Company boardrooms have followed the broader mining industry trend by transforming into diverse environments.
Mining is rapidly transitioning into the future by embracing the power of digitisation and innovation. It has responded by attracting workers with different skillsets than the past, with growing focus on technology and data management.
The industry is also re-establishing its image in the face of more scrutiny than ever from governments, local communities and investors, creating the need for new ways of collaboration to position mining for the next generation.
As Deloitte’s 2018 Tracking the Trends report explains, these drivers and more make it clear that companies need to make substantive cultural shifts.
At an operational level, mining in Australia has set a strong pace with this transformation by introducing digital technologies and developing more diverse and inclusive workforces.
This has led to a transformation at a board level to support the move in this direction, something most companies have responded to by reshaping their front office.
Fortescue Metals Group perhaps demonstrates the transformation at a board level better than most.
The iron ore miner has been a standard setter for establishing diversity on its board on a number of levels in recent years, most visibly from a gender perspective.
It was only a few years ago that Fortescue had an all-male board; now, more than half of its directors are female.
This transformation has included some of the company’s most senior positions. Experienced Australian director, Elizabeth Gaines, started as Fortescue’s first female chief executive officer in February.
Gender is, however, just one of the visible aspects that make up a diverse board. Deloitte also suggests blending in other visible aspects like race, age and physical ability.
Deloitte Australia national mining leader Ian Sanders says these attributes create the most important requirement for a modern-day mining board – diversity of thought.
“Normal board diversity principles around gender balance and geographical balance have become a standard expectation – it is ‘ticket to play’ stuff,” Sanders tells Australian Mining.
“It is more about having the thoughts that are going to be needed to challenge management in critical conversations and to challenge management in how they are executing the organisational strategy that is going to be important.”
Sanders says having diversity of thought on boards allows a mining company to effectively navigate an industry in rapid change.
He believes other industries introduced this approach to the composition of their boards long before mining, providing an example to follow. However, the transition in mining is moving much quicker than it did in those industries.
“It has been amplified for the mining sector because of the extent of change we are going through,” Sander says.
The rising expectations of company stakeholders in the aftermath of the mining downturn has been a key instigator of the shake-up. As has the continued influence of digital technology on the industry and making mining an attractive career choice for future generations.
Sanders says company directors must now be able to contribute in areas like corporate strategy, technology, workforce management and emerging risks.
“It is the extent to which technology and our future of work, the workforce and the workplace will now influence the composition of boards,” Sanders says.
“That means it will not only require a good background in technology, but also a good background in operational technology and how we use data to drive the insights.
“Board members must then be across the area of social licence and what that means to the image of mining. How they deal with that from their previous experiences in other industries provides that real diversity of thought.”
Deloitte advises mining companies to target board members with experience in other industries to secure the diversity of thought required for these areas.
If this diversity is not established, Deloitte continues, board members can potentially complicate issues because of their limited ability to uncover outside views or challenge habitual thought processes.
Fortescue has also ticked the box in this regard. Gaines, for example, has experience in a number of industry sectors, including resources, construction and infrastructure, financial services, travel and hospitality.
The company even has two Olympic gold medallists – Sebastian Coe and Jennifer Morris – on its board (while likely not an intentional focus) who formally represented the sports industry.
Sanders believes a transformation like this has become an imminent requirement.
“It is not only important as we move into the next two to three years, but as we are here today,” he concludes.
Deloitte’s leading strategies for realigning mining boards:
Create a vision for transformation
Before corporate boards can be properly constituted to support the transformation, the management team must first articulate a clear vision. The aim is to then realign the board’s skillsets, committees, and processes to ensure it is properly composed to achieve the visions for transformation.
Look for a broader set of attributes
While board members are frequently selected based on their functional industry experience, companies can benefit by broadening the attributes they seek out, with the aim of attracting directors with more varied demographic backgrounds and wider bases of knowledge.
Most boards seek directors who are current or retired C–suite mining officers, which can make for a small pool of female candidates. It’s further limited because women with boardroom experience are often oversubscribed and don’t have time to serve on additional boards.
Boards should look beyond mining to industries already advanced in this transformation to overcome these challenges. The adoption of a policy to increase board diversity is also important.
Invest in board training
Board members must walk a fine line between fostering a collaborative environment with senior executives while still challenging management by asking hard questions. To help them find this balance, it can be useful to ensure that board members understand corporate governance best practices both within and beyond the mining sector.
Review board refreshment policies
To ensure they are capable of overseeing evolving strategies and risks, well–run boards typically adopt an ongoing approach to refreshment. This means assessing the board’s composition; considering the average and range of tenure; reviewing the board’s size and committee structure; and ensuring the board has access to appropriate skills, expertise, experience, and diverse representation.
This article also appears in the November edition of Australian Mining.