Boards have lessons from Hayne

Banks have had much of the focus in the aftermath of the Hayne Royal Commission with some justification.

The misconduct that was uncovered by the royal commissioner, Kenneth Hayne, and his legal team was egregious and bore all of the hallmarks of a complete disregard by the individuals involved in the worst cases for basic decency and the welfare of the consumers at the other end of their nefarious capers to fill pockets with the bonuses and commissions that came with hoodwinking punters.

Another important consequence is for the practice of governance in companies, clubs, societies and other entities that must keep good books and records as a part of their process of running an entity.

One of the key tasks is the keeping of accurate and adequate minutes to document decision making at the level of the board of directors.

Persistent questioning by counsel assisting of key officer bearers in companies such as Catherine Livingstone from the board of the Commonwealth Bank ought to send a shiver down the spine of company directors, company secretaries and senior managers everywhere.

It is a salutary reminder that you must ensure that your views as an individual involved in governance are properly recorded in company minutes. Objections to policy decisions, resource allocations, responses to the way in which complaints by customers are dealt with and responses by the board or individual members to regulatory concerns matter.

Each director that has a concern must ensure that they have that minuted properly and that the concern is reasonably expressed. A failure to document a concern properly either by directing a notetaker such as a company secretary to do so during a meeting or when the draft minutes circulate means an objection goes unrecorded.

Why does this matter?

Failure to record something can lead to questions about whether a director had properly done their job. Arguing before a court or another forum that you asked a question or raised concerns is worth trying but evidence that you raised it is better. Ensure that your views are reflected so that you as an individual director can demonstrate you were doing your job properly.

Company secretaries must also tighten up their procedures where they sense boards have directors on them that are tardy or are unwilling to be perceived as troublemakers.

Specific requests must be made in each e-mail of board members to ensure that they are satisfied that any views or objections they made during a meeting have been reflected. It is critical that company secretaries make sure this request is embedded in an e-mail or other communication so that directors under pressure in a court of elsewhere are less able to blame a company secretary for failing to raise the issue as a red flag.

A company secretary can be the convenient meat in the sandwich if there is not audit trail of communication that tells board members to do their job and advise the company secretary whether their views as expressed during a meeting are properly reflected.

It is healthy for boards to re-examine their internal processes periodically to ensure that they are engaging in best practice governance and the Hayne Royal Commission has only underscored the importance of boards doing and being seen to do the right thing.

Tom Ravlic FIPA is an investigative journalist, consultant and the author of ‘Vulture City: how our bankers got rich on swindle’ (Wilkinson Publishing) that is available for pre-order via all good online bookstores and www.wilkinsonpublishing.com.au .

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