02 April 2024
4 min read
#Corporate & Commercial Law, #Governance
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In March, I had the privilege of attending the Australian Governance Summit held by the Australian Institute of Company Directors. This article highlights the key thoughts and lessons from the two-day event, where the theme was governance at the forefront.
A theme that echoed throughout the conference was sustainability.
The opening address made it clear that sustainability touches every aspect of governance and company directors, who have a fundamental obligation to act in the best interests of their corporations, need to consider all the stakeholders that contribute to its sustainability. This goes beyond the traditional lens of shareholder returns to ensuring customers buy its products or services, investors provide finance, employees produce the products or services and a society that accepts those products or services.
In a social media enabled world, everyone is considered a stakeholder and a commentator so governance becomes an ongoing juggling act to ensure the corporation remains sustainable.
Using the old hierarchical command and control model for decision making is unsustainable in today’s environment. Instead, companies should adopt a transparent and inclusive decision-making process as it can and will likely be scrutinised by stakeholders.
The focus on the continuous impact of climate change highlighted the fact that strategic plans are never truly complete and are a best-case basis for an executable business plan, assuming nothing changes, which may not be a reasonable assumption.
Directors should maintain constant “situational awareness” in an environment of constant change. This prompts the issue that diversity on boards should extend beyond traits such as gender, to diversity of thought.
Former head of the CSIRO, Larry Marshall, shared that any actions we take to mitigate climate change in our lifetime will only produce results in the next century. Businesses must plan for ongoing climate disruption, such as adverse weather events, to minimise the risk to their assets.
Other speakers emphasised the need to apply a similar rigour for documenting operational knowledge to that applied to financial statements. Discipline in operations would assist in having a plan to ensure sustainability of business operations through climate events.
The significance of the upcoming implications of mandatory climate reporting for large entities and the flow-on effects for businesses were another significant stream of discussion.
Another major challenge facing businesses is productivity and the need for capital expenditure in human skills to boost it.
The session on hybrid work and how organisations can best deal with it was very popular, indicating that everyone is grappling with to how to best manage hybrid work across a multi-generational work force.
One takeaway from the session was the concept of leaders needing to be “trilingual”. This entails not only effective communication in person and audio-visual meetings, but also actively engaging and communicating well on social media channels. This is sometimes forgotten but is essential to leaders connecting across generations.
A session on cyber resilience repeated the need to be prepared and have your team ready to respond. Rinse and repeat your cyber security policy regularly as it is not a one-and-done scenario.
The session on AI clearly set out the benefits to operational efficiency and reducing human error and captured the risk of competition from an unexpected vector as a reason for ensuring that organisations do not choose the ‘do nothing’ option which will only see them going backwards.
ASIC Chairman, Joe Longo, made several interesting observations.
One was that directors need to take an active stance of curiosity in relation to their businesses. This includes delving into how those businesses work at a granular level, how they make money and consequently what the real risks to them are. He stated that cyber is a foreseeable risk hence companies should make cyber resilience a priority.
He also indicated that along the theme of curiosity as a key skill for directors, being able to ask the right questions to gain a better understanding of risk is important. He reminded directors about reliance and the benefit of utilising third parties with specialist knowledge sets, while cautioning against blind acceptance of their opinions without questioning how their opinions fit with the business of which they as directors have a deep understanding.
He also explained that principles-based legislation and rules are part of the solution as they allow flexibility to move with the changing times .
Overall, the statement that resonated with me was “AI is not a law free zone”, which I think is another example of regulators using their existing broad powers to hold emerging areas of technology and business accountable.
Disclaimer
The views expressed are those of the author and may not reflect the intended message of the speakers. Information given is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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