Stakeholder interests top of mind for boards

The annual Director Sentiment Survey reveals an overwhelming majority of boards (91%) consider stakeholder interests a high priority (up from 86% in 2016).

Released by the Institute of Directors (IoD) and ASB, the Director Sentiment Survey takes the pulse of the director community in New Zealand.

The survey reveals key challenges for New Zealand boards, including stakeholder interests, leading on organisational ethics, strategy and risk in the age of technological disruption, and access to skills and talent in a tight labour market.

The emphasis on stakeholder interests could also be seen in the high number of directors who considered sustainability and social issues as very important to their organisation (69%).

IoD Governance Leadership Centre General Manager Felicity Caird says “for boards to succeed in today’s environment, they will need to think beyond compliance in assessing risks and the drivers of business sustainability.”

Comprehensive reporting from management to boards on ethics and conduct risk is even more crucial in a business environment with greater stakeholder expectations about corporate behaviour and activities, including their social and environmental impact.

“Boards play an important role in setting the tone on ethics and culture for the organisation, and communicating it. In order to hold management to account for ethical risk and conduct, it is essential they receive comprehensive reporting.”

The survey also revealed an opportunity for boards to request improved reporting from management to guard against ethics risks. Just under half (44%) of New Zealand company boards have assessed organisational ethics risks, and less than a third (32%) of boards had discussed how they could make whistleblowing and speak-up provisions more effective in their organisations.

Capacity constraints remained a key concern in the economic outlook with more than half of directors citing labour capability and quality as a key restraint (54%). This is up from last year, when 46% of directors identified this as one of the top three issues.

While the survey indicates business optimism, there is more caution on the economic outlook. ASB Chief Economist Nick Tuffley says this may be due in part to the survey’s post-election timing, before a government was formed, and also due to perceptions the economy may be past its peak in the current business cycle.

“We are continuing to see the impact of the tight labour market register highly in directors’ key challenges,” Mr Tuffley says. “This tightening in labour is due to strong economic performance, which has created a highly competitive market for talent. Directors identified this as a key barrier to business performance and the economy more generally.”

Digital leadership within boards and in organisations remains a concern, with just 30% of directors feeling their boards had the expertise to lead their organisation into a digital future. While half of boards were discussing cyber risks, less than half of boards (45%) felt that they received comprehensive reporting on cyber breaches from their management.

This year saw a continued increase in the number of directors considering their boards had the capability to comply with the Health and Safety at Work Act 2015 obligations, up from 51% in 2014 to 76% in 2017. This is a welcome trend but vigilance in the boardroom is still needed, Ms Caird says.

“The ability for directors to navigate the rapid changes caused by the digital revolution is a key challenge, and should be a priority for boards.

“Social media and the risk of cyber breaches also mean that companies operate in a more complex environment, where comprehensive ethics reporting and risk management is vital to sustainable success”.

The survey was conducted in October 2017 by the IoD and involved 934 members of the Institute of Directors.

This is the fourth annual Director Sentiment Survey, and the second year the IoD has partnered with ASB on the survey.

Read the 2017 Director Sentiment Survey

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