“Australia is the lucky country… outside of rugby,” former New Zealand Prime Minister Rt Hon Sir John Key quipped as he opened day two of the Australian Governance Summit.
Key, after easing delegates into the day with some personal stories of his time as Prime Minister, set out the hard work Australia needs to undertake to ensure its continued prosperity. In a time of rising populism, Key emphasised that Australia must continue to bring in new migrants and be open to foreign investment.
"We shouldn’t be afraid of the grandma and grandad that can’t speak english. Their kids and grandkids will be more Australian than you are,” Key said.
Key, appointed to the group board of ANZ just this week, also set out three steps banks need to take to rebuild trust and respond to the Royal Commission:
- Banks have to own the issue
- They have to rebuild trust
- They have to change the behavioural elements of their staff
Key’s strong vision for Australia’s future led to several delegates submitting the same question: “Could he be Australia’s next Prime Minister?” However, Key showed himself well-versed in Section 44 of the Constitution.
"Being a Kiwi clearly didn’t work for Barnaby,” Key responded.
Pathways to CEO and Chairman
Coca Cola Amatil (CCA) Managing Director Alison Watkins said she hadn’t considered her professional choices fully until her Mum told her to “keep her options open” instead of pursuing her original ambition: locking down a farmer husband. Despite that initial hesitancy, Watkins’ corporate career has steadily gained incredible momentum. Watkins walked Australian Governance Summit delegates through her professional story, starting at the highly competitive McKinsey & Co.
Watkins developed an interest in being a client (rather than an adviser) moving on to run ANZ’s Strategy division. Fellow panellist and AICD Chairman, Elizabeth Proust FAICD, hired Alison for that role. Her ambitions growing with every step forward, Watkins then decided that instead of running one part of a company, she’d like to run a whole company end-to-end. She was appointed Berri’s CEO which in turn led to her appointment as a non-executive director (NED) at Woolworths. It was this run as an NED which piqued her interest in listed companies, looking at CEOs in the market and thinking, “I can do that”.
Taking delegates on a similar journey through her many achievements, Proust told the audience a “level of boredom” and a “level of ambition” took her to various positions. She said she had been told “You’re a woman in too much of a hurry”, a barrier moderator Leigh Sales professed to having also experienced.
Watkins expressed a desire for CCA’s to show leadership in the context of declining trust in institutions and a political power vacuum. “Obesity is a critical issue for us. We asked ourselves, what role can we play as a leader particularly in relation to our sugar sweetened beverages?” She said CCA continues to ask themselves: How can we reformulate our products? How do we make smaller pack sizes? How do we provide good information? “How can we be a positive influence where we know there are particular problems?” she asked, naming at risk Indigenous and low socio-economic status communities as a particular priority for engagement.
As data-driven technology creates new opportunities for businesses and new services for consumers, trade-offs (often hidden) also create new risks. A plethora of grey areas were discussed with this panel featuring Jon Duffy of Trade Me, Annelies Moens FAICD of the International Association of Privacy Professionals ANZ, and Amanda Noble of Data Governance Australia.
We all love the convenience of Uber, and the sharing of personal data – such as your location – is an obvious “cost of use”. But how do we feel if we learn that Uber charges us more because they can detect that our phone battery is running low and are likely to be in a hurry?
Nobody wants e-marketplaces to suffer or enable fraudsters. But how do we feel about investigating police demanding large caches of data, including that of innocent people, to investigate unrelated crimes?
The panel discussion suggested that transparency, proactive reporting and board level discussions are critical to the successful navigation of these situations – to stay on the right side of the law, and in the good graces of your customers.
Getting up to speed
Boards aren’t sufficiently up to speed with technological changes disrupting their industries was the bracing message of Stephen Scheeler, the former Managing Director of Facebook Australia.
The speed with which tech is changing the world is faster than ever and outstrips the ability of boards to deal with it.
He compared the negligible efforts of Australian retailers on voice assistants with Amazon’s huge dedicated workforce devoted to voice.
Scheeler encouraged directors to skill up and be curious to close this gap. They need to use technology in the same way as their customers do. They need to talk to experts. They need to take courses. They need to be relentlessly curious.
Andrew Stevens, Advanced Manufacturing Growth Centre Chair spelt out the key questions when it came to commencing an innovation partnership: “What components of a given project is going to be world-leadings? Not many boards know the answer to this question. In governing innovation and technology, you get insightful answers by asking this.”
CEO of the corporate alignment accelerator Slingshot Karen Lawson said there was an appetite from the corporate world to get moving on collaborations. “There is great desire from boards wanting to connect with start-ups. […] We want to connect corporates and start-ups in a meaningful way. We work closely with executives to highlight what their strategic direction is. When you have alignment, you get good outcomes for both.”
But, what are the impediments to collaboration between corporates? KPMG’s National Sector Leader Professor Stephen Parker told delegates to expand their focus beyond culture and mindset. “Australian business isn’t structured for collaboration. Small businesses don’t necessarily have time to think about collaboration. It’s a bigger gulf to bridge here than in other countries.”
It’s’ not only about culture and mindset. Most research in Australia happens in universities. This happens in R&D institutes or elsewhere in other countries. Research is shaped more in Australia. Australian business isn’t structured for collaboration. Small businesses don’t necessarily have time to think about collaboration. It’s a bigger gulf to bridge here than in other countries. - Stephen Parker, KPMG.
Detailing the skills nominations committees should be looking for in directors for innovation and collaboration, Stevens said, “If you look at the way businesses are trying to compete, you can run parallels with this into the way they collaborate. Knowledge about how you compete in your industry, and what’s best in class, is important. You have to know where to compete and where to collaborate.”
The dismal science
AICD's Chief Economist Stephen Walters GAICD shared his forecast for the year ahead in both domestic and global markets and reflected on the economy 10 years after the Global Financial Crisis. Specifically he flagged rising inflation in the US and its upward impact on interest rates. Stephen called out interest rate rises in the U.K. And Canada as likely to be shortly followed by rises in Australia, and identified risks in the low growth in global trade and the big balance sheets of central banks.
In the context of the strength in global economies, Su-Lin Ong GAICD Chief Economist and Head of Australian Research outlined that economic growth will be fuelled over the next 12 months by strong public spending in capital expenditure and infrastructure, export growth (particularly to china) and positive business private investment encouraged by high levels of business confidence.
Ong identified that concerns around consumption - which is low in growth with record high levels of household debt and low wages growth- may impact markets. As will a softening in the housing market. However, she called out strong employment in health and construction as contributors to good growth.
AICD CEO and Managing Director Angus Armour FAICD outlined the threats to growth posed by global and geopolitical instability, as well as new technology such as artificial intelligence. All panellists called out tax as a key area for reform. They also argued that Australia needed to watch and engage with china, perhaps more so than the US, to drive our economy forward.
Making the invisible hand visible
Ken Henry turned to a 19th century economist to close the 2018 Australian Governance Summit.
"We need to make Adam Smith’s invisible hand visible,” Henry urged the delegates.
“A narrow pursuit of profit might lead a business to negatively impact its employees, thus denying workers a source of income formerly available to them. And in pursuit of profit our businesses might generate negative externalities, including greenhouse gas emissions and other forms of pollution. And when we are challenged to explain why we are doing these things we often say that we are simply going about our business… "If that’s the best we can do, then we shouldn’t wonder that we find it so difficult to occupy positions of trust and respect in society.”
Henry defended his famous tax review that would have led to comprehensive reform of the tax system. The tex debate now is piecemeal, he argued. We should cut the company tax rate but this is only a small part of the required restructuring of the tax system, which is only a small part of the policy reform program that will ensure all Australians have the opportunity to choose a life of real value.
Business must be fully involved in this debate. But to do so it must demonstrate that is about more than just profit to be part of the debate on what we can do to improve the well-being of Australia.
"We are going to have to demonstrate that our social purpose drives the way we operate. We are going to have to demonstrate that we are more than profit, much more. It’s a challenge that I’m hoping all of us want to embrace."