Corporate Attitudes Driven By Social Connections Among An Elite

Corporate Attitudes Driven By Social Connections Among An Elite, by Richard Talbot, who was a director at NRMA in NSW but not part of the social elite.

Let me take you back to early December 1990. Jane Singleton and I had just become the first new directors elected to the board of the NRMA since World War II, other than a director who’d been due to retire but was re-nominated. I caught the train into the city from West Ryde for my first NRMA board meeting.

Being the new kid on the block, I thought I should arrive a bit early. I got out of the lift to find I’d arrived right in the middle of the long-established pre-board meeting cocktail party. Looking a little lost, a kindly waiter wearing bow tie and cummerbund took me over to meet old Jim Millner, who was NRMA president and chairman … Jim grabbed me by the shoulder of my coat and dragged me across the room to meet the NRMA’s then vice-president, Dame Leonie Kramer, who was also part of the so-called NRMA board succession committee.

“Richard,” she asked, “where did you go to school?” I answered: “Meadowbank Boys High, Dame Leonie.” To which she replied “Meadowbank? Where’s Meadowbank?” I answered: “Its in the western suburbs, Dame Leonie. Doubt if you’ve ever been there.”

Well, it all seemed to go down hill from that first meeting. I didn’t fit the mould. I wasn’t a private-school-educated accountant from the lower North Shore or an eastern suburbs lawyer. Apparently the NRMA members who had voted for me — in the largest election of its kind in Australia outside of a federal or state election — had made a big mistake in choosing a road surveyor from the burbs. …

Why corporates are so weak, stupid, and herd-like:

It is still social connections that drive board appointments. And more than two-thirds of directors in Australia’s 200 largest public companies are on the boards of multiple companies, according to RMIT research, and often they collect eye-watering fees from each.

It’s a small gene pool with few outsiders. It leads to “group think”, under which directors become more concerned with being liked and connected. In Sydney they cluster in the eastern suburbs. They go to the same schools, then mix with the same people in legal firms and big accounting firms. They get onto boards at the Art Gallery of NSW, the Opera House and the Museum of Contemporary Art. Melbourne has its own club network. And they network like fury for that next board job. They scratch one another’s backs. …

Directors are disinclined to rock boats. Boards sign off on questionable business practices, as we’ve seen from the banking royal commission.