Speaking at an Association of Superannuation Funds of Australia luncheon on ‘good governance’, Herbert Smith Freehills external consultant Scott Donald pointed out there is a “huge weight of financial regulation on institutions”.
“Yet when people really do something bad we don’t seem to be able to do anything about it,” said Mr Donald.
“So we bear all the costs, but the resolution of it is not dealt with very well.”
The first place issues about non-performing or compromised directors should be dealt with is at the board table, said Mr Donald.
Herbert Smith Freehills has worked with clients to set up board structures so that the expectations of directors are clearly laid out, he said.
“When board members are aware of what the expectations are, and subscribe to those expectations, I suspect the frequency of problems is going to be reduced,” said Mr Donald.
Michael Clancy, who is a non-executive director on a number of NAB Wealth superannuation trustee boards and joined Mr Donald in a question and answer session, said all boards should have a “very systematic evaluation process”.
“That should happen on a regular basis. If that happens, directors will know if they’re doing a good or a bad job – and if they’re not doing a great job, most people self-select out,” said Mr Clancy.
“If we were forced into a position where regulators were able to step in on anything other than the most extreme circumstances, then that’s almost the most fundamental governance failure you can imagine,” he said.
