How ASX shareholders are dudded by quarterly reports

Quarterly reporting does a massive disservice to public companies and their shareholders, according to well-known businessman David Gonski. 

Gonski, who is the outgoing Australia and New Zealand Banking GrpLtd (ASX: ANZ) chair, said such frequent reporting incentivised management to neglect long-term goals.

“I know that quarterly results have come back a bit now because of COVID-19, and that’s very explicable and correct,” he said.

“But I hope that once the pandemic is over, we will move away from that – because running a company purely to report every 90 days is too short-term.”

Gonski said any large business must communicate its long-term vision to shareholders, staff and customers.

“Superb business leaders know what the right balance is given the right set of situations and those who put it out of balance can do real damage to the company.”

Optus chair Paul O’Sullivan will take over from Gonski at ANZ from 28 October.

Give CEOs a break: Gonski

As chair of ANZ, Gonski oversaw the bank during the Royal Commission into the finance industry and into the COVID-19 pandemic.

But he said CEOs were the ones with an unenviable job during tough times.

“I’ve been a chairman of a bank, but I’ve never been a CEO of a bank. I have great praise for those who take that on,” he said. 

“While I’m not suggesting for a minute that one should feel sorry for them, I do think that we should all be aware that these are not easy jobs.”

Chief executives of ASX-listed companies juggle the livelihoods of thousands of employees, investors and customers in a “very public setting”.

“It is not just a matter of being paid well to sit in that chair, rather, it’s a matter of being paid well to do a job that is very challenging and very consuming in all aspects.”

As chancellor of University of NSW, Gonski singled out alumnus and Commonwealth Bank of Australia (ASX: CBA) chief Matt Comyn for praise.

“I’m not only proud that we have trained him – I’m proud that we can train a person of that standard.”

How independent directors can challenge executives

The Royal Commission found that independent (non-executive) directors have a crucial role in challenging management for good governance and culture.

Gonski said there were two ways directors gathered information to play this role effectively.

First is setting up matrices that check management is adhering to basic governance and cultural requirements.

“The danger, obviously, is that this could become just paperwork… I think there’s a place for that – but people who rely on it totally make a mistake.”

This leads to the second activity.

“Questioning in private sessions between the CEO alone and the board is terribly important,” said Gonski. 

“Listening to other people in the company, from senior management down and sometimes during board tours and inspections of the assets – where you actually see some of the people who work in the business – is also terribly important.”

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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