This is the second update of several to summarise observations from the 33rd Governance Institute of Australia National Conference being held in Sydney this week. You can read the first update (opening session) here. This update includes observations from the late morning and early afternoon sessions.
The question explored by the panel in the late morning session was "Creating a safe harbour: Beyond the business judgement rule". Judith Fox (GIA Policy Director), Prof. Pamela Hanrahan (UNSW Business School) and John Stanhope (Chairman, Australia Post) discussed proposed changes to company law (safe harbour provisions). The panel noted that the establishment of a 'safe harbour' clause might lead to inappropriate incentives for directors and executives. Whether this possibility is any better or worse than the current situation (of boards providing little if any guidance in their forward looking statements) was discussed at length. The question was not resolved explicitly. However, the panel did agree that it is reasonable to expect boards to provide shareholders with 'fair' and 'reasonable' guidance' to indicate strategic intent, so that shareholders could make informed decisions about their ongoing interest in holding shares and director selections.
The early afternoon session spoke to emerging trends that directors and boards need to be aware of if they are to contribute meaningfully to the future performance of the company. Specifically, the topics were the Internet of Things and Innovation. Mike Briers grabbed the audience's attention by demonstrating how pervasive the IoT phenomenon is becoming: the level of connectedness and quantity of data generated as a result of millions of connected devices is expected to dwarf every other sector of commerce and life except, perhaps, astronomy. The challenge that IoT presents for boards relates entirely to strategy. How can or should boards respond to the ever advancing wave of technological innovations? What impact might any of these innovations have on current business models and markets? Boards need to create space in their meetings (and perhaps add meetings to the calendar) to grapple with these questions directly. Briers suggested that the rate of innovation is occurring at such a pace and complexity that boards and executives will struggle to understand, let alone respond well. Therefore, boards need to seek symbiotic relationships with other companies and experts. Collaboration is no longer an option. Companies should also prioritise investments in 'complex integration solutions' over behemoth systems. Amongst the turmoil, one thing was clear: if companies are not actively investigating emerging trends and technologies including the Internet of Things (amongst others) they risk becoming irrelevant to their current and future customers.
Thoughts on corporate governance, strategy and boardcraft; our place in the world; and other topics that catch my attention.