For the first time in 18 months, director confidence has fallen, according to the AICD’s Director Sentiment Index. Despite the fall over the last six months, directors are optimistic about the health of the Australian economy at present and the overall sentiment remains in positive territory.
The Australian Institute of Company Directors’ bi-annual Director Sentiment Index is the only indicator measuring the opinions and future intentions of directors on a range of issues including the economy, government policy and governance regulations.
This 2nd Half 2018 Index reveals that while directors are generally confident about the current state of the Australian and global economies, they are much less optimistic about the outlook for economies over the year ahead.
AICD Managing Director & CEO Angus Armour FAICD said that the DSI highlighted a number of areas of concern for directors. “At home there’s also increasing pessimism around Canberra’s impact on business, with 54% saying the federal government’s performance has a negative effect on their business decision making and 79% perceiving a negative effect on consumer confidence.”
He noted directors are conscious that they need to drive change to enhance public trust in institutions. Over 80% of directors support stronger penalties for misconduct, and 56% support an increase in funding for regulators.
Sustainability and long-term growth prospects are the main issues keeping directors awake at night, followed by business reputation in the community and corporate culture.
Directors also nominate less focus on short-termism and fostering innovation as the measures most needed to boost productivity. Their desire for more innovation has increased substantially in this wave of the Index. For the first time, our members have nominated climate change as the number one issue they want the Federal Government to address in the long-term.
Other key findings from the AICD Director Sentiment Index 2nd Half 2018:
- 84% of directors rate the current quality of public policy debate in Australia as poor.
- 69% of directors say there is a risk-averse decision making culture on Australian boards. Of those, 28% believe the primary driver is a focus on compliance over performance, followed by pressure from shareholders for short-term returns (21%).
- Energy policy, tax reform and infrastructure are the top priorities for the federal government to address in the short-term.
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