AICD submission on Productivity Commission inquiry into productivity performance

On 23 March 2022 the AICD lodged a submission with the Productivity Commission to its second five yearly inquiry into Australia’s productivity performance.

The submission recognised the Government has made progress in recent years in enacting reform in areas that are relevant to the role of directors and governance of Australian businesses. This includes insolvency law reform and enabling virtual Annual General Meetings and electronic communications. These reforms should, over time, result in cost and time savings for organisations, directors and shareholders.

The AICD view is that there is room for further governance focused policy changes to spur productivity through encouraging directors to lead organisations in a way that promotes innovation and appropriate risk taking. Our key points were:

  1. The AICD’s DSI results reveal that Australian directors consider that a reduction in short-termism, in both government policy making and business decision making, is key to driving productivity gains. Australia’s recovery from the COVID-19 pandemic represents a unique opportunity to move away from short termism through empowering Commonwealth and State/Territory governments to embrace targeted long-term microeconomic reforms that will boost productivity through promoting innovation and business investment.

  2. The AICD’s recommendations were focused on areas that we consider have the potential to support a culture of dynamism and entrepreneurism at organisations of all sizes, including: 

    a) the potential for targeted corporate governance reform focused on stimulating measured risk taking and investment, reflecting on the success of the insolvency Safe Harbour under 588GA of the Corporations Act;

    b) measures to promote effective government and maintain progress in reducing the regulatory complexity and burden faced by boards and businesses of all sizes, including the need for a national reform agenda to ensure coordinated policy making in emerging areas; and

    c) measures to harness the untapped productivity potential of small and medium sized enterprises and NFPs, including support schemes focused on management and digital skills and how to drive improvements in the visibility and governance of the NFP sector.

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