How Much Direction Can a Board Give?

When Cowan returned to the boardroom on 6 June, the immediate confrontation was over, but the issue that had provoked it remained.

The Board passed a resolution requiring the executive to report on Cowan’s contract.¹ The aim was to determine if his package was appropriate, in line with industry benchmark figures, and with companies of a similar size. The exact details were to remain confidential to all but the executive and the auditors — accepting, at least implicitly, the pre-existing confidentiality conditions of Cowan’s contract.

An important point needs to be made here. Members of the Footy Five began to joined the Board of Panthers from late 1995; all departed in late 2002. In those seven or so years, this was the only resolution ever passed on the subject of Cowan’s contract, either in relation to the remuneration itself, or the confidentiality clauses.

For at least three of those years, they had a majority. Yet, they told the Inquiry they only raised it at the second last board meeting they attended as directors.

There was certainly knowledge among directors that Phyro Holdings existed and was associated with Cowan. Evidence presented at the Temby Inquiry was inconsistent with the suggestion, made by some, that there was a knowledge vacuum within the Board around Phyro.

But, to be fair, knowledge that Phyro existed was not necessarily the same as knowledge of the nature and extent of its financial dealings with Panthers. That distinction would later become an important issue in the Temby Inquiry.

A number of meetings followed, between the board executive members themselves, and between Cowan and the executive. The second meeting, was held at the Lone Star restaurant in Penrith. An issue at the Temby Inquiry was whether Geoff James, a member of the Five and the newest member of the board executive had sighted the three Phyro contracts. Keith Rhind maintains they were on the table at the meeting, and Cowan says there is no way that he would attend such a meeting, given its purpose, without presenting all the relevant documents.

Geoff James told the Inquiry that he did not see the contracts. He did admit being told the total figure, at which, according to Rhind, he commented, ‘I thought we would be paying him much more than that’. He also scribbled the figure on one of the documents he had with him.

Temby was unable to resolve the conflicting evidence. After examining the contemporary documents and the recollections of those involved, he said he could not confidently determine whether James had been told of the Phyro agreements, shown copies of them, or both.

Temby also questioned James’ actions in faxing documents relating to the meetings and the executive’s enquiries to John Bateman. James said that when Bateman had called him to ask how everything was going, he had offered to ‘fax him some details’. Various draft copies of the report that the executive was preparing for the board were also faxed.

The written report to the Board on the remuneration package took eighteen months to be presented. . For Cowan, the delay added weight to his belief that the directors had all the information they wanted and, for the most part, must have been satisfied.²

In fact, only one member of the board expressed dissatisfaction at the package. Greg Evans says he felt it was ‘an extraordinarily large amount’, particularly since at the time, there was no mechanism in place for a performance review.

We were trying to make management in general come under the direction of the board, says Evans.

But he asks, how much direction can a board give?

Yes, it should give policy direction, but these days, it should do more. Directors have much more liability now. So they need to take more responsibility for what goes on in the company. A director of a company was put in jail because scaffolding fell down and a worker died.

For management, however, increased Board involvement could itself become a source of frustration. Glenn Matthews says the situation often got beyond frustrating and frequently cost the Club money.

Once we had an opportunity to introduce some kind of equity funding, or quasi equity funding into the group. We wanted to reduce our reliance on debt. We spoke to Westpac, our banker, who said it had a department that could take on such a project. It operated completely independently from the one that held our loans.

The proposal was carefully analysed by the management team and then a recommendation was made to the board. The Board agreed to proceed with a feasibility study at a cost of $60,000. They resolved that providing it all stacked up, we would go ahead. We spent a lot of time, and the $60,000.

The Westpac report was positive. Matthews recalls that it concluded between $20 and $35 million could most likely be raised in a retail bond issue, with minimal risk to the Club. Matthews says it would have been ‘sticking our toe in the water’. If it was successful, it would open the door to other opportunities. They took the report to the board, feeling reasonably optimistic.

The night we presented it, Craig Terry just threw his hands up in the air and said, “What are we doing this for? They’re just fucking junk bonds”.

That was it. They had the majority, of course, and that was the end of it.

No rational questions or debate, just an emotional reaction. The money, time and effort had all been a waste.

The resolution had been passed months before – if it stacks up, go ahead. Now they were asking, “Why are we dealing with Westpac?” That issue had also been dealt with before we spent the money.

And they talked about corporate governance!

That was $60,000 just thrown out the window!

Matthews concluded,

I think that might have been the night I threw the papers at him.³

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1. Temby records that the Board resolved on 6 June 2000 that the Executive should consider whether Cowan’s contract was relevant to the position, in line with industry benchmark figures and comparable with companies of a similar size. The resolution arose from the governance policy work undertaken following the Kilmister workshops.
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2. Temby noted that the Chairman’s report was not presented to the Board until 18 or 19 December 2001, more than eighteen months after it had been requested, adding: “I do not know why so much time went past.” He subsequently described the report as “belated” and “inaccurate”, identifying errors concerning the structure and date of Cowan’s agreements and the provisions governing annual increases.
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3. You can find the story of Matthews hurling papers at a director at the end of Part 50 — The Changing Face — and Culture — of the Panthers Board. ↩︎

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