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Transparency and accountability key for future of boards

Boards of the future will be more transparent, accountable and strategic, according to a new report from the Governance Institute.

user iconLauren Croft 09 November 2021 Big Law
Transparency and accountability key for future of boards
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Having survived a global pandemic, future board discussions will centre heavily on business resilience, flexible working arrangements and strategic thinking, The Future of the Board report has revealed.

The report, released by the Governance Institute of Australia last week, found that transparency between boards and management will be of the utmost importance as we enter a post-pandemic world.

The Future of the Board report is based on a survey of 550 non-executive directors, CEOs and C-suite executives, company secretaries and senior governance or risk management professionals, as well as two working groups of senior directors and industry leaders. 

 
 

Sixty-nine per cent of survey respondents are currently on a board, with 40 per cent on more than one. 

Overall, the report shows responsibility and accountability continuing to move away from management and towards the board as directors become more involved in management issues.

“Survey respondents ranked leadership and management skills as the second most important skill future board members need to develop. Perhaps with this trend in mind, survey respondents also ranked a culture of transparency, trust and respect between board and management as the most important factor affecting the dynamic between the two in 2025,” the report stated.

“Board members can equip themselves to meet these challenges by developing strategic skills, which the report highlights to be particularly important. They should take charge of their own professional development and ensure there is the best overall skill set on the board by recruiting from the widest possible talent pool.”

The head of legal for Australia and the Pacific Islands at Philip Morris International, Niti Nadarajah, echoed this sentiment in conversation with Lawyers Weekly earlier this year – and said that it was paramount for leaders to be open and transparent with their underlings.

By casting forward to 2025, Governance Institute of Australia chair Pauline Vamos said the report is a roadmap for directors – current and aspiring.  

“We are about to see the pressure turned up on boards as shareholders and the community expect directors to be more in tune with the full range of ESG or non-financial risks, navigating fallout from the pandemic, and responding to a regulatory and technology landscape moving at hyper speed,” she said.  

“This report – Governance Institute’s major thought leadership piece for 2021  lays out the challenges the board of the future is likely to face, what issues need to be on the radar now, and the skills and attributes board members will need to be effective.” 

The report also noted that board accountability and responsibility will continue to grow towards 2025, with 92 per cent of survey respondents agreeing on this and 66 per cent agreeing strongly.  

“Directors already face strict penalties for contravention of their obligations under the Corporations Act 2001, including the possibility of imprisonment and/or a large fine,” the report stated.

“There is potential for significant fines or imprisonment for a director who breaches their duties under the Workplace Health and Safety Act 2011, or the anti-bribery provisions contained in the Criminal Code Act 1995. Directors can also be held personally liable for a breach of relevant environmental legislation, consumer law or taxation law. This is in addition to their duties and responsibilities under other statutes and at common law.”

Environmental, social and corporate governance (ESG) issues will also be in the spotlight moving forward, with almost 90 per cent of respondents confirming that boards will need to align their purpose with community values. 

“This report shows that social license to operate will be the number one ethical (or conduct culture) challenge for board directors in 2025,” Ms Vamos added.

“The ESG agenda is building, and boards need to ensure they are engaging, reporting – and acting on or adapting to  the non-financial risks that are and will impact their organisations.”

These issues will, in turn, create the need for more strategic thinking in the future – with strategy ranked as high priority across the board.

According to the report, “survey responses consistently highlight strategy and strategic thinking as top priority for the future board. For example, strategy is ranked as the top skill or competency that future board members will need, and strategic and critical thinking the most valued attribute of future directors. Corporate strategy was ranked the most important issue requiring the board’s time in 2025.

“This makes sense given the difficult issues boards will have to address. Survey respondents acknowledge that improving strategic thinking will be central to the board’s ability to navigate the challenges of the coming years.”