Laura Grierson – The West Australian
Director Acacia Executive Search
Laura Grierson: 2022’s disastrous board appointments show need for diligence
It’s safe to say that 2022 has been a year of disappointments for executive appointments.
Bank of Queensland CEO George Frazis was axed last week after only three years, with the bank saying a different style of leadership was needed. Earlier this year James Hardie’s CEO Jack Truong joined a group of executives fired after complaints regarding unacceptable behaviour, and in October Essendon was left with egg on its face after appointing Andrew Thorburn who resigned 24 hours later.
All of this very clearly illustrates why organisations need to deep dive in due diligence in 2023 before making executive appointments.
So, why isn’t more due diligence taking place?
Running an executive search firm, I’m all too aware of the responsibility that comes with hiring key positions for companies, having done so for smaller private firms right the way up to the ASX10.
It’s safe to say that 2022 has been a year of disappointments for executive appointments.
Bank of Queensland CEO George Frazis was axed last week after only three years, with the bank saying a different style of leadership was needed. Earlier this year James Hardie’s CEO Jack Truong joined a group of executives fired after complaints regarding unacceptable behaviour, and in October Essendon was left with egg on its face after appointing Andrew Thorburn who resigned 24 hours later.
All of this very clearly illustrates why organisations need to deep dive in due diligence in 2023 before making executive appointments.
So, why isn’t more due diligence taking place?
Running an executive search firm, I’m all too aware of the responsibility that comes with hiring key positions for companies, having done so for smaller private firms right the way up to the ASX10.
I’m often met with surprise and resistance to the depth and thoroughness of our background check process. There’s a worrying disparity in the level of due diligence undertaken by boards with some forgoing the candidate due diligence process entirely, leaving companies vulnerable to investor unease, and a damaged reputation and bottom line down the track.
Recruiting, supervising, retaining, evaluating and compensating the CEO or general manager are arguably the key functions of the board of directors, yet so many are either getting it wrong or backing away from doing what they should.
It is undeniably becoming harder and more time consuming to find those capable of being successful c-suite professionals.
As the world changes we need more effective leaders than ever before, and as the talent crunch continues to tighten, boards often spend months finding who they believe to be the right person for a role. But once they find this perceived “right” candidate, the one who interviewed well, whose CV looks right and who someone they know anecdotally recommends — they prematurely want the process to end.
In these cases ignorance is not bliss, but a sign of ineffective stewardship.
These boards focus too much on the initial search component and gut feel at interview and not enough on following through with the required due diligence as they, likely unconsciously, don’t want to disprove themselves.
It’s human nature to rely on instinct and simplify where we can, but the problem is at executive level, the stakes are so much higher when we get it wrong.
This is precisely why a system that significantly reduces the human bias from hiring decisions is crucial.
Once a board has a preferred candidate, or a few, they should be looking for reasons not to hire them, not looking for evidence to prove them right.
For ASX listed companies, the listings rules and corporate governance principles and recommendations published by the ASX Corporate Governance Council provides guidelines about the level of due diligence that should be done. This includes undertaking and providing confirmation of appropriate checks before appointing a director or senior executive, typically reviewing the person’s character, experience, education, criminal record, and bankruptcy history.
Where an executive sits on other boards, it makes sense that those organisations would be suitably researched to ensure no conflict of interest or values exists.
Unlisted companies should be applying the same level of due diligence as listed businesses, it not only provides assurance that you have the right person for the job but also that you have sufficiently discharged your duty as a director.
In these cases ignorance is not bliss, but a sign of ineffective stewardship.
Laura Grierson is director at Acacia Executive Search.