The issue of corporate governance is a symptom of a much bigger problem: the way executive managers/directors relate to their shareholder/owners.


Many/most listed companies claim they conform with ASX's Governance Principles - yet how often is their rhetoric actually checked for accuracy and effectiveness.

Just as it is possible to build a concrete life vest while being quality-accredited, so it is possible to have the corporation harm shareholders - even when complying with all Governance Principles. Therefore, Corporate Governance in and of itself is not "enough".

In the context of corporate activity, governance as an issue, pales into insignificance compared to the billions of dollars of shareholder funds wasted through managerial subjectivity, incompetence, poor judgement, ill conceived pursuit of guru theories, pursuit of executive managers’ (and directors and chairpeople) personal agenda, misguided assumptions and inadequate corporate oversight and accountability. All of that despite management’s generally "honest" endeavours “to do the right thing” and generallly all within the context of "reasonable" governance practices.

As long as directors and managers are free to define the outcomes of the organisation they manage, then shareholders will nearly always come off second or even third or fourth best.

Managers decide the projects that the corporation invests in, the initiatives they will undertake, the markets they will play in, the tools they will use, the philosophies they will adopt, and the corporation’s remuneration policy. Management also determines how resources will be applied, what the organisation will generate, what benefit the owners of the business will secure, if any, and how they themselves will get paid. They determine the performance criteria against which they will be assessed and by which they will be rewarded.

And these business costs are costs carried by owners and the business risk is also largely carried by owners. They are not costs or risks carried by management who initiate those costs and risks.

This stems from a belief that the corporation, because of its legal status, is a separate entity from its owners i.e. the Social Entity view of the corporation.

This view argues that only managers and directors can determine corporate objectives.

Instead, directors and managers must understand that, despite the legal status of the corporation, they are nevertheless agents of the owners – and not the owners themselves.

Managers must apply their efforts toward the optimisation of shareholder objectives – that is their job and that is what they are paid to do – and that is the fundamental purpose of the corporation.

Critically, ONLY by knowing its shareholder objectives (i.e. its metrics – value, benefit, growth and risk), can an organisation align its activities toward their fulfilment.

Corporations currently make assumptions about their shareholder objectives that are demonstrably, logically and intuitively wrong.

As examples of such erroneous assumptions, my research has found that:

• All shareholders do not have the same objectives

• A shareholder may have different objectives for different investments

• Institutions are not a proxy for small investors

• Management assumes it knows what it is that shareholders want and they act on that assumption – but they don’t know without asking – and no one asks.

• Shareholders cannot run the company but they can and should define its outcomes: i.e. board interpreted shareholder metrics based on value, benefit, growth and risk – and what they want becomes the corporation’s Mission.

If you don’t fix and realign the relationship between the corporation and its shareholders, then tweaking governance will make little difference to the business owners and may lull them into a false sense of security. Ultimately,

Governance is all about process and nothing about outcomes.

"Bright young things" certainly bring to the market exciting opportunities, largely because of their tech-savy, their understanding of the needs and behaviours of "their generational peers", and their enthusiasm.


They also bring inexperience, arrogance, unwillingness to learn the lessons of more experienced people and an impatience - particularly with the cultural and human side of organisations and the complexities of building a sustainable business.

These comments are certainly generalisations with many notable exceptions. However, the warning is that it is wonderful to grab hold of the coat tails of a young entrepreneur (of which there are many), but be prepared for the free-fall moments when market or technical intuition is insufficient to inform them of the organisational, people or process needs of the organisation.

On balance, I have a lot of time for the "bright young things" and mentor many of them - a process that is enlightening for both of us.

A board's role and function is not static over time. As its members develop experience and insight in their various board and non-board roles and activities, they bring enhanced insight and understanding to the board. Directors "mature" in the role as do executive managers mature in their roles.


Similarly, as executive positions change within the company, keener focus is required is some areas impacted by those changes. As new incumbents gain experience and understanding in their role, so the need of the board to be vigilant "softens" as trust, honesty and understanding grows.

As challenges emerge in a corporation's operating environment, so directors need to develop understanding of the issues and develop competencies enabling them to adjudicate on strategies or remedies affected by those challenges.

Thus an important aspect of directorship is the ability to be flexible and understand new contexts, new people and be able to absorb new skills.

In this day and age, there are not many boards that can justify inflexibility in its members.

Having worked with many family-based businesses, it is my view that most family businesses choose not to have a formal board because they focus on their perception of the "negatives" of a board and discount the "positives".


From their perspective, a board may make them more accountable (even if only to a board-outsider) and less flexible in "doing business". They may also see the expense of the board as an "unnecessary" cost.

The positives that they discount include compliance, governance, networking, experience, etc.

Where family businesses do adopt a board structure, it is often (but not exclusively) to aid business - to bring in experience, establish business relationships, enhance status (i.e. appointing a "big name") or satisfying stakeholders (investors, banks, etc).

I suspect that family-based businesses will not adopt formal board structures and processes unless they see a significant benefit in it for them - particularly benefits that out-weigh the perceived negatives.

I have found that there is no "silver bullet" solution to this question, primarily because people are different and have different objectives, needs and contexts. Some need cash, some need asset growth, some need prestige and status, some need a retirement nest egg while others just want to be wanted and others just want to be "loved". Therefore, assuming you could find a tactic that would satisfy your three criteria, there is no guarantee that it would satisfy the needs of your key people.


Assuming therefore that the objective here is to retain your people, my suggested process for finding a way forward is:

1. Meet with each executive or valued staff member in a one-on-one session. Ask them why they are working for you and what benefit, over three to five years, would they regard as sufficiently meaningful and enticing to pursuade them to stay and help build the business.

2. Develop a time-boxed benefits plan (whatever benefits they might be - for each year of the planning period.) Have that plan signed by you and the staff member as a plan in principle.

3. Have your accountant, CFO or financial advisor sit with your employee and/or their accountant to develop a strategy within the context of your business to achieve all the financial benefits needed to hit the agreed milestones with the least negative (most positive) impact on the employee.

4. For all non-financial outcomes (e.g. responsibility, career progression, work variety, status, travel, etc) develop a similar plan but use your HR manager (if you have one) or an external HR specialist to develop career plans for all employees to deliver the agreed milestones.

5. At least twice per annum, meet with all key employees to monitor performance and progress toward their milestones - financial and other. Be prepared to change milestones and outcomes if needed and warranted.

The benefit of this process is that is customises the benefits and outcomes to the employee's context - thus has more meaning. It also has the employee's buy-in to the process rather than having it imposed on him/her.

Furthermore, it sends the employee a signal that they are important and warrant such personal treatment - rather than being "merely a dispensable cog in the machine".

As a generalisation, every person should be considered on their merits. Youth certainly brings great benefits, as do the insights and perspectives that come from experience and maturity - one does not compensate for or exclude the other. Yet youth or maturity, in and of themselves, are insufficient to provide what is needed in every context and situation.


If I were to nominate a single attribute that helps flag a high potential contribution at board (or any senior managerial) position, then I would have to opt for Emotional Intelligence (EI). Corporate management is about understanding context, understanding people, and being able to read all of them through a prism of objectivity, fairness, commerciality and compassion. In my humble opinion, EI is more more important than "just" knowing facts and figures.

The mark of competency is not merely knowing facts and figures, but being able to mould them to achieve desired outcomes.

Therefore, it is arguable whether "youth" has the required EI to do this. That some younger people have this skill is indesputable - and that many mature individuals lack such EI is also indisuptable.

Why don't we leave the age-based view of board members behind, and rather focus on the the match between what a board requires, and the best candidate available to fit that role - regardless of age (or gender, nationality, religion, etc).

As historic as Wyatt Roy's election has been, it is easier to secure a ticket to the Grand Final than it is to effectively play in it. Let us give him the room and time to gain the insight to make a valuable contribution - and then judge him by his results. Prematurely using him as a "role model" may pressure him sufficiently so as to impede his ability to perform.