The three pillars of modern governance the legal industry needs to know
Promoted by Governance Institute of Australia
Among the extraordinary challenges that 2020 has handed organisations and the legal teams who advise them, are there opportunities for lawyers to play a part in governance success?
The answer is absolutely, according to a leading global governance expert Brian Stafford.
With so many decisions that have complex legal implications being made by businesses, now is the time for legal teams to entrench their value to governing boards, both from the perspective of providing sound regulatory advice and by establishing an effective working relationship.
“In the current climate where change is the only constant, legal teams have an opportunity to serve as a trusted partner to executive teams and directors,” CEO of Diligent Corp Mr Stafford said.
“Legal professionals should look for ways to lead the moment and create even better alignment for their businesses between legal and compliance considerations and the strategic decisions directors make.”
Regulation is one of the three pillars of modern governance that will be explored in a panel discussion - chaired by Mr Stafford - at the Governance Institute of Australia’s upcoming virtual National Conference [https://www.governanceconference.com.au].
Alongside the other pillars of ‘innovation’ and ‘reputation’, the panel will examine how this triad sustains successful governance of an organisation, with success demonstrated by its ability to be adept and agile when navigating “diverse trends and megatrends” in the economic, social and political environment - and 2020 has had its fair share.
There has been no “playbook” for this year, says panel participant William Cox, the Australian based CEO of international engineering, design and advisory firm Aurecon.
“There has had to be much innovation brought to bear in organisations and this has been critical to keeping businesses operating and adopting different tools, systems, structures and approval mechanisms to maintain continuity,” Mr Cox said.
“Reputation and how boards ensure they do not lose social licence either through a health issue or how they oversight business management, redundancies, pay cuts is a very tricky issue.
“In the current environment, there is no playbook for boards to call on, we have all to some extent had to develop the solutions as we go.”
Discussion at the National Conference panel session will hinge on the alignment of, and tension between, these three pillars.
Although innovation and reputation are obvious levers that can be pulled and pushed to navigate responses to challenges such as that presented by COVID-19, regulation is set - you can't steer around it, Mr Stafford says.
“Rather, you have to make sure you’re doing everything you can to meet regulatory requirements alongside your investment in innovation and your work protecting the brand.”
This interface between the organisation’s strategy for innovation and reputation, and its regulatory requirements, is where the legal team can positively influence how adept and agile a business becomes in responding and adapting to trends and changes.
To be effective, Mr Cox says legal teams should offer clear advice, and listen to and understand how the board and management are looking to approach regulatory change.
“Clear advice and explanation is a very good starting point, explaining the key issues and how to address the change in a form that is suitable to the enterprise taking into account the size, form and function of the organisation,” Mr Cox said.
“It’s also about listening to the board and how they want to implement the change. Do they want leading edge? Best practice or fit for purpose? Or back in the pack compliance? There can be a big difference. Asking good questions and also giving the board options is always a good starting point.”
Exemplifying the complexity of regulatory issues that boards and management face is the ongoing impact of the EU’s General Data Protection Regulation (GDPR), according to Mr Stafford. He highlights a recent ruling by an EU court that struck down a provision many US companies were relying upon to allow them to continue to process EU citizen data. The July court decision leaves “US businesses working to ensure they fully comply while understanding how this may impact their businesses”.
Having the tools to help boards stay on top of emerging issues and understand how they might impact their business can support agile responses in these situations, he says.
This includes access to tools that allow legal and compliance teams to communicate quickly and in a confidential manner in case of an urgent development that has a material impact on the business.
“Right now, we’re living through a ‘black swan’ event that has already extended for seven months with minimal signs of rebound and recovery,” Mr Stafford says.
“This is the time for companies to double down on digital transformation in every aspect of their business and to get creative about business models that can work well even when consumers and businesses remain displaced for months to come.”
“I think those in legal roles would do well to continue to listen in to learn about where we’re heading and how they need to be ready to help their boards and management teams adapt in real time.”
The Governance Institute of Australia’s virtual National Conference will be held on 7 and 8 December 2020. Registration includes access to live and on-demand sessions, with early bird rates available until 16 October: https://www.governanceconference.com.au/.