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With the Australian economy recovering faster than expected and sexual assault allegations making headlines nationally, the 2021 Australian Governance Summit was a critical time for directors to gather in person and online. As MC Helen Dalley said, the issues under discussion were crucial, changing and not easy to manage.

AICD chair John Atkin FAICD opened the conference highlighting the dramatic societal and economic changes since the March 2020 summit and the hybrid format, “which is the new normal”. The theme “Accelerate: the new pace of change” reflected that the world is moving faster and the pace of change is, itself, accelerating.

Atkin said if we are going to go faster, we need better navigation to set strategy, to spot bumps in the road ahead, and opportunities, and to anticipate what the impact on our stakeholders will be — while warning, “we’ll need better brakes” if we head off course at any stage. “In short, we need better boards,” said Atkin. “We need to go back and examine how our boards are composed and how they work together. And we need to welcome the next generation of directors.”

What has served well in the past was unlikely to be appropriate for the challenges today. This would require greater cognitive and generational diversity, and continuous learning and development.

Telstra’s appointment of 32-year-old Expert360 co-founder Bridget Loudon in 2020 was an example. Its 65-year-old chair John Mullen said that it was important Telstra had a millennial perspective around the board table as it was driving its social media and digital sectors, which were important to its business.

Atkin noted that Mullen had received pushback. “Firstly, it was ‘what would a 32-year-old know about running a business like Telstra?’ That misses the point — no one director is meant to have all the answers. Secondly, [critics said] that Telstra was merely virtue signalling.”

Atkin cited recent research by executive search firm Russell Reynolds that more than 93 per cent of CEOs and 70 per cent of directors of Australian listed companies are Anglo-Celtic. He noted that significant progress made by the federal government, NFPs and listed company boards on greater gender balance “shows us the way forward”.

“If assembling boards with greater diversity is in itself not enough, we need to promote cognitive diversity in our boardrooms. People think differently and we should welcome difference.

“We need to foster in our boardrooms an inclusive, respectful environment where the quiet voices are heard. Mahatma Gandhi said you must be the change you wish to see. So we must approach our paths as directors humbly, learning with each other.”

Changing fortunes

NAB chair Philip Chronican GAICD said that while some sectors may never bounce back from the COVID-19 recession, a sustained economic recovery in Australia will only be achieved through business investment, job creation and productivity improvement. On a panel with Christine McLoughlin FAICD, chairman of Suncorp, a director of Cochlear and chancellor of Wollongong University, and Peter Hay FAICD, chairman of Newcrest Mining and Melbourne Airport, Chronican outlined the effect of COVID-19.

“There have been nearly 29,000 COVID-19 cases in this country and, tragically, 909 Australians have died,” he said. “It has been a very difficult time, not just for those who have lost family members, but also for those who lost their livelihood. In just one month — between March and April last year — almost 600,000 people lost their jobs. In other parts of the world, the health and economic impacts have been much more severe, including nearly 2.5 million deaths.” Chronican said one fifth of deaths from COVID-19 had been in the US, where GDP shrunk 3.5 per cent in 2020, the biggest contraction since 1946. In the UK, headline GDP fell 9.9 per cent, more than twice the fall at the height of the global financial crisis, according to the UK Office for National Statistics.

“Australia has already re-entered a growth phase that will return the economy to pre-virus GDP levels by the middle of this year,” he said. “We are indeed a fortunate country. We are not in this position by luck, rather through the coming together of government, business and community with a shared objective to get Australia and Australians through the pandemic in the best possible shape.”

Australian banks had deferred the principal and interest payments of more than 900,000 loans, with NAB deferring $60b in home loans and business loans, now down to less than $2b as customers return to normal payments.

“Some sectors will not return to their pre-COVID-19 activity levels any time soon and will need support — for example tourism, aviation and education,” said Chronican. “Unemployment is expected to steadily decline to 5.4 per cent by the end of next year. This is still too high and won’t create upward pressure on real wages, a key driver of consumption growth, until we get down to 4.5 per cent. We cannot rely on a consumption-led recovery in the long term, through an indefinite federal deficit.

Chronican stressed it is the role of boards to recognise the new world in which businesses are operating. “It is our responsibility to guide them through the risks and find the opportunities in front of us. Australia can capitalise on its post-COVID-19 advantages — but only if we quickly reposition our businesses and chase the next era of economic growth. It will require boards to be more demanding of management on business performance, to challenge constraints to their thinking.”

He named Cochlear, CSL, Atlassian, Canva and Visy as companies that have chosen to “innovate and break away from the pack — they saw opportunities, took risks and ultimately became global leaders.”

The most important quality in leaders during a crisis is authenticity, Shane Fitzsimmons AFSM, head of Resilience NSW and former NSW Rural Fire Service Commissioner, told the AGS. Fitzsimmons stressed that authenticity is really important and starts with the person you see in the mirror. “Be the best you can be. No-one likes an imposter or a poser,” he said.

Leaders must understand their limits and those of their team members, because those working inside the organisation already see the limits of the leader, he added during the Resolve and Resilience: Leading during a crisis session.

In a crisis, Fitzsimmons said it is also important to deliver information honestly. “Don’t sugarcoat something that’s not pleasant. Don’t give someone a dog**** sandwich and tell them it is fairy bread, because they will work out quickly what the difference is.”

Investing in the culture of the operation upfront will also yield benefits when the crisis hits, when all the cracks in the organisation will be magnified, he adds.

The way the Australian Public Service came together during the crisis was “nothing short of a marvel,” added Cheryl-anne Moy GAICD, deputy secretary and COO of the Department of Home Affairs. Many staff switched from policy to helping supermarkets, while graduate staff had to work all year on processing JobKeeper applications. Closing Australia’s borders and devising a new system of exemptions also proved a big challenge.

Structural shift

Neville Power MAICD, chairman of the National COVID-19 Commission and Perth Airport, updated directors on the current COVID-19 situation in Australia and the path to economic recovery. Adaptation and resilience were the guiding principles of 2020 as businesses worked their way through the pandemic, but they now need to shift from crisis management to focus on long-term growth. “We need the level of ingenuity displayed during the height of restrictions to be directed at other opportunities to accelerate and grow.”

He noted that as the vaccine rollout gathers pace in 2021, directors should ensure their approach to risk matches the rapidly changing environment. Cycles over which directors assess business risk and outlook will be shorter and directors need to be prepared to respond quickly to upside changes in conditions, not just the downside. Directors will need to shift through short-term disruption and structural changes to plan the business accordingly.

Reimagining capitalism

The private sector has an enormous role to play in dealing with current realities, Harvard Business School professor and economist Rebecca Henderson told the summit. She offered a passionate provocation that in times of great change, the private sector had both the power and a compelling duty to tackle “the large public goods problems we face” — including inequality, exclusion, environmental degradation, and to respond to enormous global institutional pressures.

A director of Idexx Laboratories and CERES, and author of Reimagining Capitalism in a World on Fire, Henderson said free market capitalism has produced enormous benefits and prosperity, but the current system is failing. Speaking via video from the US, she said that in many parts of the world, governments are either under threat or deeply hamstrung, while in civil society, a strong media, and a strong voice for labour is also under threat — or significantly weaker than it was.

“Business is one of the strongest institutions on the planet,” said Henderson. “It also enjoys one of the highest levels of trust. According to Edelman [Trust Barometer], the institution people trust most is the firm they work for. That’s an incredible opportunity.”

Henderson said that many directors would be thinking, “Wait, wait, I have a major duty to investors, I can’t run around solving these massive public goods problems”, or “It’s not up to us to solve climate change or inequality, let alone political stress”.

However, she said, companies that change will reap substantial returns and if we don’t reimagine capitalism, we will all be significantly poorer. It is important that business moves from having its primary goal as maximisation of shareholder returns to a broader goal. “Let’s call it a purpose.”