Performance hurdles, remuneration structures and dismissal policies have all come under scrutiny. “There is now a greater emphasis on negotiating investment deals and arrangements that allow us to sack the manager, remove them if they have underperformed. In the (pre-GFC) heyday there was less emphasis on that. You have to have the capacity to remove the manager and just as importantly replace them with someone else who will perform better.”
Not all managers have been adversely impacted by the GFC. Some companies have found that the crisis changed their competitive positioning. Simone Tilley, head of business execution, global agribusiness, for the Australian and New Zealand Banking Group, says that the crisis, especially in Europe, opened up market opportunities. She says the global agribusiness firms, which have up to 170 banks supplying them with services, find the ANZ’s credit rating appealing.
“Our AA rating is now scarce in the global marketplace and it is becoming increasingly attractive given the European banks are retreating,” says Tilley. “Many global agribusiness companies are recalibrating their exposure to European financial institutions, which is providing an Australian bank like ANZ with its super-regional footprint with an absolutely unique opportunity.”
Tilley says her clients are saying that the big European banks no longer have the appetite to do business in Asia. “They are saying: ‘You guys have a AA credit rating, you are well capitalised, do you want to take some of this business?’”
Companies that were more conservatively managed before the GFC have found that opportunities opened up. Wesley Ballantine, general manager of investor relations for Transurban, says a number of toll road operators prior to the GFC used overly optimistic forecasts, which he believes Transurban avoided. Now, the tables have turned. “There are not a lot of companies that will take traffic risk (invest on the basis of optimistic forecasts) in the current environment. We are one.”
For most corporations, the GFC changed the way management is held to account. Regulators and boards, tending – as ever – to solve the last problem, not the next, are far less tolerant of risk. Blackhall & Pearl’s Boyle says in the post-GFC era there is a much greater concentration on regulation and detail.
At board level, there is much greater scrutiny on the collective skills of directors. “For those not at the edge of creating performance it was a big wake-up call.”
Boyle observes that the post-GFC environment has led to boards concentrating more on compliance than performance. But the post-GFC trend towards extra scrutiny is unlikely to change.
“Capital is still very tight and banks are not as keen to lend as before,” says Boyle.
“It is leading to a greater focus on the basics and the numbers. It has highlighted the need to understand the accounts. You need people on boards who have a greater understanding of complexity, especially debt-to-equity structures. If you can find all that in a woman, you have hit the jackpot.”
