The Australian Institute of Company Directors’ (AICD) chairman, Elizabeth Proust AO FAICD opened the Australian Governance Summit by discussing some of the challenges directors face in an increasingly complex world, which she said “makes good governance and governance education more important than ever.”
However, Proust warned that it was not business as usual for Australian companies as more numerous and diverse stakeholders mean the practice of directorship is less straightforward than ever. Citing The Firm of the Future report, released by Bain & Company at this year’s World Economic Forum, Proust outlined four major forces believed to be shaping the future of organisations being governed today. They were:
- The changing nature of the workforce, particularly millennials who are now the largest generational cohort in organisations.
- The increasing complexity of large organisations themselves, which sometimes struggle to translate strategy into execution.
- Technology and the growing importance of speed over scale.
- A more challenging macro-environment with more activist governments, a backlash against short-term thinking and growing critiques of inequality and the role of the modern corporation in contributing to that inequality.
Proust pointed to changing technologies, markets and stakeholder engagement as key challenges facing directors who must lead the thinking to help organisations adapt and respond to the changing environment.
“As our world becomes increasingly digital, the number and type of channels we have to reach people has exploded. Yet simultaneously people are harder to engage with and inform than ever, and reaching people, informing them and engaging them is crucial for all organisations,” she said.
Key to this is engagement with stakeholders in an increasingly hostile world where business, government and even charities are mistrusted. “There are no simple answers, but ignoring valid concerns and fears will only worsen the credibility and trustworthiness of the organisations we lead,” she said.
Business must act
Proust called on business to do more to address the issues around growth, inequality and fairness as well as build trust and confidence among employees and shareholders, adding that it is no longer viable to simply attribute blame to the government, but instead, work together to address future challenges.
“It is not reasonable or credible to grumble that government doesn’t listen to the needs of business, if business isn’t acting as a partner in helping find solutions. As leaders in our respective businesses and organisations, we need to consider what is being said, and our response. Solutions need the engagement of all stakeholders, and to do that we need to take collective responsibility.”
Citing key areas of policy reform, Proust pointed to changes to fundraising legislation and the protections around whistleblowers as top priorities for regaining trust and creating a more stable environment of workplace culture. “There is a balance to achieve – as leaders, we must show that we can be trusted to operate ethically in less prescriptive regulatory environments, or else risk being told, and perhaps rightly so, that we do not deserve to,” she said.
Criticising Australia’s corporate whistleblowing framework as “narrow and weak,” Proust said directors have a duty to ensure that information relating to corporate wrongdoing is brought to light so that it can be addressed. “We should provide a whistleblowing framework that protects and encourages disclosures, within reason, and which incentivises internal disclosures,” she said.
Concluding her presentation, Proust urged directors to think outside the box when it comes to broader public policy issues such as tax reform.
“Tax reform is unfinished business in this country, and it should be done in a holistic manner that benefits a wide cross-section of our society. Business does not operate in a vacuum. The choice is whether we are at the fore of those changes and help shape them, or forced by regulation to comply with them. As directors we need to grapple with this complexity and change, so that we can help to shift the dial for the benefit of our society. Only then can society’s institutions hope to gain back the faith they have lost.”