Matters Arising that Actually Matter

[00:00:00] Intro: Welcome to Minutes by boardcycle, where in each episode we pack the insights from one of Australia's boardroom leaders into just a few minutes.

[00:00:10] In today's episode, Richard Conway interviews Julie Coates, director of Wesfarmers and former CEO and Managing Director of CSR about how Chairs, CEOs and company Secretaries should approach board actions or matters arising.

[00:00:27] Richard Conway: Welcome to Minutes by boardcycle. I'm your host, Richard Conway, and today my guest on the podcast is Julie Coates. Julie is an experienced non-executive director. She's currently a director of Wesfarmers and a Green Building Council of Australia, and formerly sat on the boards of Coca-Cola Amatil and Spotless.

[00:00:45] She's also a highly experienced executive, having led CSR through its takeover as CEO and Managing Director and holding Senior Executive roles at Goodman Fielder and Woolworths. Welcome to the podcast, Julie.

[00:00:58] Julie Coates: Thanks, Richard. Thanks for having me.

[00:01:00] Richard Conway: So, Julie, today, given your experience on both the non-executive director side and the executive side of the board table, I wanted to dive into a practical topic with you, which is about board actions or matters arising.

[00:01:15] They're often a source of frustration for management and I think sometimes for the board as well. So, to open, I wanted to ask you, how you thought about matters arising, board actions, when you were a CEO, and whether that's changed now that you've moved into I guess, the non-executive phase of your career?

[00:01:35] Julie Coates: Yeah, thanks Richard. I think this is a great topic. I think the action items or matters arising is a critical outcome of any board meeting. And I think that's true whether you are a CEO or a non-executive.

[00:01:51] I think there are two things that are really important. That the actions or the matters arising are documented in a way that is accurate and we'll kind of come back to that.

[00:02:00] But also, the actions that are noted, add value. So, it's got to take the business forward or it's got to help resolve the issue, or it's got to help the board determine a decision. I think that's really, it's got to be for a reason. There needs to be a purpose.

[00:02:17] And one of my style things, even in this day and age, is I'm very much pen and paper and keep my own notes. So, as the CEO and Managing Director, I kept my own notes and I kept my own action items and my own list. And I now do the same thing as a non-executive director and I cross-check that with so at the time as CEO and Managing Director with the company secretary, Making sure that that lined up, and as a non-executive, I crosscheck that with the first draft of the minutes that comes out making sure that I believe what's being captured has been captured. So, I think it's really important.

[00:02:51] Richard Conway: And perhaps, before we go on to what you do to do this well, what do you think is a bad way of dealing with board actions and what have you seen that you think is really bad practice in this space?

[00:03:04] Julie Coates: I think rather than bad practice, I'd just say less effective than it might be is when a CoSec takes everything down in the conversation that a board, you know, a non-executive director might request something in the context of a conversation and that becomes an action item.

[00:03:19] But actually, the request evolves or the discussion evolves, and actually the context is really important. So action items without context can be really unhelpful.

[00:03:32] So, it's the ability to stand back from the conversation and everything that's actually stated and rounded up to an action item that A, is in line with what the board has requested. Because that is important from a, credibility point of view. But also, adds value.

[00:03:51] And so, you have to be a very disciplined thinker with respect to that and you have to be on. Like, you can't be a passive listener to the conversation. You have to really lean in and actively listen to what's going on.

[00:04:07] And a good chair, and I think an effective CEO, if they believe that what's being requested is not going to add value, will actually continue to evolve the conversation to develop it into something that is an action item that does add value. So you kind of got to wait as well.

[00:04:23] And so not everything that's asked for should make the matters arising kind of list by definition because it's evolved over time. I hope that kind of helps Richard.

[00:04:34] Richard Conway: Yeah. And so, a follow on from that is, if you were giving advice to a company secretary, and it sometimes can happen that in a board of eight or ten people, for example, directors will ask for lots of different things and you might capture a lot of different actions, small and big.

[00:04:52] What do you want your company secretary to be doing sort of editorially to decide what is value-add and with the things that don't make that list, are you expecting them to sort of manage that in a separate way or just drop them entirely?

[00:05:07] Julie Coates: Yeah. Look, if it needs to be recorded and it needs an action, it needs to make the list. So, there shouldn't be two lists. There should just be the list of things that need to be done. I'd encourage the company secretary to have a conversation with either the chair or the CEO or both, to kind of work it through so that by the time it makes the draft minutes, it's kind of 90% of the way there.

[00:05:32] Because it can be very difficult if all of those action items make the draft minutes, then the CEO or the chair have got to, kind of, do all the disciplined thinking. I always think a conversation can be quite helpful early on post the board meeting just to say, "Okay, that conversation, where do you think that landed? Where did I think that landed? Where did the chair think that landed? Okay, let's agree, this is the action item that comes out of that. And then I don't think there's a secondary list.

[00:06:01] Richard Conway: Yep. And so, would you encourage then CoSecs to try and get time with the chair and CEO perhaps like, maybe not immediately after a meeting, but very shortly after a meeting to just kind of run through the list of what they might have taken down and be clear with them that of the 10 things they took down, maybe there's only five or six that really make the list.

[00:06:23] Julie Coates: Yeah, and I would, I guess you'd expect, well, I know why I say this because it's recent, as Managing Director, I would suggest you start with the Managing Director.

[00:06:33] Because that's the role that has the breadth of knowledge of what management has done already. So, sometimes boards request things to be done, even Chairs, Management's already done that work - it just hasn't got to the board paper. And sometimes, the board just needs to know that work's being done. And if they want to see it, it can come back to another meeting, which is fine, right?

[00:06:56] But the Managing Director is going to have the broadest view and the best context for what should actually make the matters arising.

[00:07:05] Richard Conway: And Julie, while we're in your, sort of in the zone of the Managing Director sitting in the meeting. When you hear the board or perhaps a particular director going down the path of something that you think is just not a priority or is not going to be critical.

[00:07:21] What are you trying to do? Are you trying to close that off in the meeting or is that something that you might let go through to the keeper and then deal with the company secretary and that director after the meeting?

[00:07:33] Julie Coates: Yeah, look, my preference is always to deal with it in the meeting. Because I think it's important for all directors to hear the conversation of what happened as a result of that request. Because otherwise you can get yourself into this position where you only deal with it with that Director, but other directors think it was important, but because it was raised, they think it's going to be dealt with, if that makes sense.

[00:07:52] So I, my preference is to deal with as much as you can in the meeting. And what I tended to do is ask the next question. So, what is it that you are looking for in requesting that piece of work to be done? What are you trying to find out? What value do you think that will add in terms of the critical path or in making this decision and kind of explore it a bit further so that the request potentially evolves?

[00:08:18] And I think that does two things, that it makes sure the directors know that they've been heard. But also that management's trying to get to the nub of the issue and provide the information that's required, and nine times out of 10, there is some more work to be done.

[00:08:35] But the work to be done as a result is much more specific to the question that the board is asking or the information they need in order to make that decision, rather than a far-reaching piece of work. Which may or may not add value. And every now and again following that conversation, it will be the chair will say, okay, we've heard what management said.

[00:08:56] I think on this occasion we don't actually need that and the board actually does have what it needs. So, my style is to be very direct about that and I think if it's an effective board, I think the conversation is far better in the room.

[00:09:12] Richard Conway: And Julie now, I guess getting you to put the non-executive director hat on, has that changed your view at all around - it's a device, I suppose that gives you an ability as a director to investigate into areas that management may not have given you enough information on - have you changed your perspective on how you think about these actions at all? Or what are appropriate circumstances to raise something up, I guess.

[00:09:37] Julie Coates: Yeah, look, I obviously you've got a different hat on, but I think the principles are the same: does it add value? And where is it gonna add value? And so I think as a non-executive director, I would encourage us to continue to be specific about what it is we actually need in order to make that decision.

[00:09:56] Or in fact, because sometimes in a boardroom there's the Managing Director's not in the room, and as I said before, they've often got the best context and information - so, the chair in that case would say, let me discuss that with the Managing Director. And then they'll agree what it is that needs to come back to the board and as I said, nine times out of ten, the work's already been done. It's just that the board hasn't seen it.

[00:10:18] I think it's a good process and people, I think focusing on what the action item is and what the matters arising is, is actually a good discipline to have when you are in a conversation because it forces you to think about well, what exactly are you asking for? Because sometimes these conversations can be a bit esoteric and a bit loose, and when it's got to be converted to an action item, then I think it puts the onus on directors about being really specific about what it is they need in order to make this decision.

[00:10:46] Richard Conway: Yeah. One last question to you on this one, Julie. If you were in a management team, say you're senior executive or company secretary, and you've just lost control of the actions or matters arising - you've got more than management can do. They're chasing their tail a little bit. How would you seek to sort of resolve that with a chair or with the board?

[00:11:07] Julie Coates: I think the first thing is it's kind of the same answer. You're probably not going to be dealing, if you've lost control, you're not going to be able to deal with that in the meeting potentially.

[00:11:14] You might say at the end of the meeting, "Could I just catch up with you chair and Managing Director so that we can agree the appropriate action items and matters arising." And then I would have all three together to agree what's appropriate. Because in that way, the chair can manage the rest of the board, the Managing Director can manage what's required for management, and the CoSec can do their job.

[00:11:37] I think one of the things I watch for and I watched as a Managing Director and now a NED, is when action items get kicked to touch every meeting. So, you have your matters arising, and then it says TBD. Well, that is okay maybe first, next meeting. But if that's still happening two or three meetings down the track, then that would cause me to ask: is it an accurate reflection of what's being requested?

[00:12:03] Or B, does it actually add value or not? Because clearly if management thought it was important, they would've done it. So I think that's cause for rethinking the validity of that action item or matters arising.

[00:12:15] Richard Conway: Yes, that's a good point I might ask a follow up question on, which is: generally expect that if actions are arising, then they will be closed out within a couple of months or a couple of meetings of being done, like there's an immediacy to them generally speaking. Which I guess might be a reflection of the fact that it is important and value add.

[00:12:36] Julie Coates: Yeah, look I think it depends on what it is. Because if it's something that needs to be done or incorporate the next round of the strategy, well then that probably should sit with the strategic planning cycle.

[00:12:49] I think the other thing that I found quite useful to do, and I think the board found quite useful, was at CSR when we had our offsite sessions at the start of the year - in their case was the start of the year because we had a March end, we had February strategy planning - all of the things that the board asked for as part of that process, or the questions that we raised, the CoSec, I would generate a list of all of those actions. And actually what we would do is take the calendar for the remainder of the year. And actually determine where we would do what. And so the board knew at the next meeting, at the March meeting, when they could expect that action or that matter to come back to them in the course of the following kind of 11 months.

[00:13:33] And that just set everyone's expectations and allowed you to be quite strategic about when you address those matters arising in the context, because CSR also had separate business divisions, in the context of the business divisions coming back to the board.

[00:13:47] And I actually, now that I kind of talk about that, I actually think that was really valuable. And I know from the board's feedback, they also found that a very valuable cadence. And I think that's something a lot of boards could adopt.