Social connections drive board appointments and more than two-thirds of directors in the 200 largest public companies are on the board of multiple companies. So whoever replaces ex-AMP chairwoman Catherine Brenner will likely be drawn from a small pool of people.
The use of closed networks in the recruitment and selection of board members also creates other problems related to “group think“. Group think creates a situation where board members are more concerned with being a liked and connected member of a particular social group.
As a result members will conform to the status quo, which guarantees them membership perks, such as highly paid directorship roles.
A direct outcome of the group think mentality are boards signing off on questionable business practices as we currently see in the banking sector. Coupled with a self-regulated system, this is a recipe for disaster.