Corporate Culture

Governance 2025: Complexity, Regulation, Technology

“The world of the governance professional is changing faster than ever before … This report attempts to understand why governance professionals’ roles are shifting, what future skills they require, and the resources and support they will need from their executive leaders.”

So says Megan Motto, CEO of the Governance Institute of Australia (GIA), in her letter opening The future of the governance professional, a new research report published by the GIA . Detailed interviews with 11 senior governance professionals helped shape a subsequent online survey that was answered by nearly 500 practitioners in mid-2018. The report reveals three key governance trends shaping the profession’s outlook through 2025:

  • Increasing complexity: boards are more accountable for internal processes, external relationships and their organisations’ impacts on society.
  • Regulatory change: boards face increased regulatory oversight, in part due to high-profile compliance failures, and must rebuild community trust.
  • Technology disruption: boards can access more information than ever before, bringing judgments about its selection, curation and presentation to the fore.

“I believe that governance – globally – is in a period of transition,” says Dottie Schindlinger, VP of Thought Leadership at Diligent. “We’re seeing a new level of scrutiny on boards of directors at organisations large and small, listed and private, for-profit and not-for-profit.”

The report suggests six ways the company secretary’s role is likely to evolve through this transition, from:

  • ‘Secretary’ to ‘trusted advisor’ to the board
  • Minute-taker to thought leader
  • Servant of the board to ‘conscience’ or ‘moral compass’ guiding the board
  • Simply collecting and supplying information, to becoming a curator, analyser and adviser on that data and pointing to where to find more
  • Supplying answers to stimulating wider thinking by proactively raising the right questions
  • Being process-based to being principles-based

Increasing complexity

A majority (79%) of respondents indicated ‘complexity of business environment’ as a vital or very important driver of governance changes. Even for smaller businesses, boardroom decision-making is becoming more complex. Stakeholder numbers and influence are growing, and they expect a fuller accounting of board decisions’ costs and consequences.

These include bodies with the ability to influence government policy, institutional investors with their own agendas and activist customers who demand ethical and responsible behaviour from the companies they engage.

Another impact is greater scrutiny of director appointments and demands for information on company policies on climate change, diversity, remuneration and culture.

Schindlinger concurs, noting that in her research she was struck by “how much more challenging governance work has become in the past decade – mostly due to volatility, uncertainty, complexity and ambiguity in a number of areas”.

Culture is coming to the fore, especially in the wake of Royal Commissions and high-profile media reports revealing poor behaviour within the banking and finance sector, various churches, the aged care industry and political parties. Public trust in these institutions is low, and governance professionals will play a critical role in rebuilding it.

Regulatory change

Eighty per cent of those surveyed nominated ‘regulatory reform’ as very important or the most important challenge they face today, in the next 12 months and the next three to five years. Similarly, most participants rated regulatory change as their top risk today, in the next 12 months and the next three to five years.

Communities want regulators to deal harshly with institutions that don’t meet their responsibilities and company secretaries will need to identify how and where potential compliance failures might impact their organisation.

As a result, directors are feeling the pressure; Schindlinger notes that “the biggest challenge is simply staying current”. This presents an opportunity for governance professionals to keep their directors informed and confident that they’re across their regulatory and compliance responsibilities.

As Schindlinger says, it’s an opportunity “to shift their roles from being those of ‘report writers’ to ‘curiosity facilitators’ … this can lend additional energy to the board’s pursuit of insight”.

There is a further upside: by motivating organisations to improve their compliance, new regulatory requirements for greater transparency and accountability can also bring financial, reputational and other benefits.

Technological change

‘Technological disruption’ will have a vital or very important impact on governance professionals’ roles by 2025, according to more than three quarters (75.4%) of respondents.

They expect that artificial intelligence (AI) and machine learning (ML) will come to the fore. Other technologies nominated as playing key roles include real-time information gathering, big data analysis, improved regulatory technology (regtech), automation, board portal and collaboration tools, blockchain and voice recognition.

Schindlinger says these technologies will change the way governance professionals operate: “Within the next six years, I’d expect to see more governance professionals relying on these digital tools to supply them with better insights and analytics to do their governance work.”

That is, data gathering and analysis will be largely automated, freeing them to concentrate on using their business, interpersonal and other professional skills to present concise briefs and information packages to assist the board in its decision-making role.

“We need governance professionals to ask the right questions at the right times,” says Schindlinger, so they can anticipate emerging trends and keep directors’ attention focused on critical issues.

The future of governance is … now?

The future of the governance professional paints a not-unexpected picture. Complexity, regulation and technology are transforming boards and those who assist them.

“Ideally, corporate secretaries and governance professionals would provide directors with access to digital tools … and then provide regular updates that provide context, background and food for thought,” Schindlinger suggests.

It’s an enticing prospect, and one we believe will only become more relevant, and more prevalent, between now and 2025. Why not start your journey today?

 

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