It was
announced yesterday that former Qantas CEO, James Strong, will return to the
Flying Roo to join the board as a non-executive director. Strong was previously
CEO of Qantas from 1993 until 2001 and is currently the very successful chairman
of both Woolworths and Insurance Australia Group.

Strong’s
appointment has followed a trend in recent times of CEOs jumping back onto the
boards of companies they used to run. On 10 May,
Fletcher
Building
announced the retirement of CEO, Ralph Waters. Fletchers also confirmed that
Waters would parachute directly from CEO to the board. Similarly, BHP announced
that former chief, Paul Anderson, will also rejoin his old mates on
Lonsdale
street.

John
Durie in the AFR (not online) was critical of these moves in two respects.
First, Durie claimed that having a former CEO on the board “is bad practice in
principle because [having the former CEO on the board] makes it harder for the
new boss to stamp his name on the job and clean out any skeletons left in the
closet.” Durie makes a fair point: it probably wouldn’t
be an easy task to tell a dominant former CEO, such as Rupert Murdoch or Kerry
Packer, that they stuffed up over a buffet lunch in the boardroom.

Durie
also argued that having former CEOs on boards can be detrimental in a different
sense. While former CEOs may have sound industry knowledge,
that needs to be “balanced against whether the ‘knowledgeable’ director
will test a chief executive who is an old colleague and in many cases selected
and trained by that same director.”

Overall,
the question of whether former CEOs should rejoin their old employer is one
which probably needs to be considered on a case-by-case basis. While it is
difficult to argue against the appointment of Strong after a five year absence
(with his fine record as Qantas CEO and as chair of two of Australia’s best
performed companies), the appointment of Waters as a non-executive director of
Fletcher Building has probably not made the role of his successor, Jonathan
Ling, any easier.