Without revision, Australian boards will struggle to meet the diversity of thinking and skills required to effectively advise management teams in meeting the challenges of today’s economy, according to Grant Thornton’s latest report, Corporate governance: the tone from the top.
Ensuring skillsets of board members are aligned with the company strategy is integral for future growth, stated Andrew Archer, National Audit Leader, Grant Thornton Australia.
“The desire for board members to have current industry knowledge is significant with 69% citing this as an important board member attribute. Furthermore 43% think members should have sufficient time available to meet board responsibilities and 41% believe that board members should bring new ideas to the table with which to challenge management and the rest of the board.
“However, the research raises a significant concern with regard to the lack of technology experience among boards today.
“A lack of digital savvy in the boardroom is a glaring hole. Digital has disrupted markets and the way we do business but it hasn’t yet changed the makeup of boards. While board experience and wisdom on how to run businesses successfully remains as important as ever, boards need a 21st century upgrade.
“Conducting periodic assessments of board skills and the criteria used for selecting new board members should form part of a board effectiveness reviews to ensure boards are poised to tackle the business issues of today and tomorrow.
“Further to this, having robust strategic goals in place provides a framework against which companies can assess whether their short term operational plans meet longer term objectives.
“The research reveals 94% of businesses operate under a planning cycle of three years or less. Most board members believe this is an appropriate planning horizon, though some stated that they would like to see CEO compensation linked to longer term performance to avoid operational decisions being driven solely by quarterly reporting.
“A good governance culture is critical to a company’s longevity. Three-quarters of businesses believe they give about the right level of attention to the issue of culture. Whilst, Integrity and transparency were highlighted as the rules that should govern every action a business takes.
“It is important that boards therefore encourage the company to pause and reflect on what its real purpose is to understand whether some of this has been lost in pursuit of profitability, said Mr Archer.
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Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 10,000 businesses per year across 36 economies. This unique survey draws upon 22 years of trend data for most European participants and 11 years for many non-European economies. More information: www.grantthornton.global
Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis, primarily by telephone. IBR is a survey of both listed and privately held businesses. This report and release draws on 1,865 telephone interviews, companies 51 of which were Australian with business leaders and 82 in-depth interviews with board members across 8 countries conducted between November 2014 and February 2015.