AUT governance symposium: reflections

I had the privilege of attending a corporate governance symposium in Auckland yesterday. The one-day symposium, hosted by Auckland University of Technology (AUT), was held in the recently opened Sir Paul Reeves Building on the main AUT campus. It's a great facility. Approximately 30 researchers and other experts, including several international speakers, gathered to discuss recent developments in the field of governance. Topics included ethics, performance, diversity, technology and remuneration. There were seven main presentations throughout the day, and twelve supporting papers (presented in two concurrent streams after morning tea and after lunch). Some of the main presentations are summarised below:

• Thomas Clarke (University of Technology, Sydney) provided the opening keynote. He spoke about emerging challenges for directors, not the least of which is structural. While the four primary functions of the board are strategy formulation, policy making, monitoring and supervision and accountability (see, R. I. Tricker), most boards spend most of their time monitoring performance, a past-focussed, internal activity. The changing context of business requires that boards embrace change, lest any value that they are able to deliver is lost. This includes the adoption of meaningful (board performance) evaluation processes, embracing a greater level of diversity around the board table, and the gaining of a greater knowledge of the business being governed.
• Vincent Naidu (VINCI Law) provided a sobering reflection when he spoke about the duties directors owe to shareholders and to the company, and the consequences of not fulfilling these duties. He suggested that nine out of every ten failures fall into the second category—failures by directors to fulfil their duties to the company. Most of the breaches can be described with one of four summary descriptors: responsibility transference; passing the buck; "it wasn't me, it wasn't me"; and, "it's all about me". Naidu reminded delegates that the word governance is derived the Greek word kubernao ("to steer"). Directors need to keep a watchful eye, and they cannot afford to fall asleep at the wheel. Sadly, many still do.
• Julie Cassidy (AUT) summarised proposed changes to the Companies Act, particularly provisions to criminalise breaches of certain duties of directors. The proposed changes are limited to serious breaches of sections 131 (act in good faith) and 135 (reckless trading). In contrast, the scope of the provisions in the Australian statute is much more extensive. Cassidy called for officials and politicians to look at the Australian context more closely, with a view to including a more extensive set of provisions. There is considerable resistance to the addition of any criminal consequences in some quarters (surprise, surprise). However, the disreputable actions of some have tarnished the reputations of the majority (who are well-meaning and hard-working). So, something needs to be done. 
  
• Kevin McCaffrey (Effective Governance Consultants) spoke passionately about advisory boards. He asserted that many owners of small-medium enterprises (SMEs) and consultants to SMEs simply don't understand vital differences between boards of directors and advisors to boards. In the eyes of the law, groups of advisors that meet regularly and perform duties similar to those of directors may be deemed to be acting as directors. Consequently, they bear all of the legal responsibilities, accountabilities and consequences of a director, even though they don't realise it. The safest way forward for groups of advisors is to avoid "advisory board" language, and to meet on demand for specific advisory tasks only. McCaffrey's talk provided a welcome and timely wake-up call. SME consultants, business incubators, angel investors and professional bodies all need to take note.

The symposium delivered great value to attendees—if the many complementary comments overheard during drinks at the end of the day is any indicator. Dr Coral Ingley's vision, and hard work to breathe life into it, needs to be acknowledged and applauded. Well done Coral. I hope the AUT corporate governance symposium becomes an annual event, to bring researchers, experts and (importantly) practitioners together to share and test ideas, in order to improve governance in this part of the world. It would fill a gaping void.