What do public company directors actually do to earn their keep?

The thought struck me reading the three-volume report of Adam Bell SC’s inquiry into the Star Entertainment’s Sydney casino operations released last week.

Bell found a litany of sins, from apparent efforts to flout money laundering laws, to ignoring the risks of criminal infiltration and allowing vulnerable patrons to gamble for more than 24 hours at a time.

Star’s behaviour was so egregious he found it unsuitable to hold a casino licence.

The NSW authorities are considering the report’s recommendations as is Queensland’s own, still-sitting, inquiry into Star headed by Robert Gotterson KC.

But Bell let Star’s directors (most of them now gone) off the hook. It was apparently all management’s fault.

This despite the fact that one of the biggest jobs of any public company board is to identify any potential risks to the organisation and sign off on and monitor plans to mitigate that risk.

And this despite the fact that Star spent $1.65 million on director’s fees in 2020-21 and uses the word, “risk” 121 times in its latest annual report.

The directors’ defence was a simple one.

In the words of the NSW Independent Casino Commission’s Chief Commissioner, Philip Crawford, they “didn’t have a clue”.

Bell uses more lawyerly language but makes the same point.

“The non-executive members of the Board of Star Entertainment were all well qualified, well intentioned and highly experienced directors,” he says in his report.

“The culture which the Board of Star Entertainment thought it had set bore little or no relationship to the real culture which was seen in the evidence presented in this review, the way things operated at Star Entertainment when no one was watching.

“The paradox is that people of this calibre presided over a dysfunctional culture identified by this review.”

Bell spends no time explaining or exploring this “paradox” but I blame it on the soap.

You probably don’t know this but Star has donated more than 2,500 kg of soap to charity since 2015.

It’s also donated 62,000 kg of food and more than 32 tonnes of used furniture, equipment, uniforms and hotel linen.

It also hopes to have reduced its carbon and water intensity by 30 per cent by next year.

This largesse and commitment to the environment have seen Star recognised by Dow Jones as a “global sustainability leader (Casino and Gaming Industry) for the past five years.

Star published its first-ever stand-alone sustainability report last year, which is full of all the good things it is doing to prove its Environmental, Social and Governance (ESG) credentials.

“The Star Entertainment Group’s Board strongly supports the principles of corporate governance and is committed to maintaining the highest standards within the company,” it says.

“This is particularly important given the highly regulated environment in which this company operates and the need to ensure that its businesses are sustainable.”

Indeed, but on recent evidence, perhaps the board should have been spending less time on soap and sustainability and more time on making sure its management wasn’t breaking the rules.

Surely, the single most important thing to ensure a casino company’s sustainability is to make sure it doesn’t lose its licence to operate.

Of course, it’s important to be a good corporate citizen and to take the zeitgeist seriously.

And if that means paying more attention to ESG principles, then more power to the board for signing off on the soap handouts.

But this is a gambling company we’re talking about. Star prefers “integrated resort company” but at its core it’s a business model that involves taking money from punters who think they can beat the odds.

All the soft soaping in the world isn’t going to wash away that fact.

But to get back to the question of what public company directors actually do to earn their keep.

Bell SC has one  answer in his report:

“With the benefit of hindsight, some of the directors expressed regret that they had not asked more questions.”

I’d add another: Make sure the company sticks to its knitting and doesn’t get too distracted by the fads of the day, as virtuous as they might be.