Directors confident on economy, focused on culture

The Australian Institute of Company Directors’ bi-annual Director Sentiment Index shows that directors are more confident than at any time in seven years since the Index started.

The Index is the only indicator measuring the opinions and future intentions of directors on a range of issues including the economy, government policy and governance regulations.

Directors are more optimistic about the outlook for the Australian economy than they’ve been since 2011, and optimism has also increased in regards to the outlook for the US and European economies.

In addition, 57% of directors expect their business to expand over the coming year, continuing an upward trend over the past two years. Optimism around wages growth and decreasing unemployment was also strongly evident.

AICD Chairman Elizabeth Proust AO said the Index showed that directors were significantly more optimistic about the general business outlook as well as the outlook for their own sector and organisations over the coming 12 months.

“We’ve recently seen the strongest employment results since 1994. So the fact that directors are so confident about employment and wages growth over the coming 12 months suggests the economy may be turning a corner after a sustained period of flat wage growth and investment,” she said.

Over 90% of directors also reported that Australian business needs to make improvements in relation to corporate culture.

“Corporate culture is an important topic for the board table. It is positive to see the vast majority of directors are actively working to improve corporate culture in their own organisations,” said Ms Proust.

“A focus on culture over the long-term is critical for management and boards of all organisations. This is a complex task that requires sustained effort.

“Directors have told us that some of the tools they are using include capturing data on key cultural indicators, better communicating the ethical position of the board and business and making culture a regular feature on the board and audit committee agendas.”

AICD MD & CEO Angus Armour said that directors nominated infrastructure, energy policy and international competitiveness as the top three issues the federal government should address in the long term.

“In the short term, directors were clear that energy policy needs to be addressed quickly, with 58% of directors nominating it as a priority,” he said.

“Directors clearly feel the current impasse over energy policy is holding us back, but in the long-term infrastructure remains the big-ticket item to grow our productivity and prosperity.”

Directors nominated ‘less focus on short-termism’ as the main measure needed to lift national productivity and 83% rated the quality of public policy debate as poor or very poor.

The AICD’s Blueprint for Growth national reform document, released earlier this year, recommended a range of structural reforms to improve public policy debate and encourage long-term thinking.

Other key findings form the AICD’s Director Sentiment Index 2nd Half 2017 include:

• Renewable energy sources topped the list of priority areas for infrastructure investment (53%), followed by regional infrastructure (41%) and roads (33%).

• 53% of directors reported their boards were actively seeking to increase gender diversity while 77% reported they were actively looking to increase diversity of skills.

• 42% of directors reported strong expectations around the availability of credit for working capital purposes.

• Directors nominated a greater focus on the long-term in planning and reporting, accountability for corporate misconduct and corporate culture as areas needing improvement in relation to business standards and social licence.

• Personal income tax topped the list of priorities for taxation reform (50%), followed by company tax (47%), multinational tax arrangements (43%) and state-based taxes such as payroll tax (43%).

AICD Media Contact: Carissa Simons 02 8248 6612 | 0417 348 659