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The Director’s Chair

Charles Curran

Bright ideas, maximum leverage

In The Director’s Chair with David W. Anderson: The common thread in director and investor Charles Curran’s long list of career successes? Always finding ways to ensure money, people, boards and organizations work better

Photography by James Horan

Australia’s Charles Curran began with the essentials—an early background in law, accounting and stockbroking. Then he started making things happen. First tabbed to help lead the reform of his country’s capital markets system, he’s since chaired many company boards, including his own investment business, along with public agencies and philanthropic organizations at home and abroad. Here, in conversation with governance and leadership adviser David Anderson, Curran shares his well-honed views on such topics as good governance, the work of a chair and the role of private equity in building strong businesses and economies.

private equity in building strong businesses and economies. Charles Curran Current role Chair, Capital Investment

Charles Curran

Current role Chair, Capital Investment Group

Additional roles Chair of trustees, The St. Vincent’s Curran Foundation; board of international advisers, Goldman Sachs; ambassador, Australian Indigenous Education Foundation

Former chair Medical Benefits Fund of Australia; The Australian Wool Exchange; Amalgamated Holdings Ltd.; Greater Union Organisation Pty Ltd.; Perpetual Ltd.; Unibuilt Holdings Ltd.; Scotts Food Ltd.; Capital Television Group Ltd.; Australian Ireland Fund; St. Vincent’s Hospital Sydney; Garvan Institute of Medical Research; The Sydney Health Service; National Gallery of Australia Foundation; New South Wales Commission of Audit; Independent Commission to Review Tasmania’s Public Sector Finances

Former director QBE Insurance (Australia) Ltd.; Pioneer International Ltd.; Ampol Ltd.; Ampol Exploration Ltd.; Kleinwort Benson Australia Ltd.; Sydney Stock Exchange; Haminex Ltd.; Australia Day Regatta (president); Young Endeavour Youth Scheme; Royal Institute for Deaf and Blind Children (vice-president); National Gallery of Australia (deputy chair)

Education Bachelor of Law, University of Sydney 1961; Stanford Executive Program, Stanford University, 1978; Fellow, Australian Society of CPAs (FCPA)

Honours kOfficer of the Order of Australia (AO), 1987 kElevation to Companion of the Order of Australia (AC), 2006 kPapal knighthood: Knight Grand Cross, Order of St. Gregory the Great, 2012

Age when first became a director


Years of board service


David Anderson At a young age, you participated in changes to the face of capital markets in Australia. In your 30s, as vice-chair of the Sydney Stock Exchange, you chaired the joint committee that led to the merger of it and the Melbourne exchanges, moving from state-based to Australia-wide private ownership, and eventually the world’s first publicly listed stock exchange. Then, still in your 30s, you chaired several large public company boards and entered the investment world. What drove you and what did you learn? Charles Curran In participating in these changes, I was interested in reform in the capital markets and business world. The securi- ties industry was not effective in bringing together the savings of Australians and putting them to productive use. I recognized that markets were not always efficient. Change was required and I want- ed to be in business and influence decisions as an owner. I was later asked to chair government commissions to improve government operations and state finances. I also became involved in community organizations by invitation, chairing several educational and health boards to contribute as a citizen.

David Anderson At 40, you returned to the classroom for executive education at Stanford. Why was that? Charles Curran In my view, to be effective, one needs to have a pre- paredness to examine the status quo and identify areas needing change. While this in itself creates challenges for companies and leaders, it is essential. I wanted to learn the state of practice and theory in corpo- rates around the world to broaden my perspective. The experience was transforming and helped me considerably.

David Anderson Was there a formative experience at an early stage in your career that caused you to think carefully about corporate governance? Charles Curran Yes, I was asked to come in as chair to sort out serious issues concerning the future direction of the Medical Benefits Fund of Australia, a not-for-profit mutual that provided medical insurance for its members. The fund had been established after World War Two, by doctors, who did a good job meeting community needs. As it grew, it continued to be controlled by doctors, not by those who contributed the money. This led me to think about the longer-term governance of organizations—how they should be led and the consequences of not getting it right. Governance involves the selection of a board account- able to the contributors of money, not just the members—in this case the doctors. The democratic outcome of one vote per member resulted in other mutuals becoming politicized organizations; they did not ben- efit from having large shareholders who could assess the situation in an experienced and professional way. With the aid of outside advisers, I recommended a governance model that instituted a member-elected electoral college that appointed the board under the supervision of three incorruptible and unpaid governors. This scrutiny ensured the board was responsive to needs of contributors.

David Anderson In discussing corporate success, the costs to direc- tors of their service are rarely raised. What are the sacrifices you made to provide your leadership? Charles Curran First, and inescapably, one faces a significantly heavy workload. When I could, as chair, I reviewed the amount, quality and style of material the board had to consider. Undistilled, it could be over- whelming. I sought to provide information to independent directors

The Director’s Chair

Charles Curran

that was manageable to analyze and adequate to take decisions. I called upon expert, outside advisers and ensured a proper recognition of the role of the board so that we weren’t drawn into management. My task as chair was to make sure diligent directors could properly discharge their responsibility. Second, the increasingly public role required of chairs and direc- tors can be an unexpected burden. It can force you into a greater role in public debates than you might have chosen. For example, when I chaired an investment group with tens of billions of dollars of invest- ments, we faced pressure from some stakeholders to take certain posi- tions on ethical and environmental questions when they couldn’t get leaders in the political field to do so. Unlike politicians, directors are at risk of legal suits as a function of their decision-making.

An important role for the chair is to ensure a proper relationship between the CEO and the board. I endeavoured to fulfill that role by ensuring I was available to the CEO and had the ability to discuss ideas privately as a sounding board.

David Anderson How do you think of the role of board chair? Charles Curran I start with the proposition that the chief executive, ap- pointed by the board, is the person who should be running the com- pany. Immediately, you then recognize the need for an accountability function. Corporate governance arises because of the split between the owners of businesses and managers of businesses. In an earlier era, this was not an issue. But when you have providers of capital who are not the people running the company, you have the issue of how you will organize the relationship. The shareholders need representatives, who are the directors. In Australia, invariably, we have a distinction be- tween the chair, not having executive responsibility, and chief execu- tive. An important role for the chair is to ensure a proper relationship between the CEO and board. The way in which I endeavoured to fulfill that role was to ensure I was available to the chief executive to discuss ideas privately as a sounding board. I wouldn’t give any commitment to the CEO concerning those ideas, other than they would be considered by the board. I worked with the CEO to ensure there was an effective board accountability and approval process.

David Anderson Is there a caution you would offer chairs in manag- ing relations with the CEO? Charles Curran Other than in crisis, be careful of not being in lockstep with the CEO, so as not to deny other directors from participating in decision-making. Maintain a respectful relationship, avoiding becom- ing too close. Also, the board and chair will have discussions on succes- sion, which can be awkward if the chair and CEO are too close.

David Anderson How did you deal with the added pressure on chairs and boards to deliver economic performance, particularly as measured by share price? Charles Curran The big issue that arises is the short-termism of much of the investing community. Many investors are large organizations

that are accountable on monthly and quarterly bases to their inves- tors—so they put pressure on their investee companies to get the share price up. Yes, share price is how we measure economic progress, but it’s a short-term measure. There is a tension between looking at share performance to satisfy shareholders who are short term in outlook and trying to build sustainable value. Accordingly, companies need to edu- cate investors to show potential long-term benefits. At the end of the day, corporations are there to serve the community in terms of provi- sions of goods and services and creation of community wealth. In the modern era, so much of the equity in corporations is owned by retire- ment funds; their success is a community objective served by compa- nies and directors.

David Anderson As chair, you sought to lessen the compliance workload while enabling your boards to contribute greater gov- ernance value. How did you do that? Charles Curran Simply put, I set up structures for much of the compli- ance work to be done by others. For example, with Perpetual, which had operated primarily as a trustee, we decided to make our investment ser- vices available to a wider group of clients through investment products. This required the issue of prospectuses. Signing off on these prospec- tuses became an undue time commitment , so we set up separate boards with skilled people not drawn from our own board. Our board oversaw the process and auditors made sure the documents were reliable. As a result, we freed up directors from tedious but important work, to con- cern ourselves with even more important work. A second example is QBE, a global insurer of which I was chair of the audit committee. QBE operated in 30 countries and by habit we looked at voluminous audit reports from various operations on a cyclical basis. This was valuable, but ate up our time. So we required our external auditor to review all internal audit reports and provide the audit committee with a two- page synopsis, highlighting items they thought we should look at more closely. The full reports were tabled at audit committee meetings. This freed us up for bigger-picture work, primarily to do with the actuarial reports addressing estimations of losses and related trends.

David Anderson For many years you’ve served on Goldman Sachs’ board of international advisers. How would you characterize the role of investment banks and private equity in the capital markets? Charles Curran Private equity performs a valuable role in ensuring dynamism in capital markets. Companies often are unable to demon- strate to shareholders a sufficiently attractive outlook to achieve a good share price, but private equity can see greater opportunities by way of restructure. In practical terms, private equity interests buy such a com- pany, make the change and re-float it, having made the company ready for public capital. Investment banks are uniquely positioned to aid businesses by bring- ing ideas for growth, hedging liabilities and arranging financing to en- able corporate growth. Few companies have these varied and valuable skill sets resident within them. I constantly see valuable advice given to corporates to assist them determine strategic direction and pursue business development. Large, well-organized investment banks bring demonstrable value to the economies and financial markets in which they operate. Goldman Sachs keeps large amounts of surplus capital to provide billions of dollars on short notice to enable business opportu- nities. Some investment banks failed in their risk management leading up to and during the global financial crisis, demonstrating the need for

The Director’s Chair

Charles Curran

a strong regulatory environment. Goldman Sachs makes huge invest- ments in its risk management processes and this expertise helps clients manage their risk, too, bringing great benefits to clients.

David Anderson In future, how can boards improve their perfor- mance to provide a higher quality corporate governance? Charles Curran While the corporate sector is generally well led, I would like to see greater recognition of the merits of performance evaluation for boards and limited tenure of directors, so that others can make their contribution. Formalized annual review of board performance can identify gaps in experience important to proper board functioning, as well as identifying underperforming directors. Sometimes people will be disappointed, but a board needs experienced people who, as direc- tors, accept that the environment and company are changing and that what was right 12 months ago may not be right now. They must accept their fit on the board may not be right, and despite their self-interest we must go to the fundamental need for change to achieve the right skill set. The use of consultants here can be valuable in bringing dispassion- ate and respected views on these matters.

Investment banks are uniquely positioned to aid businesses by bringing ideas for growth, hedging liabilities and arranging financing to enable growth. Few companies have all these valuable skill sets resident within them.

David Anderson How can boards help companies lead change through innovation and adapt to change in the environment? Charles Curran The rate of change is enormous and profound. It raises the question of what sort of organization should the board be endeav- ouring to create—and how will it enable the company to survive, grow and prosper, and not be left with legacy businesses losing value. Boards must put a premium on looking forward to identify and understand changes in technology that will equip them for the future. In an earlier time, planning involved looking at business operations and examining how to expand them by scale or geography in a linear fashion. Physical resources and quality management were needed to grow organically. Today there’s the same need for organic growth, but organizations also need to be built to be adaptive. They must rapidly see emerging trends and change the organization itself to survive and take advantage of opportunity, often beyond the extension of the cur- rent business. At the board level, directors need more than informa- tion; they need the mental ability to think in this wider context. Do we understand this well enough to survive and prosper?

Do we understand this well enough to survive and prosper? David W. Anderson, MBA, PhD, ICD.D
Do we understand this well enough to survive and prosper? David W. Anderson, MBA, PhD, ICD.D

David W. Anderson, MBA, PhD, ICD.D is president of The Anderson Governance Group in Toronto, an independent advisory firm dedicated to assisting boards and manage- ment teams enhance leadership performance. He advises directors, executives, investors and regulators based on his international research and practice. E-mail:

david.anderson@taggra.com. Web: www.taggra.com