Maxwell HarringtonChief Financial Officer · Essays & perspective

Maxwell Harrington · Chief Financial Officer · Australia

One listed seat, an audit committee, and a year before the chair

My contribution to a board

A board would get three things from me, and I would rather name them precisely than claim more.

The first is fluency in the judgements that decide results in capital-intensive businesses with long contracts: lease accounting and return conditions, hedge accounting, the useful lives and residual values of large assets, maintenance provisions, and the indexation terms buried in government contracts. I have prepared those judgements as a CFO and priced them as a lessor, so I know where a management paper tends to be generous to itself.

The second is experience of risks that arrive from outside a business and need a price before they arrive: fuel, the exchange rate, weather, a competitor's hiring campaign, a tender that suddenly weights something new. An audit and risk committee spends much of its time on such risks. I can help it ask whether each one has an owner, a measure and a limit, and whether anyone has quietly taken a position the board never approved.

The third is practice on both sides of the committee table. At Saltbush I attend the Audit and Risk Committee as the executive who writes its papers. At Kalmara Community Housing I have chaired the Finance, Audit and Risk Committee since 2021, which taught me how differently a paper reads when you must decide whether it is enough. Kalmara has government funding, about 2,100 homes and a demanding regulator, and chairing its committee has made me a better author of papers at Saltbush.

The ASX Corporate Governance Council's recommendations expect a listed company's audit committee to be made up of non-executive directors, most of them independent, chaired by an independent director who does not chair the board, and to have members with relevant accounting and financial experience. I would meet the expertise expectation. I would still serve a year as a member before chairing, so that I knew the company's auditors, its control environment and the judgements that recur each half.

Judgement in practice

01

Telling the market before the result did

In May 2023 crew-shortage cancellations meant Saltbush's underlying profit for the year would fall about 12 per cent below the guidance we had given in February. Our chief executive preferred to explain the shortfall with the full-year result in August, when he hoped to show the pilots' negotiation resolved. I recommended an announcement to the ASX within days, because I believed the change was material and our continuous disclosure obligations did not wait for a better story. After advice from our lawyers the board agreed. The share price fell 9 per cent that day. In the months that followed, two of our largest shareholders told us that the early announcement was why they believed the August numbers. As a director I would expect management to bring the disclosure question to the board as soon as the forecast moves, not when the narrative is ready.

02

An impairment taken before the redeployment plan was proven

When we declined to match a rival's bid for an exclusive regional route in 2024, five of our oldest turboprops lost most of their planned flying. Our chief operating officer had a credible plan to redeploy them on charter work and argued that no impairment was needed until that plan failed. I tested the plan against contracts we actually held, not those we hoped to win, and recommended a A$17 million impairment in the 2024 accounts, consistent with the requirements of AASB 136 that recoverable amount rest on supportable assumptions. The auditors agreed and the committee accepted it. Two of the five have since found charter work; the other three fly a reduced scheduled programme at the values we recorded. The lesson I would take to another board is to ask whether forecasts in an impairment test are contracted, probable or merely possible.

03

Funding the maintenance backlog at Kalmara

In 2022, as chair of Kalmara's Finance, Audit and Risk Committee, I asked management to reconcile its ten-year maintenance plan with the condition surveys of its homes. The plan was underfunded by about A$11 million over the decade, because it had been set from the previous year's spending rather than from the condition of the properties. Management proposed closing the gap gradually from future surpluses. I recommended that the board fund the plan in full and slow its new development programme by about forty homes over three years. Two directors who had championed the growth programme disagreed, and the board debated it over two meetings before accepting a funded plan. Our regulator's review in 2024 noted the change. As a non-executive I learnt that the most useful question is often what a plan was built from.

My first year on a board

Three questions would shape my first twelve months on a board, and I would try to answer them in order.

What does this company actually own and owe? Before the first meeting I would ask for the asset register, the debt and lease schedules, the main customer and government contracts with their indexation terms, and the auditors' last two reports, including key audit matters. I would want to see one operating site in person within the first quarter, because the controls that matter in a capital-intensive business are often physical: a depot, a workshop, a stores yard.

Where are the judgements? By the second half I would expect to know which estimates move the result most, who in management prepares them, and how the committee has challenged them in the past. I would meet the external auditor and the head of internal audit without management present, as good committee practice allows, and ask each what they would examine more closely if they had another month.

Am I useful? At the end of the year I would ask the committee chair and the board chair for a candid view of my contribution, and I would read the board's evaluation for evidence that my questions changed a decision rather than merely lengthened a meeting. Only then would I discuss chairing the committee.

Conflicts and their management

Most of the companies I might naturally be asked to join are ones I should decline. Saltbush flies for many of Western Australia's resources companies, so I would not join a miner or a mining-services contractor that buys or could buy our charter services. I would also decline airports, fuel suppliers, aircraft lessors and financiers, and aviation insurers or brokers, since Saltbush pays all of them. Harlowe is no longer my employer, but I would not join a bus operator that competes with it for state contracts while former colleagues there could reasonably see a conflict.

Before accepting any seat I would disclose my Saltbush shareholding and both current directorships in writing, and obtain the consent of the Saltbush board. If a conflict arose later, for example because the company began tendering to Kalmara or contracting with Saltbush, I would declare it at once, leave the room for the relevant items and offer to resign if the relationship looked likely to continue.

Time is the conflict I worry about most. Like most ASX companies, Saltbush reports in February and August, so a second company's reporting season would probably fall in the same weeks. I would agree the committee calendar a year in advance and hold twenty-five days for it, preparation included.

My independence statement

I am a full-time executive of Saltbush and hold its shares under our executive incentive plan. A company considering me would need to know about that holding, my two directorships and any dealings between its business and Saltbush, its customers or its lessors, and I would set those out in writing before any discussion went further. The board of that company would then decide whether I am independent of it, applying the factors the ASX Corporate Governance Council's recommendations describe. That is its judgement to make, not mine, and I would accept its answer.

Committee contribution

Chair and member readiness
CapacityCommittees
Ready to chairAudit and Risk Committee, after a year as a member
Ready to joinAudit and Risk Committee · Safety, Health and Environment Committee · Remuneration Committee

Board and committee exposure

Presented to the Board or a committee

Saltbush Air Group Limited

Board of directors: results, budgets, fleet plans, capital allocation and treasury policy

March 2021–present

Presents management's financial recommendations at every board meeting, including the 2021 hedging change and the 2022 aircraft purchase; not a director of the company and holds no vote.

Presented to the Board or a committee

Saltbush Air Group Limited

Audit and Risk Committee: financial reporting, hedge and lease accounting, insurance, internal controls and the external audit

March 2021–present

Attends every meeting as an invitee and writes its finance papers; not a committee member.

Reported to a committee

Saltbush Air Group Limited

Board Safety Committee: financial effects of fleet availability, insurance claims and weather disruption

July 2021–present

Reports twice a year on disruption costs, deductibles and claims; safety judgements remain with the accountable manager.

Served as a director

Kalmara Community Housing Ltd

Board of a not-for-profit community housing provider with about 2,100 homes in Perth and the Peel region

July 2019–present

Non-executive director with full voting responsibility, serving without pay.

Member of a committee

Kalmara Community Housing Ltd

Finance, Audit and Risk Committee

July 2019–present; chair since November 2021

Chairs the committee, which oversees the external audit, the long-term maintenance plan, treasury and the risk register.

Presented to the Board or a committee

Harlowe Transit Group Pty Ltd

Board and audit committee of a fund-owned company

January 2016–February 2021

Presented results, contract bids, financing proposals and the vendor due diligence for the 2020 sale as chief financial officer; not a director.

Capacity and preferences

Time available
25 days per year
Current directorships
2
Sectors
Ports, rail and contracted transport outside aviation · Waste, water and environmental services under long-term contracts · Agribusiness and grain logistics · Healthcare and aged-care services funded through government arrangements
Company type
ASX-listed company with revenue between A$300m and A$2bn, capital-intensive, earning much of its income under long-term contracts or government arrangements, and with no commercial relationship with Saltbush
Company stage
An established business entering a large asset-renewal or contract-renewal cycle, where the audit and risk committee must test assumptions that run for a decade or more

The seat I am pursuing

I am pursuing one non-executive directorship at an ASX-listed company with revenue between about A$300 million and A$2 billion, in a capital-intensive business outside aviation and resources that earns much of its income under long-term contracts: ports or rail, waste and environmental services, agribusiness logistics, or healthcare and aged-care services funded through government arrangements. Those businesses share the problems I know best, from asset lives and lease judgements to indexation that lags costs and workforces that are hard to replace.

I would like to join the audit and risk committee and, after a year, chair it if the board wished. I could also contribute to a safety or remuneration committee where workforce costs are large. I would not take a second listed seat while I remain an executive at Saltbush. Kalmara will continue to receive the time it already has, and I would rather do one listed role properly than two adequately.

Governance learning and readiness

IICA Independent Directors’ Databank: Not yet registered

The IICA Independent Directors' Databank applies to appointments at Indian companies under India's Companies Act. It does not apply to the ASX-listed seats I am pursuing, so I have not registered, and this status records that fact rather than a plan to register. In Australia, each board assesses a director's independence for itself against the ASX Corporate Governance Council's recommendations and discloses its view to shareholders.

  • A five-day company directors' course in Perth, completed in 2019 before joining the Kalmara board
  • Chairing Kalmara's Finance, Audit and Risk Committee since November 2021, including an external auditor tender in 2023
  • Every Saltbush Audit and Risk Committee meeting since March 2021, attended as an invitee
  • Annual briefings from Saltbush's external auditors on changes to accounting standards and on key audit matters
  • Study of the ASX Corporate Governance Council's recommendations and of directors' duties under the Corporations Act with Saltbush's company secretary