For those who may have missed the Australian Governance Summit or are seeking a short summary, we have compiled a short list of the 5 key takeaways. You can find more detailed coverage on our live blog for Day One and Day Two.

COVID-19 to hit economy

The current COVID-19 shock is first and foremost a public health crisis, but also has consequential economic impacts which will be very different from the global financial crisis, Andrew Charlton, a Director at Alpha Beta Advisors, said during an interview with AICD Chief Economist Mark Thirlwell MAICD.

“We have less firepower from the monetary and fiscal perspective, and it is much less clear if it will be effective. We don’t really have a map for this crisis.

“This time it is more like governments are slower to get to grips with it through lack of experience and they are not sure how to interact with other underlying issues in the economy such as low growth underlying weaknesses.”

Now there is also the problem of low interest rates, Australian currency which has hit an 11-year low and no Budget surplus. “Australia is going into this crisis much weaker than it did in the GFC”, he said. A different geopolitical situation also exists, with protectionism getting in the way of international agreements.

Australian companies that did well after the Global Financial Crisis (GFC) took measures to stabilise their balance sheets immediately and all companies should now do the same, Charlton told the summit.

Belinda Hutchinson, AM FAICD also spoke on key actions that boards need to take for the COVID-19 crisis. As a Non-executive Director of Qantas, and Chancellor of Sydney University, Hutchinson said having “the absolutely best management team” was key and that contingency planning is important.

“If the board hasn’t already been taking steps, we’ve got a problem. The board’s role is well in advance of the crisis,” was the warning she gave to AGS attendees.

Sydney University staff had put 1087 units of study online over three weeks and staff and students had sent many messages to students in China. “Those students in China know we support them,” she said.

Key actions:

• review risks

• create a risk register

• scenario planning

• delegating to the management team

• ensure the management team have plans for each phase.

Purpose is the new culture

In governance terms, the new word of the year for 2020 is “purpose”, Professor Pamela Hanrahan, Deputy Head, School of Taxation and Business Law, UNSW Business School, told the AGS in her regulatory update session.

“Last year’s word for me was culture, but I think this year the word has changed to purpose,” she said. The shift in defining the purpose of the corporation (by the US Business Roundtable) away from just shareholders to all stakeholders shows that the narrative around purpose is changing, she says.

“Lawyers are asking if this has legal implications,” she says. “Does that mean we are legally required to do something different? I don’t think that the roundtable represents much of a change in the law. In Australia we have always served the best interests of the company and it is really about authenticity of purpose. If you stick to articulating the purpose of the company all stakeholders are always at the heart of director duties.” The question of purpose should be addressed by the law and regulators, she says.

A properly clarified purpose is also a powerful lens for strategy development, according to participants in the Tackling your social purpose panel discussion. Geoff Brunsdon FAICD, Chair of Sims Metal Management described how board and management worked together in 2017 in its centenary year to align purpose and strategy.

Framing the work around 30-year megatrends, businesses and milestones, its purpose became “to create a world without waste to preserve our planet”. The words came entirely from its employees. “Clarity of purpose is a powerful mechanism to drive strategy, so long as board and management are clear on the purpose and they own it,” Brunsdon said.

Richard Boele, Global Leader Business and Human Rights Services at KPMG and Chair of inclusive sport organisation Boccia Australia, said being able to paint a larger picture about societal change and what the organisation is doing to contribute helps alignment.

He warned directors that organisations need to go the distance. “Don’t start on articulating a purpose if you are not going to live it – it’s better not to have a purpose.”

Climate change crunch

Richard Goyder AO, FAICD, Chairman of the AFL Commission, Qantas and energy giant Woodside Petroleum, says climate change is the number one issue raised with him by investors. “We do have a responsibility to engage on this and manage the risks as best we can, while acknowledging that we do not have all the answers,” he told the summit. The issue of climate change also makes companies susceptible to attack by activist investors, as Woodside has experienced, he says.

Kathleen Conlon FAICD, a Director of REA Group, Aristocrat Leisure and Lynas, said boards have improved their risk management practices, which is helping them to deal with climate change.

There are three questions directors need to ask. Firstly, is there a strategic opportunity that comes out of climate change? For Lynas, for example, the raw materials from their batteries are central to renewable energy.

Secondly, will there be a fundamental change to the way the company operates? In terms of liability, she said: “We’re at a tipping point. You can’t say we don’t know anymore.”

Finally, where is the disruption or significant liability going to occur?

Professor Hanrahan says climate change is one of the top issues that directors must address this year. In terms of climate change standardised reporting, boards need to determine if it is it an ESG issue or a financial issue (or both) and take into account recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).

Boards of 2030 to be swamped by data

About 20,000 new satellites will launch into space in the next decade, which will enormously impact the amount of data boards are dealing with, according to Dr Megan Clark AC FAICD, Head of the Australian Space Agency and director on the boards of CSL and Rio Tinto.

Boards of 2030 will also need to cope with a super powerful new generation of communications from different space technology. “If you thought you were being swamped with data now, you have not seen anything yet,” she told attendees at the keynote session, Boards of 2030. “This whole industrialisation change will completely transform how we communicate”, she said.

“In the future, we’ll learn to throw away 90 per cent of our data – the challenge is identifying the (other) 10 per cent.“

The task of directors in the face of so much technology operating off the planet makes the value of our human judgement all the more important, she says. “When things get really difficult, no amount of AI will help you.”

Boards of 2030 need to operate in a more globally complex world tested by increased global security and surveillance. As we move off our own planet, into hostile realms, “values and purpose are ever more important”.

Environmental and social governance

Michael Froman, a former adviser to US President Barack Obama and now an executive with Mastercard and board member of the Walt Disney company, said companies need to look at how to meet environmental challenges and how to be inclusive while at the same time pursuing economic growth.

"I actually think the challenge that companies face is not between shareholders and stakeholders - it's between short-term and long-term,” Froman told the summit.

Froman said Mastercard invests in financial inclusion because it is in the company's interest to have inclusive and healthy economies. “If the economy is thriving, then we will thrive as a company," he said. Likewise, the company focuses on the environment because it helps it attract and retain the best talent and build the brand with customers. Boards can justify these actions because they all contribute to long-term shareholder value, he said.

Sharon Warburton GAICD, Co-deputy Chair at Fortescue Metals and a Director at Wesfarmers and Perth Children’s Hospital, says ESG (environmental and social governance) will also be a big focus for future boards. About 80 to 90 per cent of her own personal development has been in the ESG space and her boards now have “very chunky” ESG reports.