Chief investment officers have a big role to play in encouraging boards to think long-term as a fear of failure is promoting short-term thinking at ASX companies, a survey has found.
Interviews carried out with 80 ASX company representatives including chairmen, non-executive directors and chief executives, by recruitment firm Blenheim Partners, and released in a report entitled “The Challenges of Attaining Growth”, found the stigma of failure in Australian business and culture is leading to a much higher risk aversion than that found in the USA.
“It has brought key points to the table and cut through the spin and rhetoric because the quotes are all verbatim from key decision makers in this country,” Gregory Robinson, managing partner of Blenheim Partners, said.
He added that the most surprising finding from his report was how prominent was the fear of failure.
“Risk aversion, taking the safe bet or no bet by boards was discussed throughout the 80-plus meetings,” he said. “One participant noted ‘There hasn’t been a major risk taken in the ASX Top 50 since Wesfarmers acquired Coles’.”
Robinson said the company representatives were aware of the need for businesses to take greater risks and how failure was perceived as part of the journey to success in the USA by contrast.
He added: “As one senior director said ‘One mistake and the heavens descend upon you’.”
Many of those interviewed outlined the coverage of the press and the regulation by industry authorities as a factor in encouraging risk aversion.
Robinson saw a greater role for chief investment officers in changing these mindsets.
“This requires the long-term investment strategy message to be sold to the senior executives, the board and the external stakeholders and to hold off the short-termism,” he said. “It requires the appropriate message to attract the longer-term shareholder, and the ability to articulate the story is critical.”
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