Boards Face Significant Challenges in 2019
The 2019 Edelman Barometer ranked Australia the 12th lowest of 28 countries surveyed when it came to the informed public’s trust in our institutions. The Royal Commission into Misconduct into the Banking, Superannuation and Financial Services Industry, the Prudential Inquiry into the Commonwealth Bank of Australia (CBA) prepared for APRA, the ACCC Report of Retail Electricity Prices and various other reports and enquiries have all raised serious issues of corporate governance. In particular issues that centre around Core Purpose, Credibility, Reputation, Visibility, Board Renewal and Structure. The findings in these reports, whilst confronting, provide boards with a unique opportunity to examine their own processes and dynamics.
Progressive companies are now taking the step of articulating their “Core Purpose” and publicly making a stand for why their company exists. A core purpose statement is not a clever advertising slogan; it describes how the company is present and committed to the communities they are part of. Core purpose goes beyond vision, mission, values and strategy: it speaks directly to the organisation’s constituent base.
The majority of customers, employees, suppliers and other stakeholders see directors as shadow figures in the background. Being unseen means being unknown. It is easy to trust those you know and to mistrust those you don’t know. Visibility has strong links to credibility, better communication, and promoting a feeling of trustworthiness. Being a company director is not a passive role. All directors need to be present in the organisations they govern and the communities in which their organisation operates.
The foundations of effective board functioning (structure) are not always applied with agility and awareness. Company and industry changes may call for structural review and development resulting in innovation and adaptation. That is, structures also need adaptation and fresh eyes in times of change.
Board renewal is not just about finding new directors. It also includes time out to work on the board as well as in the board. It's about finding opportunities for self-assessment and fresh approaches to old problems. It requires innovative thinking and new conversations. This can be challenging. Board dynamics can be positive and enhance functioning. But they can also be negative and inhibit effective decision making.
“Trust is clearly a top board priority. Let’s not sugar-coat it: Australian business is still not performing well on trust……As leaders, we’re still ranked poorly on trust by the community and Australia is going backwards on trust, overall, according to Edleman.”
How Boards Can Help Australia Recover From Its Trust Crisis,
Dr Nora Scheinkestel AICD Feb. 2018
With extensive experience in working with boards and directors we offer a unique approach. One based on a depth perspective informed by the practice of organisation dynamics and directorship. Formal structures are only part of the picture. We offer innovation, creativity, engagement, depth of analysis, relevance and perspective in order to enhance individual and collective director contribution. With all the issues around good governance and board effectiveness at present it’s never been more important to work on your board hot spots. For an initial conversation call Geoff on 0418 595 107 or email firstname.lastname@example.org
Di Percy & Geoff Nunn
Reputation is a fragile asset. Issues emerging from the Banking Industry Royal Commission highlight the very real risks to an organisation’s reputation if its conduct dips below good governance standards and community expectations. Some commentators assert that up to 25% of a company’s market value is tied up in its reputation. The AMP share price since the Royal Commission revelations provides a clear testament to this. In today’s world of social media, incidents that might previously have gone unnoticed very quickly spread throughout the world. Just think of the damage a rogue trader or dubious financial planner can do to a financial institution’s reputation. It takes many years to build reputation and only one incident to destroy it.
Credibility is linked to core purpose and reputation. When an organisation acts in ways that are perceived as deceitful or dishonest by its stakeholders, it very quickly loses credibility. A loss of trust and questionable authority very quickly erode an organisation's standing in the community. The Board sets the tone for a company’s credibility. How directors are perceived both within the organisation and in the public arena is critical for maintaining a credible corporate presence.
An In-Depth perspective
In this article Board Advisor & Corporate Governance Specialist, Geoff Nunn, considers the current crisis of confidence in our corporations and government institutions. He explores the history and offers guidance to directors on a way forward.