Merit-Based Board Appointments – Is Merit a Myth?

It’s never been more important to select a board appointee with the right skills, experience and capability. The fallout from the Royal Commission has highlighted boards that have been asleep at the wheel. In some cases, it has showcased high profile failings of individual board members who don’t possess the required skills and experience to deal with challenges the business has faced. These failings have resulted in a loss of confidence from other board members, investors and the business community.

The stakes have never been as high regarding reputational risk for under-performing board directors. The heat is on, more revelations are coming, and I predict that there will be more board director resignations from the banking and finance sectors before the end of the year.

When the Chair of AMP Catherine Brenner was forced to step down followed closely by three other female board directors who failed to attract support from the major investors, inevitably the focus shifted to gender diversity and whether female candidates had been appointed ahead of more experienced male directors. While this may have brought out the worst for both sides of the argument, shining a spotlight on this issue is imperative if we are going to improve boardroom composition and assemble a world-class board capable of dealing with today’s business challenges.

There is no doubt that many ASX boards have felt pressured and even compelled to appoint female board director candidates to achieve gender diversity targets set both formally and informally by the company and regulatory bodies. For example, director organisations such as the Australian Institute of Company Directors has been vigorously lobbying for 30% gender diversity by 2020. An ASX board that does not achieve this target or refuses to appoint females to the boardroom have been publicly named and shamed in an attempt to force the board to alter their position. 

I don’t agree with this approach, and there continues to be a small number of ASX 100 boards that have refused to appoint board directors based on gender and continue to focus on merit-based board appointments.

Merit-based board appointments have been given a bad wrap. Some high profile feminists have even gone so far as to label merit as a myth. Having worked in executive search for nearly two decades, I find that a little hard to swallow. When assessing candidates, merit is your most important benchmark. Former Prime Minister Hon Julia Gillard has commented a number of times in her speeches on this topic that she believes that merit is equally distributed amongst the sexes and therefore there is no logical reason why a woman cannot be appointed to the board with equal merit. That may well be true, but we cannot and should not discount merit when appointing board directors. They must simply have the requisite skills, experience and capability to do the job and be the best possible option available in the market at the time of appointment.

Now, without going into a detailed review of the directors who stood down from the AMP board, let me make these observations. A media report stated that a global executive search firm had approached highly-regarded, former AMP CEO Andrew Mohl, to serve as the Chairman of the company. 

Mohl was not only exceptionally well qualified, experienced and skilled to take on the position, but despite turning down numerous approaches and other board directorships, he had flagged his willingness and a keen interest in taking on the job. For reasons that may never be clear, this opportunity was not pursued. We see here a true Sliding Doors moment for a business that desperately needed a highly experienced Chairman and board directors around the table that had intimate knowledge of financial planning and advisory services.

Inevitably when things go wrong in the boardroom and you start to study the experience of each board director, you will begin to find skills gaps and deep operational experience missing around the boardroom table. Often the expertise around the boardroom may be perfectly adequate in a smaller organisation, but in a large complex business with enterprise-grade problems, your board is going to unravel during a pressure test such as a Royal Commission.

In conclusion, it’s time to bring merit-based board appointments back into the frame. Appoint the best experienced, skilled and capable board member to your board – now is the time more than ever to have the A-team in the room.


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