Board virtualisation reflects ongoing governance challenges
The COVID-19 pandemic has created a challenge for boards and directors, with managing governance in a crisis facing several evolving obstacles such as the future of virtual meetings post-pandemic.
The Australian Institute of Company Directors (AICD) and the Governance Institute of Australia have published a new report about the impact of COVID-19 on board practices and insights into the governance challenges in the current climate.
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Governance Institute of Australia CEO, Megan Motto, said the lessons in the report will be an important part of a board’s arsenal as they emerge from the pandemic, and crisis planning has been highlighted as a key consideration.
The report has revealed that virtual board meetings are not for every director. More than half of company directors expect virtual meetings to replace face-to-face meetings only occasionally on an ongoing basis.
The findings stated that boards are finding it challenging to conduct virtual meetings whilst 17 per cent find it somewhat more effective.
In the report, Wesfarmers chairman Michael Chaney has found virtual meetings “quite effective”, but he expects the board of the conglomerate to meet in person, whilst chair of OZ Mineral and Scania Rebecca McGrath said that virtual and hybrid AGMs are a great forum to bring more stakeholders into the meeting.
Qantas and Woodside chairman Richard Goyder argues teleconferencing “is not a great medium” for board meetings.
Ms Motto notes there is no evidence corporate governance is suffering, and directors say virtual meetings do have merits.
The report stated virtual meetings have seen an array of challenges including virtual protocols, boardroom dynamics but the convergence of technology and its regulatory and legal changes has also played an important role.
“To accelerate Australia’s economic recovery, our laws and regulatory settings need to reflect the modernisations embraced by organisations,” Angus Armour, chief executive of the AICD said.
“These include laws around virtual AGMs, e-signatures and electronic notices of meetings.”
Part of the governance landscape throughout 2020 has been the emergence of virtual and hybrid AGMs and organisations have largely had a positive experience and according to the report, this has been aided by legal changes in clouding the Treasurer’s emergency determination to temporarily amend the Corporations Act to enable organisations to use these formats.
“The temporary modifications to the Corporations Act represent important, pragmatic and sensible reforms, but at the same time exposed many shortcomings in the current legislative environment – highlighting the need for more permanent reforms to embrace the use of technology to hold virtual or hybrid meetings and provide shareholder and member communications electronically,” the report stated.
Technology has also become a vital enabler with boardrooms also addressing challenges in closely integrating digital platforms to ensure compliance with regulatory and security risks.
“I can’t underestimate the need to test and retest the technology and to test people’s thinking as to how to have the best outcome for security holders,” Maureen McGrath, general counsel compliance and secretariat, Scentre Group said.
“We went through a number of test scenarios including with the Chair, the CEO and other board members and involving staff participating as security holders. We can now all attest that dealing with people in the physical world is different to dealing with people in the virtual world.”