, not that I need it now, but what if something goes wrong in five months time or 10 months time and then somebody says ‘you mean to say that you didn’t look into that?’ You know, hindsight is wonderful: 20/20 vision.”
Labelling all of the corporate governance regulations which have recently come into force as “an overreaction”, and “far too prescriptive and far too shallow and the form becomes far more important than the substance”. Warburton said this made the case for in-house lawyers to have a far more active role in corporate governance issues.