The risk of sitting on a board without adequate knowledge to properly fulfill the duties of a board member will be too great to take on the responsibility in the future, according to a board director.
Speaking to Lawyers Weekly in his role as program director of Bond University’s master of laws in enterprise governance, Gary Brady said that the governance community will need to be more aware of its obligations and duties and how it conducts itself in the board environment moving forward.
He said there will be obligations to regulators in all sorts of sectors that will require a better understanding of fulfilling obligations in the board room in a proper way.
“One of the things coming out of the Hayne royal commission in particular, [is that] we will see a tightening of legislation around governance through ASIC and I think other regulatory bodies, like APRA, ACNC and ACCC will all take their lead now from ASIC,” Mr Brady foreshadowed.
“We’ll probably see an increase in penalties and in the criminality aspects of governance as well,” he continued.
“I don’t think any sector of the governance community will be immune,” the faculty business director put forward, citing the previous royal commission into institutional responses to child sexual abuse, the current royal commission into aged care, and the announcement of a new disability royal commission.
As a result, such tightening of legislation will affect not just listed entity boards, but “it’ll flow over into not-for-profits, into mission-based organisations, [and] into schools,” he said.
Mr Brady considered we have seen “too many instances where it’s really been appalling”.
“People who you would think should know better are making fundamentally unethical (and almost in a knowledge vacuum) decisions that you would expect as both a shareholder and a stakeholder should be being done better,” he noted.
Calling it “a real problem”, the director said “all of us in the governance community will have to be more aware of our obligations and duties and how we go about disposing of those inside a board environment”.
“The days of, particularly in the not-for-profit sector, well-intentioned amateurs sitting on boards are possibly gone,” he added.
Education of the board community will “absolutely” be vital going forward for Mr Brady, and he thinks “there will have to be some challenging questions asked by the governance community”.
“Every member of the governance community should really ask themselves going forward: ‘do I understand enough about this?’; ‘have I trained myself well enough to actually meet the obligations of what I'm facing here?’; and ‘what personal risk do I bear in that light’?” he offered.