Is the abysmal failure of Qantas a wake-up call for boards across the globe?

There’s no denying that Australia’s most trusted national carrier – Qantas – has been under a cloud of controversy in recent times, with criticism flying in from every angle.

Most notably, in the spotlight, the Qantas leadership team and its board.

Summary of the issues encountered by Qantas

From the airline’s involvement in the Albanese government’s move to deny Qatar Airways’ request for expanded landing capacity at Sydney Airport to ongoing issues with customer service, its substantial holdings of travel credits, and its controversial practice of selling flight seats that were subsequently cancelled, the airline has been hard-pressed to avoid a barrage of criticism.

The Australian Competition and Consumer Commission (ACCC) has sued Qantas off the back of the $570 million travel credit controversy. The ACCC is now demanding at least $250 million in penalties, based on allegations the airline sold more than 8,000 fraudulent flight tickets last year, long after the flights had been cancelled.

Even more contentious was the decision by the airline to let go of 1,700 workers, with Australia’s top court ruling it illegal.

Quite understandably, these actions have raised eyebrows and drawn the ire of the public, with many questioning the justice and legality of these acts. In addition, there have been complaints from dissatisfied customers claiming they’ve been inconvenienced after buying tickets that ended up being cancelled.

Meanwhile, Qatar’s efforts to compete for more aircraft routes to Australia have apparently been thwarted, with major repercussions for international competitiveness within the aviation sector.

Who is at fault?

Boards of major corporations often face challenges in anticipating and navigating crises effectively. Some critics argue the root of the issue lies in the board’s focus on immediate metrics, such as cost-cutting to boost profits, rather than long-term sustainability and stakeholder trust. This short-term perspective can sometimes lead to a misalignment between a company’s goals and the needs or expectations of its customers and shareholders.

One reason for this misalignment might be the widespread practice of directors holding multiple board positions across different sectors. While such roles offer diversity of experience, they might stretch an individual’s capacity to devote sufficient attention to the unique challenges and nuances of each company they serve.

Effective governance requires boards to remain attuned to various stakeholder voices, including those of retail investors, customers, and employees.

Often, the oversight process might not adequately factor in these diverse perspectives, leading to decisions that face backlash or unforeseen consequences.

External challenges, such as legal rulings or regulatory actions, can exacerbate internal management issues. For instance, when companies face allegations or legal actions that question their operational decisions, it can strain their reputation and stakeholder relationships, as we’re currently seeing with Qantas.

With so many obstacles to overcome, boards must be mindful of striking a balance between profit maximisation and the development of a solid, ethical, and transparent operating framework. Although cost-cutting and other techniques promising quick returns on investment are tempting, they shouldn’t be allowed to dominate or derail more important long-term strategic goals and the involvement of key stakeholders.

It’s crucial to strike a balance between short-term financial gains and building a solid basis for long-term sustainability and stakeholder confidence in the strategies that are implemented.

All corporate choices and actions should have moral and ethical resonance and not only conform to legal standards. This is only possible via strict adherence to a complete ethical guideline.

Together, ethical adherence and open communication guarantee the company’s brand remains intact, even if it faces claims or legal action. In addition, strategic human resource management, which places an emphasis on things like employee happiness, compliance with the law, and sympathetic communication, becomes an essential component in keeping the peace in a business, particularly in times of crisis.

Last but not least, the board’s actions need to remain flexible and responsive to the ever-changing external and internal environments, thanks to the ongoing revaluation of its strategy.

In order to ensure the company is always prepared to face problems while being true to its long-term vision and goals, it’s important to re-evaluate corporate strategies on a regular basis to make sure they’re in line with changing market dynamics, stakeholder expectations, and internal capabilities.

What can we learn from the Qantas controversy?

Protecting shareholder interests, making sure management knows its public, customer and stakeholder obligations, and setting up trustworthy monitoring and reporting mechanisms are all critical functions of any company’s board of directors.

When it comes to Qantas, these obligations seem to have been disregarded. A strong customer-centric focus is inextricably linked to these aspects, as it recognises consumers as more than simply transactional entities but as key stakeholders whose experiences, loyalty, and advocacy greatly affect a company’s market position and reputation.

But they failed in all these aspects.

When analysing these scenarios, we must consider the make-up of the Qantas board and its past performance. Many people consider the members of this board to be “high-flying” veterans of the business world. However, recent events have highlighted fundamental flaws in its decision making and supervision practices. This is not a unique occurrence; rather, it seems to represent a pattern of inefficiency on the organisation’s side.

Customers in the aviation industry are also looking for more than just a reliable and on-time service; they value open lines of contact, sympathetic employees, and moral business policies.

The need to re-evaluate how we see and evaluate the talents of board members and senior executives in organisations is brought into sharp relief by the events that have transpired recently. In many cases, persons with significant networks and connections are put in such posts, assuming they possess the requisite competence to successfully steer the organisation.

It is time for businesses, shareholders, and other stakeholders to stop depending only on personal ties and reputations as their primary source of information.

Instead, recruiting individuals for these crucial roles needs to be rigorous, objective, and accessible to a wide variety of applicants. Evaluating candidates for board positions goes beyond traditional metrics like experience and skills in today’s landscape. The evolving environment necessitates a heightened emphasis on ethics and emotional intelligence.

Simply relying on industry experience and problem-solving skills is no longer sufficient. Candidates must demonstrate a strong ethical foundation and possess emotional intelligence to navigate complex interpersonal relationships and ethical dilemmas effectively.

Ethical decision making forms the bedrock of a board’s integrity, guiding it toward responsible and sustainable practices. Board members are entrusted with significant responsibilities, and their ethical compass influences crucial decisions that impact not only the organisation but also its stakeholders and the wider community.

Moreover, emotional intelligence is equally indispensable. Board members must navigate complex interpersonal dynamics, resolve conflicts, and foster a collaborative atmosphere. Emotional intelligence enables them to comprehend the emotions and concerns of their fellow board members, employees, and stakeholders, fostering empathetic leadership.

By incorporating ethics and emotional intelligence into board recruitment processes, organisations ensure that their leadership is not only competent but also morally upright and socially aware, fostering an environment of trust, integrity, and genuine connection that drives the organisation toward long-term success.
Right now, this shift in perspective is a pillar for more effective corporate governance, ensuring that organisations are led by individuals with the competence and dedication required to navigate them through complex and challenging times.

Relying solely on personal connections and reputations as the primary criteria for appointments is no longer a sustainable strategy. The changing dynamics and the increasing complexity of business operations demand a more rigorous, objective, and inclusive recruitment process.

Future improvements in stakeholder value, customer happiness, and maybe even market dominance may result from integrating a customer-centric, holistic perspective into the board’s strategic planning, decision making, and monitoring processes. Something Qantas has so far failed to do.

Sanela Osmic GAICD is the founder and managing director of Ethical Governance.