In March 2019, at the Australian Governance Summit, AICD chair John Atkin FAICD and I launched the AICD’s Forward Governance Agenda, a program of work responding to debates around governance standards and practices. Justice Hayne AC had just handed down the final report of the Financial Services Royal Commission and APRA’s prudential inquiry into the CBA was contemporary conversation. The governance failings of some of our largest institutions had led to a sense of urgency around questions of culture, accountability, ethics and standards.
That April, we undertook a member consultation to gauge your views on the priorities for the AICD and the director community in responding to these questions. You responded with a strong message that the AICD needs to lead the debate on directors’ duties and set clear standards of practice.
Since then events have tested us further. The recent bushfire season and then COVID-19 have compelled organisations to adapt swiftly to circumstances, to protect staff and secure stakeholders, and now to rebuild the economy.
These events have cast a new light on the questions in the Forward Governance Agenda consultation. They have been a practical test of some of the principles under discussion. One of the pillars of the Forward Agenda was “Duties and stakeholders” and in particular how the duty to act in the best interests of the company was practised. The consultation revealed that members generally took the approach of balancing stakeholder interests in fulfilling this duty.
These crises have been a crucible for the best interests duty and stakeholder consideration. Boards that rely on JobKeeper to sustain their organisation or take comfort from regulatory relief cannot afford to take a narrow view of the best interests of the corporation.
Organisational cultures have been tested by workforce disruption and stand-downs. How our organisations have conducted themselves in response to crisis will be remembered by their staff and customers and shape behaviour well into the future. Recent media coverage also reminds us that how organisations recognise and deal with unacceptable workplace behaviour, including sexual harassment, remains a fundamental responsibility of boards, with directors being held to account for setting and enforcing standards.
The Forward Governance Agenda remains essential to fulfilling the AICD’s mission ‘to be the independent and trusted voice of governance’.
The Forward Governance Agenda remains essential to fulfilling the AICD’s mission “to be the independent and trusted voice of governance, building the capability of a community of leaders for the benefit of society”.
In our member consultation, there was strong support (85 per cent) for a review of the AICD’s Code of Conduct to focus on clear standards of conduct and practice expected of directors. We will shortly seek feedback from members on a revised Code of Conduct.
A clear majority of members (69 per cent) also supported mandating an ethical component of the AICD’s Director Professional Development framework. We have begun to develop a framework for this and will update members later in the year.
We are continuing to develop a range of resources to support members in the areas identified by the Forward Governance Agenda. The AICD will soon explore with members through research, publications and events the scope of the best interests duty to provide more clarity on this fundamental aspect of directorship, especially at a time of such high expectations. In parallel, we are developing a resource for directors on effectively elevating the stakeholder voice to the board table.
We also are collaborating with the Australian Council of Superannuation Investors on a research project that explores how listed company boards are grappling with their oversight of culture.
Of course, community expectations also include environmental impacts. In the coming months, we will develop guidance for directors on the issue of climate risk governance. We have consistently heard from members that boards in every sector are grappling with this complex issue and would value AICD support.
Over the past 12 months, boards have been confronted, challenged and energised by a series of events. We will continue to be challenged by the impacts of the pandemic, a slow-growth economy and a volatile global environment. We must set the bar higher, and not be constrained by events, as we seek the best for our organisations and community.