Rex Airlines has entered voluntary administration, with up to 610 jobs to go and the administrators announcing the airline will no longer fly between capital cities and concerns about regional areas being left in limbo.

A number of issues are behind the collapse, including a lack of competition in the domestic aviation sector, allegations that Qantas and Virgin have been intentionally blocking new entrants from accessing major airports, and the general challenges airlines face in operating in a market like Australia.

But governance watchers are also looking at other factors: including recent board skirmishes and poor financial and governance management.

And when it comes to governance and financial management, it’s difficult to miss the fact Rex Airlines boasts an all-male board.

Nor can you miss the fact that away from the all-male six-person board of Rex, the airline has no women on the ten-person senior management team.

Rex should provide another good example to remember the next time the appointment or elevation of women is a dangerous “diversity hire” and before we attack “diversity” for dramatic failures in decision-making.

As Swinburne law and corporate governance specialist Helen Bird has commented on the administration announcement this morning, questions should be asked as the why Rex management let losses continue to the point of having a catastrophic effect on the company’s bottom line.

Second, Bird highlights the “fireworks on the Rex Board,” which resulted in Lim Kim Hai, Rex’s major shareholder, being replaced as Executive Board Chair.

“After his departure, there was talk of Mr Lim seeking to sack all but one of the remaining board members,” Bird said. Overlaid by events leading to the administration announcement, this news reflects further on the poor quality of the company’s governance and its board governance. Serious questions needed to be asked by investors about what was going on at the board level, the quality of its members and the reasons for its recent dramas.”

Bird also notes that questions need to be asked about just where the taxpayer dollars that have gone to saving Qantas, also in the face of poor governance and management (but also due to Covid) have gone.

Rex’s annual report revealed that the all-male board and executive team (17 people then, 16 now) were paid at least 20 per cent more in the 2022 financial year. It also revealed that the airline had still failed to appoint any women to its most senior management team, despite growing pressure.

At the time, Rex’s diversity policy noted that it was about recognising and valuing the contributions of all staff — but that it believes it is “reverse discrimination” to have any policies in place “that unfairly advance the interest of any particular group.”

Would things have gone differently at Rex with more women on the board and across various management levels?

We can’t know for sure. But research shows women on boards lead to better decision-making and scrutiny and, in the case of ASX-listed entities, better financial performance. Data published in Harvard Business Review finds that female board members improve the quality of board deliberations and can help temper the overconfidence of male CEOs. Research also finds that female directors are less conformist than male directors and more likely to express independent views.

Those independent views could have been helpful in solving the problems and challenges of Rex Airlines.

Leave a Reply

Your email address will not be published. Required fields are marked *