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It’s a big day for Jack Cowin.
After an ongoing saga that’s lasted months, today the founder of Hungry Jack’s and non-executive director of Channel 10 sat down for his first Fairfax board meeting.
Cowin was announced as the latest addition to Fairfax’s board by chairman Roger Corbett on July 19. “Our discussions with Mr Cowin over recent months have made it clear that he has considerable value to add to the company,” Corbett said at the time.
Fairfax is in trouble: its profits and share price are in rapid decline. Cowin is one of many to criticise the company’s strategic direction in recent years. But now he’s on the inside; a member of a board whose members he hasn’t always seen eye to eye with. He is a friend of billionaire Gina Rinehart, Fairfax’s major shareholder, who has tried for a board seat, but been rebuffed.
The first meeting
First board meetings are always difficult, and should be approached humbly, says executive director Virginia Mansell, whose leadership development company Stephenson Mansell advises the boards of S&P/ASX 50 companies.
She says one outspoken individual, on their own, isn’t likely to be helpful in developing the organisation’s strategy.
“If Roger [Corbett] has asked Jack [Cowin] onto the board because he brings a lot of experience and wisdom to the table, and he wants his input, even then it’s still only one view in a group of people. They have to form decisions through good discussion, hopefully with lots of different opinions being presented.”
Julie Garland McLellan, a board director and chairman, says board members have two ears, two eyes, and one mouth, which they should use in that proportion. “You want to take in more than you give out.”
Nonetheless, the expectations on incoming board directors have changed in recent decades, and they are certainly expected to contribute from their first meeting, she cautions.
“It used to be, in the bad old days of history, that you were expected to not say much for the first six months. You were expected to sit there and learn what was going on... To some extent there is some validity in that – it is a very different role to the executive roles most people have before joining boards.”
“But now people expect board members to add value from the very first meeting.”
Kathleen Conlon, a director at miner Lynas Corporation as well as on the New South Wales branch of the Australian Institute of Company Directors, says a director has to establish credibility and rapport to be an effective board member.
“It’s important in your first meeting to contribute effectively in at least one area, but it’s really important not to talk too much,” she says.
“To say nothing is not an acceptable response – you were bought onto the board for a reason, you’re expected to have done due diligence on the business. You’re expected to be a senior enough person to contribute to the meeting.
“In your first meeting, you’re trying to create relationships with the other board members and executives,” she says.
“At a first meeting, I try to make sure I have two or three insightful questions or important contributions, but not to go much over that.”
Conlon says she does this partly to demonstrate that she’s “done the work”. “Executives, in particular, know if you have, and they appreciate it,” she says.
Conlon adds that there’s a certain style to asking questions in early meetings.
“You might say ‘I haven’t been part of these meetings before – have we covered this previously?’” If they have, a board director should take the discussion up outside the board with the chairman or CEO to understand what’s going on. “That way you’re not being arrogant; you’re assuming they’ve gone through this. You avoid bogging the meeting down with lots of stupid questions.”
When board member joins a board in contentious circumstances, like Cowin, it throws up unique challenges in their earliest meetings.
“There’s going to be a lot of interpersonal tension around that table,” Garland McLellan says, “which an experienced director like Cowin will have some ideas about how to deal with.” Everyone reacts differently though, so figuring out what works is likely to be a process of trial and error.
“It’s going to be an interesting meeting… There’s going to be some suspicion to overcome – more than normal.”
“Not that any board appointment is ‘normal’ – they’re all exceptional in some way,” she adds.
Laying the groundwork
Being able to contribute effectively at your first board meeting is largely a matter of groundwork.
Board directors need to conduct some measure of diligence even before they join, Garland McLellan cautions.
“They’re expected to pick up all the liabilities of the company… The moment you sign your consent form you are on the hook. There’s no point signing then doing your due diligence – you have to do it first.”
Usually between acceptance of a board position and the first board meeting, directors will get access to confidential information about the company. Sometimes would-be directors are provided with some information before they sign under confidentiality agreements to help them make up their minds, but receive a lot more when they formally join a company.
Incoming board members also get access to board papers, which they must read carefully. They can be hard to understand in parts, Garland McLellan says.
“There will be things in the papers – people will make references to ‘project x’, or ‘following our earlier discussions on x’. It takes a while to get up to speed on things like that. You should read the minutes, then ring the CEO or chairman to talk through what isn’t clear.”
Gillian Franklin, the managing director of Heat Group, and who also serves on the boards of the Australian Formula One Grand Prix and the Melbourne Theatre Company, says before the first meeting she asks for the minutes of at least four or five previous meetings.
“And I always receive copies of the financials and the company’s strategic plan,” she says.
“I make sure I have a comprehensive understanding of the cash flow in particular. This is especially important for companies that are in trouble and require rapid change.”
Franklin says before the first meeting she makes sure to know the key players, both internally and those who are external stakeholders, as well as the environment and competitive landscape, the company’s strategic plan and risks, as well as the expectations of her when she walks in the door.
“As part of the appointment process I always talk to the chairperson at length about what they expect I will be able to contribute to the board.” When she’s appointed, Franklin says she typically meets every board member one-on-one, and asks them what their role is on the board as well as what they expect her to contribute.
Mansell says meeting with key executives can give incoming board directors a feel for the morale of the business as well as its strategic imperatives. “You want to meet whoever you can in the business, to be asking questions, particularly at the senior level to start with,” she says.
Meeting with key shareholders is often also part of this process, but it’s a part of the induction that must be handled very delicately, according to Garland McLellan.
“As a single director you have absolutely no power, and you also cannot act and represent a single shareholder or group of shareholders: you have to represent all of them. You can’t have any partisan interests. So you have to be very, very careful as a director meeting shareholders.
“But, you would often try to do it. Particularly if there are large institutional funds involved. You want to meet the person involved and try to understand the company as they see it. But they should know you aren’t in a position to deliver or commit anything… you’re just there to enhance your understanding.”