TMTYB S01E02 Transparency and Accountability TRANSCRIPT

TMTYB S01E02 (Transparency and Accountability) This is Take Me To Your Board, a production from the Tasmanian Council of Social Service. This show is not only for current and aspiring board members, it's for anyone who wants to hear from some of the country's best about how a good board really works. Each episode is based on one of the 10 principles of good governance for not-for-profits as laid out by the Australian Institute of Company Directors.

Responding to current social distancing needs, this episode has been recorded remotely. Hosted by Bridget Delaney and Cameron Allen. This is episode two, Transparency and Accountability.

Bridget Delaney: Hello, and welcome to Take Me To Your Board. My name is Bridget and I'm here with my co-host Cameron.

Cameron Allen: Hello everybody and thanks for joining us. So today we are going to be exploring principle seven of the Australian Institute of Company Directors' not-for-profit governance principles, transparency and accountability. We'll start with what happens when the principle doesn't go well and afterwards, the part you’ve all tuned in for, look at how it could be done better with our special guest.

Bridget Delaney: Before we dive straight into the topic. I just want to run through what we mean by transparency and accountability. The terms sometimes feel quite vague and ambiguous, but the difference between doing it well and not, can be quite dramatic. So let's be clear about what that means first. Referring to the AICD principles, they describe transparency and accountability as the board's role to present a fair representation of the organisation's activities and take responsibility for the consequences of their actions and the organisation's performance.

Bridget Delaney: In summary, the buck stops with the board and they need to own that. To see how not to do it, let's look at the Yahoo board 10 years ago. Yes, we are talking about the pioneering web service provider from the nineties. Yahoo is a search engine and news provider and a web portal struggling to find its place in the world next to Google and Facebook. Carol Bartz, the CEO who was hired to turn the organisation around, worked to clean up the internal structures and explored partnerships with alternate companies, namely Microsoft. Unfortunately for Bartz, her vision and the vision of the board didn't appear to align, as talented staff started to leave due to a lack of innovative direction and loads of opportunity elsewhere. At Yahoo's annual shareholder day in 2010, stakeholders, investors, bloggers and analysts all publicly declared their annoyance at the organisation, blaming Bartz for the failure to keep up with modern innovation and highlighting Yahoo as a stodgy internet portal. The board publicly supported Bartz’s decision, only to fire her three months later. By all accounts, the firing wasn't pretty and strong words were had. With me so far?

Cameron Allen: I think so. To quickly recap, Yahoo hired the CEO to make changes. The CEO made changes that didn't meet the expectations of the stakeholders, namely the employees and shareholders. The board backed the CEO publicly, but then fired her abruptly soon afterwards. How is this a failure in transparency and accountability? Hiring a CEO that isn't quite the right fit happens all the time; inevitably people make TMTYB S01E02 Transparency and Accountability Transcript by Rev.com

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decisions that don't always work and the speed of change and innovation can be difficult to keep up with.

Bridget Delaney: That's correct. That is all true. What we want to focus on here is the fact that shareholders felt the need to publicly shame the CEO. With good transparency and accountability, there are plenty of mechanisms that should spark this concern before it needs to be a public hunt. That goes both ways. If the board were aware, which they should have been through their relationship with the CEO, that the stakeholders weren't happy, they needed to approach that issue from their end. Not send out a dummy. Let's look at the principle. Accountability has two components. The first is answerability, this is providing information for how one's actions aligned with expectations.

At Yahoo, the board did not have answerability. They didn't communicate well enough to their stakeholders, the intention they had for hiring Carol. The second complainant is enforcement, which is being subject to and accepting the consequences of failing to meet these expectations. Lucky for Yahoo, they had a CEO they could use as a scapegoat and dispose of. So then we had transparency. For this to be achieved, an organisation must provide information about its activities and governance to stakeholders that is accurate, complete, and made available in a timely manner. If this had been true for the Yahoo board, maybe they would have been made aware of the disconnect that was growing between the organisation and its external and internal stakeholders. It is hard to be accountable if you aren't being transparent.

Cameron Allen: Alex McKenzie is our guest on the podcast this week. Alex was previously Vice-Chair and Secretary of the Wyndarra Health Centres committee of governance and is a longstanding member of TasCOSS, where he is the current Board President. Alex graduated from the University of Tasmania in 2013 with a Bachelor of Arts and Bachelor of Law with Honours and now works as a civil litigation and criminal defence lawyer in Burnie, as an associate at McLean McKenzie & Topfer. He serves on a number of boards and committees along the North-West Coast, including as a member of the Tasmanian Community Fund and as Chair of Ten Days on the Island. Alex, welcome. How are you?

Alex McKenzie: I'm well, I'm currently in isolation due to the COVID-19 restrictions on the North-West Coast, but otherwise I'm perfectly fine.

Cameron Allen: Not the ideal situation to be in, but it's good we could get you on the podcast. First, I'd like to hear your take with regard to the actions of the Yahoo board. What could they have done differently that would ensure that they were transparent and accountable considering that they clearly had differing views from their CEO? How do you think that scenario could look a little bit different?

Alex McKenzie: Well, I think the first thing to note is all of the reporting around that Yahoo board decision that I came across, was that at the initial stages that CEO was appointed to essentially begin and take Yahoo through a period of pretty significant change. Now, from my own personal experience, periods of significant change require really careful management. Not only from obviously a CEO internally and externally, but also then that relationship and from your discussion last week, that communication between your board TMTYB S01E02 Transparency and Accountability Transcript by Rev.com

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and you CEO becomes all the more important when you're going to be putting staff and stakeholders under more pressure.

I suppose the first thing that I would say would be that clearly that communication channel was poor, particularly when you read much of what was said about it becoming essentially public and then toxic after that really disastrous AGM. So then when we returned to our principles from the AICD governance fundamentals, and we start looking at the way that answerability and obviously then enforcement play together, I think we'd probably say at least at the first point that the communication between the board and the CEO was poor and that could have been poor in that the relationships became toxic after the meeting or sure. But I think beforehand, if you're not having honest open conversations with one another, particularly between your Chair and your CEO, then you're going to go south very quickly.

Cameron Allen: You raise a good point with me when we were speaking previously about difficult conversations, not necessarily needing to be negative ones. Could you explain that a little bit more?

Alex McKenzie: Well I suppose, I hope one of the strengths that I bring to the board in that as a civil litigator and obviously criminal defence lawyer, I spend a lot of my time having to give people news they don't want to hear. And so you work out a way to do that, that hopefully doesn't ruin your relationship with them. I think that's something that's really important that a Chair and through them, a board and a CEO, can have a relationship where either the Chair or the CEO can pick up the phone and have a conversation that's going to be a difficult one. But it doesn't need to be that then their relationship becomes toxic and unworkable.

Obviously when you're leading organisations and my experience is on a much smaller scale to Yahoo, of course it is. But when you're leading organisations that involve people in positions of key leadership like when you have a CEO or key managers, like some of our members do at TasCOSS, those conversations between board president or Chair and CEO become all the more important. Because like what you touched on last week, you can have managers who don't have key executives around them, who don't have in-house expertise available to them to provide that operational support that might otherwise be available in larger places.

If you don't have that relationship whereby a difficult issue can be brought to the board, like say at Yahoo, we're going through this period of change. We're noticing that some really key staff are leaving or we're noticing that the goliath in the room being Google is performing so much better than us and we don't know how to catch up. Then you're going to be able to move forward in a much more strategic way, which is obviously the key focus of the board being the institutional health of an organisation and institutional health obviously at its core comes down to people, in my opinion. Because what is an organisation without the people that work within it? If you've got a situation where a CEO is leading change in a really fundamental way and key high-performing staff are saying, we're not on board, then even if that changes for good, then something in the communication and messaging is going awry because they're not on board with that change.

Cameron Allen: Is that important where it's good to see things through the eyes of an employee?

Alex McKenzie:

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Yeah. I really think it is. I think that probably that's something that our sector has some real strength in.

In that, we come to, and I think I can't say I speak for all board members across the sector of course, but my experience in the sector is that so many of the people that put their hand up to volunteer on our community service boards, as so many of them are volunteer, that they really do want to give back. The reason they want to give back is that they can see a bit of a gap or they can see that they can provide some assistance. I think one of the key reasons that those boards can be really effective is that many of those people come from their day jobs whereby they might have a role at a local council or at another health centre or an aged care facility, or perhaps a local GP is on your board providing some care advice for policies around treatment.

Alex McKenzie: Particularly in the current climate, we can see how important that would be and if they can bring their lens of having worked somewhere else with their own employers and their own needs to cover off on requirements to ‘higher ups’ dare I say, then when you then sit at a board table and bring that viewpoint to the fore in terms of how you then try and lead the organisation through policies and strategy. It can help you to see how those decisions might be not only initially received, but what the real impact might be on their capacity to work and live. For example, if I think about what's happened in the immediate past for us at TasCOSS, obviously the decision to work from home was a significant one. Obviously, we're not providing frontline services and certainly an appropriate operational decision to make by acting CEO's.

But in that decision, we touched base, we spoke about how the staff are going. We continue to speak about how the staff are going, and in my role as board Chair, part of how I've tried to be accountable and transparent, I suppose, in terms of assisting the CEO's and therefore the staff through what's a really challenging process. I make sure that I then start to check in more because I know that in my day to day work as a lawyer, I like it when my managers and the partners of my firm check in and say, look, you're working from home. How did that go? How's your set up? Are the servers working correctly? Are you liasing okay with courts and those sorts of things? And those questions immediately trigger your mind to think I need to make sure that I continue to do that in my role as Chair of TasCOSS's board.

Cameron Allen: You spoke a little bit about some difficult scenarios where you had to have some conversations at a CEO level, in your experience as a board member and a president, what times do you think it is important and when can it be the most difficult to ensure that you're being transparent and accountable?

Alex McKenzie: Well, I think it is in those times of crisis, because I think that there is a desire to make sure that the board who are the employers, I suppose, and providing the strategic leadership as best they can have faith in the CEO's capacity to lead. If something's going poorly, then that can be a difficult conversation to have.

Cameron Allen: Yeah. How do you manage conflicting pressures? Be it internally and externally?

Alex McKenzie: In terms of conflicting pressures, an organisation like TasCOSS is a really good example of just how complex something can be or a role can be for the person experiencing it. If we think about all of the TMTYB S01E02 Transparency and Accountability Transcript by Rev.com

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stakeholders that the CEO of TasCOSS has to manage, because in reality, that's what good transparency and accountability I think looks like, which is solid, clear, and effective communication. Both internally and externally. So internally you're going to have pressures from yes, your staff in terms of their needs.

Both from a substantive work production perspective, but also a health and wellbeing and workplace relations perspective. You're also going to have your own pressures as the CEO of your role, and what's required of you from your board. And then obviously TasCOSS as a peak, has its members that it's answerable to. Then if we look externally, we've got our funders, we've got our role as key advocates in the Tasmanian and national conversation around vulnerable people.

And then there's that further stakeholder that we've touched on in the past, which is I think that the Tasmanian public. And so there's pressures there as well. If you're not communicating clearly and effectively, and I think we've seen some really good examples recently of clear and effective communication. I think, for example, obviously Jacinda Ardern is being held up as a really clear communicator. Daniel Andrews in Victoria. And similarly, I think Peter Gutwein here in Tasmania is doing a really excellent job in saying, these are really tough decisions that we're making, this as why we're making it, and this is what we're trying to do to address the problem. Now, you can imagine in situations where that communication isn't clear, for example, like in the States where you've got, obviously Trump is swinging from left to right in terms of what he's saying one minute, it's a health crisis.

The next minute let's open up by Easter, is incredibly confusing for people. In that conflicting pressure, I think people will accept bad news if they think that they've been heard and they understand the conflicting priority. So again, you think about some of those decisions that have been made for us. I know for me personally, working from home isn't ideal and I really don't like it. But I understand that it's really important that we pull back on our connection in a physical sense from one another to increase our capacity to deal with this coronavirus. Now, if those decisions hadn't been communicated clearly to me about why we had to do that and the benefits in other ways for that decision, I would probably just feel frustrated and upset. But that clear communication in delivering that news, makes it easier to take because you still feel like you've been heard.

So then if I bring that back to TasCOSS example, or say when I was on the Wyndarra board, I can imagine that at the moment, there are a number of really isolated people in the circular head region. I can imagine that they're struggling to deal with social isolation and what that looks like. So then as a board, what you would be saying to your staff is, well, we need to work out how we're still going to provide our key services, but how are we going to do it to make sure we look after our staff now. Is that, that we make sure that we have better facilities available, or do we provide more support in terms of that tele contact and that sort of thing. Much of that is operational. But I think it's also important to acknowledge that from a strategic point of view, it's important that a board be across that. At least in an information sense so that if the CEO starts getting pushed back about those things, they can provide that support and strategic leaders.

Cameron Allen: And it's interesting, you were saying you were talking a little bit about Wyndarra as an example there and how connected to your constituency a smaller organisation can be. It can be a bit of a blessing and a curse I guess in some ways.

Alex McKenzie: Absolutely. I think that that brings some of the difficulty to the fore in terms of those difficult conversations because you might be at a board table and your CEO might actually be a personal friend of yours and they've asked you to come onto their board to provide some, for example in my context,

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some legal skills at the table. If the board are looking to try and have a bit more of a skills-based board.

But then as part of my role as a board member, I notice some regulatory issues that are popping up and to then have that conversation with that CEO who is also a personal friend, might be really tricky.

Now, if you have a good board culture where it's robust, like I think we do at TasCOSS and certainly on other boards that I sit on too, where it's okay to ask questions. Asking a question in regards to performance or regulation, or some of the really key reporting requirements of boards, whether it be your annual reporting, or for example for us at TasCOSS, the funding arrangements with government. If your culture at the board where you can ask those questions, but maintain a really, really healthy, constructive conversation, then that's a good thing.

But if some of the smallness of your community is stopping your board acting in that important oversight function that it has, and there's no dancing around because the institutional health requires there to be that oversight. And so you've got to sometimes say, well look, I think we really need to work up a policy and not all policy needs to be dense and dower. It's just also about communicating internally with your stakeholders about how you're going to operate. So for example, when I think about risk registers and making sure that related party transactions that are disclosed. That doesn't need to be a big or difficult thing. So in a personal example, I can certainly see that it may be that my firm that I work for are asked to undertake legal services for one of the not-for-profits I sit on. Now obviously, it would be important that the board and stakeholders are fully abreast of any of that work that's done.

If it's done, it would need to make sure that it would be done in a way that it couldn't be seen that I was taking some sort of personal or pecuniary benefit that was inappropriate. Some organisations in their smallness can find it difficult to have rigor around those processes of conflict. And I think that, that's understandable, but it's certainly something that boards need to be turning their minds to regularly.

How do you know the person that is going to be doing the building work? Is it a cousin of the CEO or a brother or a close personal friend or a key manager? And it may be that them getting that building contract is appropriate, but it may also not be appropriate if they're not actually competitive or they're not actually the best person for the job. Those are the questions that I think are in a real way, need to be asked.

You can imagine that can be asked in a polite, healthy way. Like, I think we should get a couple of quotes and just make sure that this is all above board. Rather than are you just appointing them cause they're your mate? The delivery is clearly a key factor. Much like if I'm going to have to give someone the legal advice that they need to ready themselves for jail, I'm not going to be doing that when they turn up to court. You need to give people time to take on board those difficult conversations and have some time to reflect and come back.

Cameron Allen: What does support mean to you? Accountable and transparent support, it's obviously not all back patting is it? It's constructive feedback, strong communication channels, plenty of things you've touched on. I guess, could you summarise in a nutshell what does support mean to you?

Alex McKenzie: Well, I think support from me, and again, this is my personal preference. It's regular, it's open.

Sometimes that's good news and sometimes it is a pat on the back. Obviously our CEO's at the moment stepped up into a role at a really challenging time with no foresight that it was going to be as difficult as it has been with the coronavirus. My efforts to support them regular contact and much more regular than I would in a normal setting. We're checking in weekly and it's sometimes as informal as some text messages between the three of us to make sure everything's ticking along. It can also be something a bit TMTYB S01E02 Transparency and Accountability Transcript by Rev.com

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more formal like asking the CEO's to provide me with a report to take to the board about where things are at. And then as part of that, I can then go back to them and say, look, there's a few holes here, or there's some questions we have that we need covered off on the basis of this report.

Support I think really is about finding a system that allows you to make sure that you're aware of the good and the bad that is happening within your organisation and the tricky stuff. Because sometimes the tricky stuff is neither good, nor bad. It's just tricky and you've got to work with the skills that you have. I think about our board table. I recognize that my skills that are legally based, that governance principles leadership from a high level. But do I know intricately what it's like to be a CEO of a not-forprofit? No, I don't. For that support, we look to other people that are deeply involved with our organisation. Sometimes that's externally, like ex-CEOs or current CEOs of member organisations.

Sometimes it's other board members who have a really diverse and impressive array of skills and knowledge that I simply don't have. It would be unsupportive of me as a Chair to say to our acting CEOs. I am to be the only conduit between you and support. All support is to come from me and if you can't get it from me, then you're not going to get it. That would be entirely unhealthy.

Cameron Allen: Yeah. Georgie spoke a little bit about that last week. About harnessing the skills of the people you've got on your board and at your disposal to cover off on a lot of different bases with respect to where you might not have all the knowledge yourself.

Alex McKenzie: Yeah. I think that it's just so important to do that. I think it's so important to have a board and an organisation that has a culture of sticking its hand up and saying, I recognise there's a gap here. It's a gap that I can't fill, but what I can do is make sure that you as the CEOs and we as an organisation are surrounded by the expertise and the knowledge that we need. I think it's really scary when you hear of organisations who are facing really significant strategic hurdles. For example, in recent years the rolling out of the NDIS and the NDIA, really significant structural challenges in terms of funding models for our members and some of our members. And to hear and see examples of organisations not reaching out for assistance and expertise to manage those really significant challenges is a cause for significant concern. You would be looking to the board to say, you need to make sure that you're asking the questions of your staff. Constructive, in a useful way to say, let's get the expertise around you so that we can continue moving this place forward.

Cameron Allen: Yeah. Exactly right. Before I let you go back to quarantine, to round it out, what are some practical things, perhaps the fundamentals that boards can do to make sure they are being transparent and accountable?

Alex McKenzie: Well, the fundamental things start at things like newsletters to stakeholders. That might be a membership like TasCOSS has. It might be through communication via press releases or statements about important changes and important work that's going on. You then obviously go up to annual reporting and financial reporting and general meetings and those more formal methods of relaying information to the people that have an interest and an investment in your organisation. I don't think investment to be thought of as purely financial, because obviously in our sector, there are lots of people that invest in a multitude of ways and not all of it, and I would say most of it is not a purely financial

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sense. You're talking about volunteers, you're talking about the public that want to see certain issues agitated. You want to talk about making sure that your organisation hits those cultural and institutional markers of what the people invested in your organisation and have.

Cameron Allen: Well, Alex it was a very insightful chat. Thanks for joining us on the podcast.

Alex McKenzie: Pleasure Cam. Thank you.

Bridget Delaney: What a great local voice for our boards. What he was talking about, about accountability and transparency, being timely and clear with communication, having difficult conversations and not necessarily unsupportive and indeed necessary to further this strategic plan of an organisation. And as well, being open in the communication around what that means for the stakeholders at all levels. I think that was a really wonderful way to think about transparency and accountability, helping to better communicate between one organisation is doing and those that are invested in them. As you were listening, that particular principal waves in and out of what the AICD recommends through their other 10 principals. There was skill-based boards in there. There was board culture. CEO on board relationships and stakeholder management. I think what we're getting the feel through Alex today and through Georgie last week is that they are all interwoven and play a big role in each one of those. Thank you Cam for being the wonderful interviewer for today.

Cameron Allen: Thank you Bridget.

Bridget Delaney: We look forward to the next time we get to attend your board meeting.

Take Me To Your Board is produced by Ikin Media for the Tasmanian Council of Social Service. It's presented by Bridget Delaney and Cameron Allen. Music is from tide electric. With special thanks to Alex McKenzie. Please follow and subscribe wherever you get your podcasts to make sure you don't miss the next episode of Take Me To Your Board.

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