Directors call for a radical policy rethink and a slow wind-down of stimulus measures to drive economic recovery

Thursday, 11 June 2020

The Australian Institute of Company Directors (AICD) has released the results of a survey of directors’ experiences during the COVID-19 shutdown and their perspectives on the future.

The survey, which polled more than 2,300 directors over the last two weeks of May, revealed that more than two-thirds (68 per cent) would like the Federal Government to radically rethink its agenda and develop new policy priorities in a post-COVID-19 world. Respondents were from across the listed, large private, SME, public and NFP sectors.

AICD CEO and Managing Director, Angus Armour, said, “As we navigate our way through the COVID-19 recovery phase, it’s clear that going back to pre-pandemic policy settings won’t increase business confidence, strengthen social services or boost the economy.

“Now more than ever, Australia needs a policy agenda that supports sustainable growth - including energy/climate change policy and tax reform - and a regulatory environment that encourages risk-taking and innovation.

“We need to actively create an environment where diligent directors are enabled to pursue new business models and technologies, accepting the risks involved. Our current director liability framework, which is burdensome by international standards, works against this.

“Our position as the second most attractive market in the world for litigation funders also works against directors and companies taking sensible risks to grow their organisations.”

A majority of respondents (69 per cent) nominated the introduction of pro-growth, pro-innovation policy settings as the area where they would most like to see further reform or relief in the aftermath of the crisis. This was followed by virtual AGMs as a permanent feature of the Corporations Act (47 per cent) and a pause on all additional regulation (42 per cent).

Mr Armour said, “COVID-19 has demonstrated our capacity to adapt and innovate and we need to continue that momentum rather than risk drifting back to old ways.

“The temporary move to virtual AGMs is one example of a change that was borne of necessity during COVID-19, and it would make little sense going back to pre-COVID rules on.

“The introduction of a National Cabinet presents a new way forward for Federal and State relations. Reducing the complexity and duplication of laws across the country will be critical to economic efficiency and improved outcomes. ‘If not, why not?’ should be the driver of legislative reform: if the Commonwealth and States cannot deliver on common approaches to critical national priorities like work, health and safety, the onus should be on governments to declare why they are unable.”

When asked which of the Federal Government policy approaches directors would like to see as we come out of the crisis, the vast majority (79 per cent) indicated a gradual lifting of public health restrictions to minimise chances of outbreaks, over a rapid lifting (21 per cent).

Similarly, 81 per cent indicated they would prefer to see a cautious phasing out of stimulus policies such as JobKeeper and the Coronavirus supplement, rather than a rapid wind-down - even at the cost of increased government deficits and debt.

The JobKeeper subsidy was identified as the COVID-19 policy measure that provided the most assistance for organisations throughout the crisis, according to 44 per cent of survey respondents – particularly in the SME and NFP sectors.

The AICD’s COVID-19 director survey also revealed that:

  • Directors rate addressing uncertainty surrounding cash flow and customer demand as the top priority in the post-COVID-19 recovery phase, while pivoting business operationally and adapting to new ways of working will also be a core focus.
  • Many organisations implemented a range of cost-savings measures for workforce arrangements over the COVID-19 period. 34 per cent had staff move to reduced hours, 24 per cent had their executives take a pay cut, 21 per cent stood staff down and 18 per cent reduced the wages/salaries of their staff. However, 40 per cent of directors reported no change.
  • On staffing levels as restrictions ease:
    - 38 per cent expect their staffing levels to stay at 100%;
    - 31 per cent expect most staff to stay (75%-99%);
    - 13 per cent expect increased staffing;
    - 8 per cent expect just over half normal staffing levels (50%-75%); and
    - 5 per cent expect staffing to be less than 50% of pre-pandemic levels.
  • A significant proportion of directors (39 per cent) are concerned with making going concern or solvency declarations in light of the pandemic, especially NFPs and SMEs.
  • Sentiment regarding the capacity that organisations will operate at over the next six months, compared to pre-COVID-19 levels, is understandably subdued – with an average of 84 per cent across all director segments.
  • 12 per cent of respondents (for SMEs, 16 per cent) said the six-month relief from personal liability for trading while insolvent, legislated in response to COVID-19, influenced their board’s decision-making on whether to continue trading through.

Media Contact: Maegen Sykes 0439 167 567

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