Governance news bites

Governance is often in the headlines, and the last few weeks have been no exception. Recent news related to governance includes:  

Focus on climate transition “heating up” 

While the ASB/IoD 2024 Director Sentiment Survey suggested further reductions in directors’ focus on climate change, insurers, notably through the Insurance Council of New Zealand, are ramping up calls for adaptation effort to be scaled up to meet the challenges that climate change is creating. On the back of that, some financial institutions (including the ASB) are putting more focus on climate change. Notably, the ASB, a climate reporting entity, has appointed a new general manager of climate transition to supplement other sustainability-focused roles at the bank.  

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Potential lessons for directors and boards from the flight deck 

Boards and individual directors can face high-pressure decisions. This was clear during the pandemic and continues to be true for boards facing difficult economic and financial trading conditions. Pilots face a similarly difficult decision-making environment, although theirs is potentially more acute and a matter of “life and death”. New research has revealed how factors such as a pilot’s experience, ability to think critically and stress level can affect their decisions. After facing a range of difficult real-world scenarios, pilots were assessed with a range of tests including a cognitive reflection test. This test measured a pilot’s ability to override intuitive, automatic responses in favour of analytical reasoning. The findings suggest that pilots who apply analytical reasoning, have significant experience and demonstrate the ability to reflect on their thinking score better in the cognitive reflection test and handle simulated emergencies better. To the extent that these finding identify the keys to good decision-making under pressure, they potentially apply as well to boards and directors. This is worth a bit of cognitive reflection!

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Positive sentiment about director sentiment  

The ASB/IoD 2024 Director Sentiment Survey attracted a lot of attention. Most media noted director optimism about the future with Radio New Zealand commenting that “smiles have replaced frowns in the country’s boardooms…”.   Greg Hurrell from BusinessDesk noted that “what really mattered was the directors were now thinking beyond how their businesses could simply hand on”.  NBR’s Fiona Rotheram picked up on director concerns about liability, which will be a key issue for the Law Commission 2025 review of director’s duties in phase 2 of the Companies Act reform, outlined by the Minister of Commerce and Consumer Affairs a few months ago. Rotheram also commented on the need, identified by a large proportion of directors, to find the right capabilities for their boards. 

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