The issue with Australian directors

Being a director means more than coffee and cake!

The types of directors and the pools from which they are drawn from clearly lack diversity, new reports from Australia propose. Recruitment firm, Blenheim Partners' Gregort Robinson & Dr Brett Wright in Macquarie University found that failure to consider more than gender diversity on a board of directors is significantly limiting the pool of potential directors and employee career prospects.
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Moreover the study found that directors are now operating generally only within an employee capacity. This means that they operate as necessary to maintain capacity. This means that they operate as necessary to maintain their jobs. As a consequence business ventures with greater risks are often rejected by big firms looking to invest. Clearly Australia which is already isolated from other economies is suffering from this complete lack of risky business venture.

The report also suggested that directors were now operating more as business employees than actual representatives of a company. As a consequence we have lost the 'arms and legs' of the business personality and instead employed a variety of guards that keep the business afloat instead of growing.

In Australian business law (contained within several pieces of legislation, particularly the Australian Competition and Consumer law – also please note it is accompanied by much common and case law) there is a legal principal known as the 'veil' this veil exists between a business and its operators. Of course, a business in order to have a usable veil must be incorporated – meaning that the original sole trader or partners extract themselves from the heart of the business in order to manifest as new body which is a non-human trading individual.

For example if I started my own sole tradership called The Underage Lawyer's Coffee, the simplest form of business, I could later incorporate it. In doing so, any debts or profits or trade agreements become part of my financial status. Once the business is incorporated the business becomes a company but it then takes on the ability to create and finish its own contracts.

Yet every person knows a company can not act by itself, hence directors become the metaphorical limbs of the new business body. Hence when a company only operates within the movements necessary to ensure the continuation of the business into the fortune. Clearly many businesses will prefer to remain in business than to look for the means by which they can increase their wealth or support innovation.

The Australian Bureau of Statistics suggests that Australia has lowering levels of innovation in key industries such as manufacturing and retail. This decrease has ongoing rollover effects on employment and living standards. Many people may not stop to consider the overall impact of investment – but programs such as crowdsurf or kickstarter highlight the importance of investment in innovative – although non-traditional- business concepts.

Clearly products such as the pebble smart watch, android gaming console (Ouya) and MaKey Makey would not exist without such support. These products are some of the great stepping stones for our economy to reach increased levels of commericial innovation. Where Australia falls in this support is that our directors are not looking for how to use the company as a means of bettering not only their affiliates significantly but to advantage the surrounding economic climate.

Many business and legal experts have dubbed the phenomenon of helping non-affiliates to better the economic climate corporate philanthropy. While probably closer to patronism in some ways it is a means of advantaging the economy for long term benefit.

This is most likely unpopular with today's director boards because in their capacity as directors they are working constantly to keep their job.

The reasonable person would assume that given directors should only operate for the good of the company by operating in their own interest they are actually failing their duty to the company. Of course with Australia's tight laws on corporate negligence it is often difficult to prove that taking a risk on innovative investments was for the reasonable benefit of the company. But directors must first become the limbs of the company and not its employees. Once this has been achieved the law of Australia can change to provide room for innovative investment.

Given that it will be difficult to prove that the investment made by a company was for purposes of helping a potentially beneficial innovation to enter the market – as fraudulent schemes are often covered by such reason – the government or business industry supervisor must create a certificate of authentication for whatever businesses are recommending themselves to investors. Similar to when a company enters the stock exchange a series of papers and tests and regulations must be performed to ensure that there is no fraudulent behavior existing while the business presents itself to business.

Factors that would be important for the government to consider when forming this scheme: 

1. the leader of the business
2. results previous dealings
3. current capital
4. financial situation
5. Applicability of suggestion
6. Potential sales
7. Any limitations
8. Potential issues/dangers
9. Any necessary certificates
10. Connections or affiliations however small to other businesses.

Australia has much work to do in order to draw in a new breed of businesses. The businesses required would be companies that work with a diverse board of directors who collate their view points in order to manipulate the movements of the larger enterprise. These movements must comprehend the importance of supporting the economic climate and creating a philanthropic culture that perpetuates innovation and entrepreneurship.