Fred Hilmer’s What’s Wrong with Boards — A Review

Fred Hilmer’s What’s Wrong with Boards — A Review

Fred Hilmer wrote Strictly Boardroom three decades ago, and it shaped how Australian boards were told to behave. What’s Wrong with Boards, published in August 2022, is his verdict on what that advice became.

The verdict is that governance in this country has been optimised for conformance and has stopped being about performance.

Failures of performance

The governance challenge is to consistently strive for excellence, not settle for the merely acceptable. Dealing with a CEO and top executive team who are modest but not top-tier performers is one of the most difficult situations boards face. Is going through the time-consuming selection process to find a new CEO worth the risk?

The book also examines the changing definition of performance. Return on equity has historically been the primary measure, and Hilmer sets out how that is shifting.

Accepting poor performance also includes tolerating strategies that are attractive in the short term but unsustainable — among them the strategies that exploit market failures, regulatory failures or information asymmetries at the expense of the customer. The book works this through using the Australian banking sector.

Conformance matters are crowding out performance discussions from board agendas more than ever.

What Hilmer actually argues

The ASX rules have hardened. Hilmer’s central criticism is that guidelines written as flexible frameworks have become rigid directives, and that a one-size-fits-all model now dominates. The result is adherence without much understanding of why the rule exists — compliance pursued for its own sake, on a thin evidence base. He wants boards working to “best fit” rather than best practice, and ASX guidelines that ask for fit-for-purpose structures instead of uniform ones.

Independence is social, not mechanical. The standard tests for director independence are structural — shareholdings, tenure, related-party transactions. Hilmer argues the harder question is social: who knows whom, and how long they have known each other. He also makes an observation worth sitting with. Where the cost of acquiring knowledge about a business is high, independence starts to lose some of its value, because the independent director does not know enough to use it. From there he questions the independence of career directors and contrasts them with semi-retired senior executives — people who have recently run something.

Values on paper are not behaviour. The gap between a documented values statement and how people actually act is where most governance reform fails. Hilmer wants principles that guide decisions rather than statements that decorate an annual report.

Disclosure has become process rather than outcome. The reporting burden on boards has grown to the point where it competes with the work. His argument is for getting commercial and strategic matters communicated efficiently, not comprehensively.

Stakeholder capitalism needs testing, not adopting. Hilmer is direct about greenwashing, and sceptical of governance models adopted because they are fashionable. What he proposes instead is a Governance 3.0 — directors with more authority, decisions made on better data.

The chair’s job is a job. Perhaps the sharpest thing in the book: the chairmanship is treated in Australia as an accolade, a reward for service. Hilmer’s position is that it is the single most demanding leadership role on a board and should be filled accordingly.

If you are trying to join a board, read the independence chapter twice

Two of Hilmer’s arguments have direct consequences for anyone building a board career.

The first is the career-director critique. If boards take it seriously, the person who has spent a decade accumulating directorships is a harder sell than the executive who stepped back from running a business three years ago. That reverses the conventional wisdom that a board career is built by accumulating board seats.

The second is the knowledge-cost argument. If independence loses value where a business is hard to understand, then sector knowledge becomes the qualification rather than a conflict to be managed. That is good news for the operator and bad news for the professional director who sits across six unrelated industries.

Neither is settled — Hilmer is arguing a case, not reporting a consensus. But both cut against how most board CVs are currently written.

Worth reading?

Yes, and it is short — 216 pages. It is also written by someone with standing to make the argument, which matters here: Hilmer helped build the framework he is now criticising, and the book is more candid for it.

The one caution: this is a book about Australian listed-company governance, argued from Australian examples and against the ASX guidelines. Read it as a national argument rather than a general theory.

Sources

• Fred Hilmer, What’s Wrong with Boards, published 10 August 2022, 216 pages, ISBN 9781761280214 — book details confirmed 19 August 2026.
• Fred Hilmer, Strictly Boardroom, referenced by the publisher as the earlier work this book revisits after nearly three decades.