Our annual 2018 International Business Report (IBR) survey, released in May 2018, asked 2,500 executives from 35 economies about Engagement Beyond the Boardroom. For Australia, the insights couldn’t be more timely, as our Boards are challenged to reconsider their roles, and whether they are prepared for a new era in corporate governance.
The legacy of boards in Australia
Australian boards focus on shareholder value first and foremost. This is dictated to by legislation. The enduring success of the economy and limited impact of the global financial crisis also mean that pressure on boards to change how they manage their businesses in less marked than other developed markets.
Yet, there are stirrings of change. Spearheading this shift is the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which is highlighting conduct lapses and conflicts of interest between banks and their customers.
Such wake-up calls highlight the risk of complacency, the need to engage more widely and balance different, and potentially conflicting, interests – such as shareholder returns and customer satisfaction. Not having the right balance can have consequences for brand and reputation.
Understanding reputation, risk and conduct
Interestingly, Australian executives feel they have a good handle on risk management with a significant majority stating that they manage risk at a company/enterprise level – with the board at the heart of curating and maintaining a good reputation and risk profile.
How we rank:
- Number 4 (81.6%) for managing risk at a company/enterprise level
- Number 2 (70.4%) for managing risk at a functional / department level – such as IT, finance, HR
- Number 1 (60%) for managing risk at an individual project or per business case level
But would these results be the same if we took the same business pulse today? Since the release of this report, additional stories and insight into the relationship between risk, lack of oversight and culture have come to light through the Royal Commission. Additionally, we know that many of our clients are looking to their boards to clarify what they responsible for, who are they responsible to, and how much they can trust the information presented to them.
In future, we expect boards around Australia to be asking more questions, requiring more data, and playing a larger role in fostering processes and cultures to create a better harmony between the company and its customers.
Are you prepared?
Tackling the growing governance challenges can be difficult for all businesses. Yet, it can be especially problematic for dynamic mid-size enterprises, which often lack the board-level diversity, developed governance structures and stakeholder engagement mechanisms of their larger and more established counterparts. Then there is the extra layer of scrutiny Australian companies will likely continue to face from customers and regulators.
There is no one-size-fits-all blueprint – the stakeholder expectations and the forces shaping them vary from business to business and market to market. Nonetheless, there are key considerations that all businesses should address.
Download the full report for further insights into Engagement Beyond the Boardroom. Grant Thornton’s team of industry experts and technical specialists work with boards and executive teams to ensure your business is fit for purpose to meet your future ambitions.