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    Benefits and costs of virtual AGMs

    Accountability Governance
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    The annual general meeting (of shareholders) is an important forum in company life; shareholders can engage with the company directly, and the board of directors is duty-bound to provide an account. Typically, such engagement includes hearing reports about the company's performance (typically the outgoing financial year) and outlook; asking questions; and, importantly, making important decisions including, inter alia, the election of directors who will be charged with overseeing the company (making decisions and ensuring performance) until the next annual meeting.
    Despite the importance of the annual meeting, attendances have been declining in recent years. For example, Tony Featherstone, a commentator with the Australian Institute of Company Directors, recently observed that attendances have declined by 25 per cent over the decade to 2015. Others have noticed similar declines. Reasons for declining attendances are many and varied. While the lack of time and the tyranny of distance are commonly cited, a perceived inability to influence the decision-making process is a big turn-off for many shareholders, especially those who perceive that voting has been stitched up before the meeting.
    Some commentators have suggested that new approaches are needed if shareholders are to be re-engaged. One alternative that has garnered widespread interest is the 'virtual annual meeting' to replace the in-person meeting. Tony Featherston and Anthony Hilton have both argued the case recently. 
    ​Superficially, the concept of a virtual annual meeting sounds great. Shareholders who cannot attend the annual meeting in person can particpate via an electronic channel. They can listen to presentations, ask questions and vote—and they can do so without incurring the time and cost of travelling to attend in person. But does remote attendance constitute acceptable engagement? Shareholders attending virtual meetings often cannot 'see' or interact directly with other remote participants. Consequently, the balance of power can (and does) shift from its rightful place (the shareholders) to the head table (the board of directors). The casuality is debate.
    The challenge for shareholders is to resolve whether the benefits of the virtual annual meeting outweigh the more traditional in-person meeting. Both formats have their strengths and weaknesses. Does the virtual meeting (a group of people sitting at remote locations with computers or tablets and collaboration software) enhance genuine participation (cf. attendance) as is claimed, or is the construct a thinly-veiled attempt by the board or management to assert control and constrain healthy debates at annual meetings?  And what of accountability? Where does that lie and, importantly, where should it lie? The answer is analogous to the quantity vs. quality debate.
    The annual meeting is the sole opportunity for shareholders to hear from the board and to hold it accountable. Accountability rightly includes answering questions and responding to challenges from those to whom the account is being provided. Boards should not be exempt from such scrutiny. Caveat emptor.
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    GIAconf'16: Post-conference reflections

    Conferences Governance
    The 33rd Governance Institute of Australia national conference was held in Sydney recently. Previously, the Governance Institute (GIA) was known as Chartered Secretaries Australia, an outpost of the Institute of Chartered Secretaries and Administrators (ICSA). The name change, implemented several years ago, implies that the body is moving beyond serving the company secretary as its core constituency. 
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    I attended to observe; meet others; serve as a panelist (topic: The pursuit of productivity, see picture); debate topical challenges for boards; and, learn more about the practice of corporate governance, especially the GIA's role in encouraging boards in their value-creation mandate. As this was my first GIA conference, some post-conference reflections are appropriate:
    • The conference was somewhat smaller than I expected. Whereas over 450 people attended the New Zealand Institute of Directors' conference in 2016, the GIA conference attracted fewer than 200 'governance professionals' (more on this term below). The paucity of company directors was also surprising, especially given the GIA's claim to be "the only independent professional association with a sole focus on whole-of-organisation governance".
    • During the conference, I asked several people about the term 'governance professional'—my presumption being that it is a reference to the role of director and, possibly, an attempt to differentiate the GIA from the Australian Institute of Company Directors. However, this did not seem to be the case. While not excluding directors, the intention is to embrace a far wider group of people and roles—risk managers, company secretaries and other staff who perform reporting, compliance and administative activities; those who are "not served by the AICD" as one person politely suggested.
    • The repositioning of governance as a whole-of-organisation phenomenon is curious, especially when corporate governance is understood to describe the structure and functioning of the corporate polity (i.e., the board of directors) or, as Sir Adrian Cadbury so ably wrote, "the means by which companies are directed and controlled".  Why the GIA has chosen to extend the understanding of governance well beyond the boardroom to include functions of management, operations and leadership is something that remains unclear (to me at least). However, I will continue to watch developments with interest.
    • The GIA, like the IoD, IoDNZ, AICD, NACD and a growing number of commentators now advocate the board's role in ensuring company performance. However, the frequent use of 'governance frameworks' and compliance-oriented language during the conference served to undermine this aspiration somewhat. It suggested that the mindset of many remains planted in conformance—when 'corporate governance' is uttered, many still internalise the tasks of 'monitoring' and 'compliance'. Clearly, more work is needed if boards, directors and managers are to embrace the value-creation mandate of boards. 
    • The speakers assembled by the conference organisers were, in general, fantastic. Most delivered insightful commentaries and updates on topics of interests to directors and company secretaries. The audience also had the opportunity to engage speakers and panelists, which seemed to be appreciated.
    • The conference was well-organised (one of the better ones that I have attended in recent years). The adoption of a conference app (something I haven't experienced before) was a novel and useful development—delegates could simply reach fo their smartphone or tablet rather than fumbling pieces of paper and lugging a heavy conference pack around. 
    • Toby Travanner's contribution as conference emcee was outstanding. Organisers of other Australian-based conferences who are looking for a top-shelf front-man should consider Toby.
    In sum, the conference revealed some interesting insights (see summaries in other blog entries below) and attendance was well worthwhile. However, I couldn't help but wonder whether the organisers missed an opportunity—to engage the group that actually carries ultimate responsibility for company performance; company directors.  If the GIA is to make further progress towards its stated purpose, it is vital that company directors are active participants in the discourse. 
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    GIAconf'16: Update #3

    Conferences Governance Leadership Research
    This is the third update of several to summarise observations from the 33rd Governance Institute of Australia National Conference being held in Sydney this week. Here are the links to the first and second updates. (The final update, covering the second day, will be published tomorrow.)
    ​This update includes observations from the late afternoon session.
    The session was dominated by a panel discussion on the topic of culture and why it matters. John Price and Judith Fox, both of whom had addressed the conference earlier were joined by Peter WIlson (Chairman of the Australian Human Resources Institute) to discuss this important topic.
    Fox and Price quickly established the strong correlation between positive organisational culture and company performance, although they did so through the 'back door': asserting the poor culture often leads to erosion of value. While this assertion is intuitively accurate, the next statement caught many in the audience off guard. The statement was, and I quote, "Good governance frameworks lead to good culture". Really? I looked forward to hearing how this might be. Sadly, the claim was not substantiated—the audience was left hanging. I was hoping for something more substantive than a straightforward claim. Fortunately, Wilson provided it—his comments  caught the audience's attention.
    Wilson tackled several myths of culture head on, reminding the audience that culture and performance are different; that a good culture is not a reliable predictor of high company performance (although the opposite is more reliably true as Fox and Price made clear); and, that culture can actually be measured, despite assertions to the contrary. Wilson backed up each of these claims with stories and/or evidence, all of which had strong practical undertones. Most notably, Wilson called out the importance of the board to set the 'tone at the top', and to insist (through reporting and walk-throughs) to ensure that the 'mood in the middle' is consistent and not, as is more common a 'muddle in the middle'. 
    Beyond the panelist's comments, my thoughts wandered to the title of Garratt's helpful book The fish rots from the head​ several times throughout the session. If the board is not leading by example, it is not leading at all. 
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    GIAconf'16: Day One (continued)

    Conferences Governance Performance Strategy
    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.
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    GIAconf'16: Opening session

    Conferences Governance
    The 33rd Governance Institute of Australia national conference got underway in Sydney this morning. Some 160 'governance professionals' assembled from around Australia to explore the role of the company secretary, and emerging governance thinking and practice. This, the first of several conference reports, covers the first session of the two-day conference. (Note: these updates are not exhaustive accounts of ever session. Rather they provide summaries of key points made by presenters and observations from an interested delegate.)
    • The conference was opened by the GIA President Simon Pordage, after which Hon. Kelly O'Dwyer, the Minister for Revenue and Financial Services delivered a welcoming address by video link. O'Dwyer spoke about the government's legislative programme aimed at improving protection for shareholders. The brief message appeared to be well received by the audience, although the significance of the signal that the Turnbull government plans to implement a 'user pays' model at ASIC appeared to waft over most delegate's heads.
    • A panel of three regulators (John Price, ASIC; Geoff Summerhayes, APRA; and, David Barnett, ASX) were welcomed to the stage following O'Dwyer's welcome, to present a regulatory update. Each panel member offered a perspective including some rather candid observations including that many small companies treat corporate governance as a box-ticking exercise; and, that directors tend to view their own contributions optimistically (on the basis that we judge ourselves by intent, others by impact). Notwithstanding this, the overarching priority of the regulators and regulatory framework was then restated: to create an environment for efficient markets, fair rules and to catch miscreants.
    • Price noted that ASIC has an important role to play in terms of establishing trust and confidence in the equity market, after which Summerhayes added that this was crucial because the financial services sector (in particular) has taken its social licence for granted for many years. The panel then postulated that high levels of trust are an important indicator of a good culture and that culture is an indicator of (firm) performance.
    • The panel then moved on the present a raft of helpful technical updates, and to respond to questions from the conference floor.
    The 33rd GIA conference promises much. The organisers have assembled a good programme and a strong line-up of speakers. However, the opening session felt like an opportunity missed. Why the organisers chose to lead out with a regulatory update (instead of a thought provoking message from a gifted communicator to reinforce the core theme of the conference) was beyond me and most of my table neighbours. Regardless, I look forward to the sessions that follow. More soon.
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    Crafting an organisation with purpose

    Accountability Decision Making Governance Performance Strategy
    Earlier this year (September), I had the privilege of attending the Organisations with Purpose conference, an event that sought to address questions about why organisations exist—their reason for being. The two-day event, which was jointly organised by London Business School and Blueprint for Better Business, was well-attended by some leading academic thinkers and, significantly, a few influential business leaders as well. 
    An overriding theme pervaded the conference: Companies with a single, clearly defined and communicated purpose tend to perform better than those that do not. To hear others summarising evidence-based research and case studies on a topic that I've been interested in for some years was great. It filled in several gaps in my understanding. A summary of the conference proceedings is now available. I commend them to you.
    The high point of the conference was the Blueprint for Better Business framework, a model to guide decision-making in purpose-driven businesses. It was compelling, to the extent that I've registered to attend a two-day immersion workshop, ahead of introducing the framework to companies in Australasia from early 2017.