Influential independent director and CPD Board Member Sam Mostyn delivered the keynote at the Australian Institute of Company Directors’ 2018 Governance Summit on ‘’The evolving role of directors.”
Sam argued that expectations for Australian companies and business leaders to provide better leadership on longer-term economic, social and environmental issues were growing – and that in many cases boards and directors had been too slow to respond.
“One of the reasons we are seeing a transfer of expectation on leadership and change to business, and to organisations outside the political and policy environment, is that we are all living through some of the most complex, global, and interconnected challenges imaginable. This necessarily impacts the role of directors.”
“The confluence of the impacts of climate change, social and economic inequality in its many forms, tens of millions of migrants and refugees on the move across the world, stress on our natural environment and food sources, the rise of small and large artificial intelligence, the future of work, rapid demographic shifts and new geo-political tensions as the world rebalances…
All these sustainability problems, and more, have exposed governments, and our traditional ways of governing and organising, as inadequate to solve these wicked problems and navigate successful futures for our communities.”
Influential non-executive director @sammostyn says there is an opportunity for board directors to step up and take more leadership on issues.
— Sky News Business (@SkyBusiness) March 1, 2018
To live up to these rising expectations, Sam said that boards and directors must cultivate the diversity, culture and expertise they need to grapple with contemporary challenges and build trust and long-term value.
“I believe we are simply not moving fast enough in building effective diversity and inclusion in governance, and embracing qualities like humility, curiosity, the capacity to deal with complexity, a comfort with uncertainty, and a genuine interest in the culture of organisations.
Despite good intentions, and some undoubted leadership from many of our leading companies, our overall progress is frustratingly slow.
This poses both a great risk, and more importantly, leads to missed opportunities.
…Increasingly, our board rooms are needing to create safe spaces for complex and difficult conversations, and a comfort with challenge and engaging with the broader world – getting insights which reduce risk of future problems.
In addition to our commitment to the success of the organisation, and demonstrated competence and expertise, directors need to be able to be independent, authentic, prepared to speak up, and prepared to learn.”
There is a significant shift underway. Good stewardship will be enacted by diverse and inclusive boards who avoid groupthink.
— AICD (@AICDirectors) February 28, 2018
Sam highlighted climate-related risks as one prominent issue where boards had been slow to respond, despite mounting evidence about the economic and environmental impacts of climate change.
“When it comes to the changing world we live in, there is one conversation I believe boards weren’t having enough of in recent years – the topic of climate-related risks.
Few boards have laid strong foundations for measuring and disclosing these risks.
It has generally taken intervention by regulators – Bank of England Governor Mark Carney in the UK, and more recently APRA’s Deputy Chair Geoff Summerhayes, joined now by RBA Deputy Governor Guy Debelle – who have asked uncomfortable questions and opened up a new conversation about the risks and opportunities presented by climate-related financial risks.
Boards didn’t need to wait for the lawyers and the regulators to open up this conversation, but many did.
I observed at close range the role of the Centre for Policy Development in the past year in bringing together a diverse group of business leaders, legal experts and regulators, to start a conversation about climate risk and director’s duties in order to be better prepared as the issues come into sharper focus.
This reinforced to me that boards should be more discerning and strategic in how they engage in the policymaking process. Boards shouldn’t hesitate to take the road less travelled and break away from the ‘safe’ political options, where there is a clear imperative for engagement by the company, and a belief that good policy can be assisted by broader perspectives.”
She also spoke about the key themes in her remarks with Sky News Business Editor James Daggar-Nixon.
Legal opinion and roundtable on directors duties and climate risk – CPD, October 2017
Can democracy deliver? – CPD Menadue Oration by Marty Natalewgawa, November 2017
A sense of purpose – BlackRock Chair Larry Fink’s 2018 letter to CEOs, January 2018