Despite her attempts to join the Fairfax Media board, Rinehart’s directorship at Ten Network Holdings is her only listed board commitment. However, she’s also the executive chair of her own company, Hancock Prospecting, through which she holds her ownership of Ten.
Garland McLellan says it’s her experience that directors who are substantial shareholders in a company can be more lax in their board commitments.
“Director-owners can feel that their directorship is a privilege of ownership rather than a service that they are providing to all of the shareholders,” she says.
“I think that’s quite a worry – it leads to this strange feeling they can act from their interest as an owner. I’m not saying that Rinehart’s doing that, but there’s a strong tendency sometimes.
“If I had a large shareholder on my board who wasn’t turning up, particularly without plenty of advance notice, and they weren’t attempting to reschedule meetings or attend through some sort of teleconferencing, I’d be concerned they were just using their directorship to gain confidential information to benefit their holding.”
Chairs can encourage attendance by pulling the director aside and making the expectations of directorship clear, or, in extreme cases, asking them to leave the board.
This is more difficult when somebody receives their directorship primarily due to their shareholding.
“If they have enough votes, that director can just vote themselves back on the board,” Garland McLellan says. “That makes the chair’s job much harder. He or she has authority only from other directors. But as a chairman, you need strength of character and courage to broach difficult subjects with strong and independent people.”
Lawrence is less concerned about shareholder-directors not attending – “as long as they don’t collect a fee for their board seat”.
To make expectations of directors clear, some companies have formal policies around director attendance, which they make known to prospective directors before they join.
Some companies, including Ten, also allow directors to appoint alternates to attend for them, should the director miss a meeting.
This is common on government boards, where a minister or parliamentary secretary may, by virtue of their position, be assigned a board seat, but appoint a senior bureaucrat to regularly take their place.
On Ten’s board, Rinehart lists her alternates as Fairfax director and Hungry Jack’s founder Jack Cowin, who is already a Ten board director (with 92% attendance), and Cheryl Edwardes, an executive at Rinehart’s company, Hancock Prospecting.
Garland McLellan warns that the use of alternates can be complex, as they may in some instances not be covered by a company’s director insurance and are thus accepting a personal risk to appear on the board.
Her preference is not to use alternates. “If I’m not available for a board meeting, well, that’s that. For someone else to get up to speak on my behalf – to do the necessarily due diligence, background reading and the like – is a huge ask, especially in addition to all the legal liabilities.
“My preference is just to appoint the alternate as board directors [in place of the original director] – it’s cleaner, and it gives shareholders a choice about who represents them.
“I take a pretty dim view of people who habitually miss meetings. As I take a dim view of people who haven’t thoroughly read their board papers. Being a board director is a lot more than just turning up to meetings. But turning up to meetings is a start.”
Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.
