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It might not be listed on the ASX, but the elite Melbourne girls’ school Methodist Ladies College has a star-studded board that could rival that of Australia’s largest companies.
The school’s nine-member board is filled with corporate heavy-hitters such as Australia Post CEO Ahmed Fahour, the CEO of Melbourne University Publishing Louise Adler, KPMG partner and demographer Bernard Salt, the former CEO of Crazy John’s, Brendan Felter, and director at Qantas and NAB, Belinda Probert. In former years, the MLC board was chaired by former Qantas chair Margaret Jackson.
Corporate heavyweights get involved in community and not-for-profit boards as a way to ‘give back’ to their community. It’s a widespread practice involving as many as 50% of directors and many senior executives, according to recent studies.
The blood of many directors will run cold today. A controversial pay dispute with MLC’s now ex-principal, Rosa Storelli (herself a former deputy chancellor of Melbourne University) has directly involved the high-profile board members in an ugly public scrap.
It’s reported that a Deloitte review showed Storelli had been overpaid for 15 years. While Adler said in a letter to parents that Storelli hadn’t acted dishonestly, attempts to resolve the issue broke down after six weeks, leading the board to sack the principal after, Adler wrote, “[Storelli’s] position became untenable”.
Storelli, who today gave interviews to several radio stations and newspapers, rejects the claims and the order of events, and says she has no issue repaying the money. Today, she went as far as to call for the board to be sacked. She told ABC radio she had reached out to Margaret Jackson to mediate, as the contractual arrangements had been signed while the former Qantas chairwoman was in charge of the board.
Storelli says the current board viewed this as “a breach of confidence”, which she says demonstrates their mismanagement of the issues and is the grounds for their sacking.
The issue has some way to play out, but it highlights the fact that not-for-profit boards can often throw up more challenges than corporate directors bargain for.
This Monday, the Australian Institute of Company Directors released its third annual Directors Social Impact Study, which surveys its members about their involvement with the not-for-profit sector.
It found 31% of respondents were currently members of both for-profit and not-for-profit boards, but the manager of the not-for-profit division of the AICD, Phil Butler, thinks the true figure is likely to be higher.
“Our estimate is that it would probably be over 50% of our membership,” he told LeadingCompany today. “If you looked across Australia you would see it’s extremely common for people in executive management roles to also have roles as directors in not-for-profits.”
Four in five (86%) of corporate directors are not paid for their not-for-profit board positions.
The most common motivation for accepting these positions is a desire to ‘give back’, Butler says. Directors often choose boards in areas they have a particular interest in – whether in education, sports or the arts – or those in which they feel they can make a significant contribution in skills, networks and experience.
When it comes to corporate governance, the legal responsibilities of not-for-profit directors are often broadly similar to those placed on for-profit directors, with small variations on matters such as use of volunteers, workplace health and safety and fund-raising. Fiduciary duties remain the same.
There are complications depending on how a not-for-profit is registered.
With incorporated associations, Butler explains, they fall under the relevant state or territory legislation.
But with companies limited by guarantee, the federal corporations act applies, as do any relevant state or territory legislation.
Most not-for-profit directors spend 23.4 hours per month their commitments, which works out to 35 working days a year. “It’s a very large time commitment,” Butler says.
Not-for-profits extend invitations to corporate directors out of a desire to broaden the experience of their board. “For example, Butler says, “I’m on the board of an arts organisation in Canberra, not from any great insights I might have into artistic or musical talents, but for my broader perspective into general business, management, and a rigorous assessments of risks.”
The report found not-for-profit directors spent most their efforts (29%) on developing strategy, 20% on reviewing performance, and 15% on funding issues. Executive remuneration typically takes up only 3% of a not-for-profit director’s time – a figure that has likely skyrocketed for MLC’s directors in recent weeks.