Over recent days much has been said and written regarding the actions of AMP and Rio Tinto, and their consequences. While the full facts of each case are not publicly known, it is clear that the conduct in these instances has fallen short of community, stakeholder and shareholder expectations. Poor process or judgement in decision-making has caused harm both to stakeholders and to corporate reputations.
The role of a director often involves weighing complex matters and decisions to safeguard the long-term interests of our organisation. Those long-term interests extend beyond profit and shareholder return, to consider the impact of organisational decision-making on employees, clients, suppliers and the broader community. As former Royal Commissioner Kenneth Hayne AC QC commented, “the longer the period of reference, the more the interests of all affected by a company’s actions will converge in pursuit of the long term financial advantage of the enterprise.”
Equally there are decisions and matters where our interests are clear. Boards must set a clear tone from the top on their cultural expectations of management and of themselves. Key decisions will be seen as tangible evidence of what is valued and prioritised. First and foremost must be a culture of respect and a recognition that management and boards must demonstrate actions and consequences for cases of sexual harassment in the workplace. The recent Australian Human Rights Commission report, Respect @Work, showed that Australia has gone from being at the forefront of tackling sexual harassment decades ago, to a situation where our nation lags in responding in the workplace to behaviours that scar our society at all levels (the report can be accessed here).
We encourage all members to think carefully about what role they can play and we are committed to providing tailored content and resources to assist members. On 17 September we will present a webinar with Sex Discrimination Commissioner, Kate Jenkins, where she will discuss the Respect @Work report and its governance implications with senior company directors (see details here).
Much of the misconduct highlighted by the Financial Services Royal Commission involved a disconnect between organisational and community expectations. In response to these evolving expectations, in March 2019 the AICD committed to a Forward Governance Agenda aimed at lifting governance standards and practice. Key themes of that program of work included duties, accountability and culture.
Since then, the AICD has published a guide to ethical decision-making with the Ethics Centre and a practical resource on cultural oversight, while giving greater prominence to diverse stakeholder voices in our member publications.
Looking ahead, we will continue to encourage members to take a long-term view of organisational interest. The destruction of ancient Aboriginal rock shelters at Juukan Gorge is a stark example of the stakeholder voice having been lost in a corporate decision-making process. To that end, we are developing a resource to support members in bringing stakeholder considerations to the board table. We are also refreshing our guidance on what the duty to act in the ‘best interests of the corporation’ demands of directors, with supporting legal advice. Recent events remind us that the role of director involves a complex spectrum of decisions and matters in the long-term interest of our organisations. The glare of media and public scrutiny can frame complex events and decisions in black and white; equally, deliberations that are overweight with nuance and compromise can make our actions difficult to justify. The trust and support of our employees, clients, shareholders and the community depend on us showing our actions are consistent with the expectations they have of us, and we have of ourselves.
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