Becoming an effective director

Written by Rob Campbell · Published on Mon, 24 July 2017

Blog home

Rob Campbell is a professional director. Some of his past and present directorships include SkyCity, Turners & Growers, Ports of Auckland, ACC and Harmoney. This article is based on his speech to the Snowball Effect Investor Masterclass at Spark Lab in Britomart, Auckland on 1 June 2017.

If you were to survey the major NZ companies (or those in any Western market) you would find that the typical director was over 50, male and white skinned. This might lead you to think that these were the salient characteristics of effective directorship. Let me assure you that while there are many directors with these characteristics who are effective, these are not required. In every business we need to be searching for effective directors and spreading the search to a diversity of age, culture and gender is part of that.

The first thing I want to impress upon you is that I am not asserting myself to be an effective director. While I think I do ok, I am very aware of my shortcomings which I will talk about later by way of warning. Quite apart from those faults, my view is that different situations require different governance input, and even within a given business and its environment, there is a variety of ways for a director to be effective. I guess that one of the reasons why one person boards are not prevalent is a recognition that diversity of opinion, skill and approach has its own value. Anyway, I try to be effective, hope to be effective, but recognise that I am poorly placed to judge the outcome.

I do think a lot about it. Partly this is a result of my natural introversion, but also as a chair of a number of boards I have to evaluate other director contributions all the time and it would be an extremely autistic chair who did not reflect on some level of personal comparison. Also, there is a pretty robust literature on business governance which one does not and should not ignore. There is a plethora of legal rules and responsibilities which change and which one does not and should not also, whatever the temptations, ignore. And there are the many and varied views from investors, in particular institutions (some directly held and others, inexplicably, contracted out to advisors), which one equally does not and should not ignore.

My thoughts here accept that the constraints exist in the law, common practice, and investor expectation and do not need commentary from me. So what I say here is about how I think you can work best within the system. If I ever had any revolutionary impulses they have waned with age. In any event, most of this can be summed up in what I what I read recently was President Obama’s pithy analysis of good foreign policy: “don’t do stupid shit”. In business as well, one should try to follow this policy.


One must recognise that a business does not operate in a vacuum. When you strip aside all the brand, corporate structure and mission statements, a business is an economic entity. The economics of any business determines the outcome. Warren Buffet opined that when a management team with a reputation for sound business meets a business with a reputation for poor economics, it is usually the reputation of the business which survives. So it is for directors.

This does not mean that directors are hapless victims of the economics of the business. What it does mean is that an effective director must study and constantly review the core economics of the business, seek to correct what is amiss, and push to maintain focus on the sound core. Management is, or should be, in the field dealing with incoming and outgoing issues. The effective director keeps both oversight and communication to those in the field to clarify the economics of the business, how they are evolving, how they are being challenged, and what the options are.

The first thing is to understand and communicate around the core economics of the business. If you are not capable of and intent on doing that, you cannot be effective.


There is no one set of skills or experience to enable an understanding of the core economics. It is better that a board has diverse perspectives but the core economics to which they apply must be shared. So in addition to having this focus on core economics, an effective director has to be able to think constructively and co-operatively. One has to be able and willing to be open to different perspectives and to incorporate those. No director is effective, no matter how brilliant, if they are not able to work in a team.

Desirably, directors have different skill sets. To my mind what is important about these is that they are genuine skill sets, not simply historic qualifications. For this to be the case, an effective director must be constantly updating their skill set. Knowledge in today’s business is not static. This is one of the reasons I think we may in many boards place too high a value on length of experience, and too little on the effectiveness of current skills. I hope there is still a place for older people in these roles, but it is a strong conviction that there is no place for old skills and ideas. No one stays up to pace without effort and continuous “new skilling” is a requirement of an effective director.


My next comment is on a personal characteristic. An effective director must have a strong level of probity and ethics. Despite the many laws and regulations which govern the activities of boards there is what would be to an outsider a surprising frequency of situations in which directors are called upon the exercise moral judgements on what is fair. For example, as between staff, suppliers, customers or other stakeholders in the business. These judgements cannot be avoided and they should not be made arbitrarily. So one needs a pretty clear moral compass. There are egregious examples where this characteristic has been lost in financial markets for example (though not limited to that market). This is relatively straight forward if it involves self-interest or the interests of the management group, but it can be harder. Sometimes this will involve over-riding the immediate short-term financial interest of the firm. You have to be up for that if required.


A critical part of being effective is for a director not only to be up- or new- skilling but also to be reading widely. The purpose of this is to be scanning the environment and horizon for implications for the business. I expect managers to do some of this, but I also expect them to be too busy to do as much as directors. For example, I find it hard to see how a director can be effective unless they are seeing all of the local business press including the Australian Financial Review, the Wall Street Journal, the Financial Times and maybe Barron’s and some selection of business blogs and news sites. In addition, one would expect a healthy diet of quality business books. This reading time I see as a critical part of effective directorship. Many boards get an internal news clipping service which is also useful, but hardly sufficient as there is usually a narrow focus. You get good at skimming to what matters and if you maintain a range of contacts who also scan like this and disseminate you will not miss much of the moment. Don’t just read it, share and comment as appropriate.

I should add that simply reading a lot and disseminating some of it does not on its own go far enough. There has been a widely observed polarisation not only of mass media but also in academia - a tendency for thought to be balkanised into separate camps which do not really communicate with each other. It is important to read challenging material, to seek out that with which one does not expect to agree. The purpose of your reading is discovery not reinforcement.


The next thing which an effective director needs is the ability to listen. Some of us find that quite hard. Often directors have had success in a business endeavour or a variety of endeavours. The nature of corporate boards is that there is a degree of deference often shown. Directors are perceived to have some power and in particular influence over management careers. So it is easy for a director to become a little self-important and to see the board meeting as an opportunity to express one’s valuable views. On occasion this can lead to one-way communication which is, or should be in this context, an oxymoron. Listen carefully to what is being said, credit the view with being potentially right or even just useful. Feed constructive questions. Be supportive.

This does not mean you have to go along with everything you are advised. Far from it. One important measure of an effective director is the courage to express a considered view, engage in debate, and to seek resolution of differences. It is important not to become an isolated dissenter.


Finally, you should be having fun. This does not mean laughing and joking all the time. But a director who is not fully engaged, interested and enjoying the business and the process involved is not effective. Being a director is one of the most fascinating and rewarding roles one can have in business. You have great access to information, options and ability to input. It is not a grim, drudging enforcement or compliance role. You have responsibilities but they have clear relevance to good outcomes so there is no need to resent or grumble about them. They are good things. Approach them with a positive view to how they assist the business. You can even learn to enjoy audits!

I said I would talk about my shortcomings. The truth is, I fall short on each of these criteria on occasion. The points I make here are really memos to myself. I hope they are useful to others.