Think, act, thrive – 2024 Leadership Conference

Day one 

Magical thinking and silver bullets were out. The first day of the 2024 Institute of Directors Leadership Conference was characterised by a challenge to Aotearoa New Zealand’s boards: Think harder if you want to thrive and survive.

Thankfully, attendees had come to the right place because a line-up of knowledgeable experts offered ideas on what to think about, how to develop new perspectives on contemporary challenges, and how to align organisational strategies for future success.

First up, Dr Rod Carr (yes, the one from He Pou a Rangi the Climate Change Commission) offered to take off his hat as chair of the Commission and speak as a fellow director. In some ways, it proved more frightening than his official speeches, because he wasn’t constrained by his role as an adviser to the government of the day.

Essentially, Carr warned the rate of global warming is exceeding expectations and scientists fear the approach of a tipping point. This foreshadows more extreme weather, an increasing rate of species extinction and other consequences we cannot reverse.

“If you make it colder later, they don’t come back to life,” he noted.

The positive from his presentation was that technology has also developed faster than anticipated. As of now, we already have everything we need to produce three times New Zealand’s clean energy requirements – carbon free – to the end of the century.

His ‘think about it’ message? Boards need the capability to look into low carbon innovations in energy, land use and transport. Don’t worry about what the rest of the world is doing. We need to get ahead of the game so that, when the world suddenly moves, we are not left behind.

Auckland Airport Chair Patrick Strange CFInstD and Chief Executive Carrie Hurihanganui shared how they keep their important relationship intact.

Linking to Carr’s presentation, one of Hurihanganui’s first challenges as CE was to deal with flooding in the wake of Cyclone Gabrielle (considered a sign of how climate change will manifest in New Zealand).

Mutual respect, transparency and “no surprises” were among the ideas that have made their Chair-CE relationship work, they agreed.

And a thinking point from the session? When you appoint a chief executive (or a new board member), don’t only consider what value they will add tomorrow. Consider what value they will add in two or three years. That is when they will be really hitting their straps.

Scott Mason CFInstD posed a provocative question: Is our tax system sustainable? His answer was a resounding “maybe”, with the variables including changes to the tax base and how current and successive governments implement policy.

The key takeaway was that the tax revenue our government needs can no longer be found from wage and salary earners. Their numbers are decreasing, in relation to those who are not working, and income is increasingly earned from capital, not work.

His recommendations included a mix of broadening the tax base and spending more wisely.

The thinking point for directors? Share your understanding of economics and business so conversations around tax become more informed and – maybe – governments will be comfortable taking action now, rather than kicking the tax can down the road for political reasons.

Australian director Debby Blakey is CEO of $82 billion industry superannuation fund HESTA and President of the Australian Council of Superannuation Investors.

She urged her Kiwi counterparts to understand how investor perspectives are influencing changes in the expectations of boards, and of governance itself.

“Any director ignores that at their peril,” she warned.

Her superannuation fund represents health and community sector professionals, so is at the tip of the spear when it comes to ESG considerations. It was among the first in the world to withdraw investments from tobacco companies and made waves when it ceased investing in Transfield, a company that runs offshore detention facilities on behalf of the Australian government.

Her thinking point for boards was how the ethical interests of their stakeholders align with their decisions. It was a nuanced idea – the repudiation of Transfield, for example, was based not on evidence of wrongdoing but on the company’s inability (due to its contracts with the Australian government) to offer assurances it was not complicit in human rights abuses.

“We will see change when there is change in terms of engagement from boards,” she said.

A panel discussion of the health and safety lessons from the tragedy at Whakaari White Island reached agreement early on. The lessons to be learned from an exploding volcano were only partly applicable to the wider systemic issues in our health and safety environment.

Facilitator Francois Barton noted early on that the rate of fatalities per capita in New Zealand workplaces was little changed since 2010, despite changes in regulations and director responsibilities.

In a wide-ranging discussion, the panel identified weak points in regulation (and regulators), culture and the Kiwi “number-eight wire” attitude. One of the actions boards ought to take was to value reports of near misses because these offer a window into foreseeable risk, the panel agreed.

White Island showed foreseeable risks will come to pass in time. If boards want to avoid all the grief that imposes on families, the soul-searching and legal jeopardy it puts onto directors, and the reputational risks it creates for organisations, they should take worst-case scenarios seriously.

The thinking point? Success and safety are not mutually exclusive. Boards should develop a vision of success, and then develop a plan of how to achieve it safely.

The day finished with an exploration of “ghost hearts”, created in the lab from pig hearts and implanted into humans to prevent deaths from heart disease.

Doris Taylor, a pioneer and global thought leader in regenerative medicine, outlined the challenges her team faced in developing the new treatment in response to the question: “How hard is it to build a heart?”

Her session showed the power of ideas, innovation and determination to change the world.

What should boards think about? The world can change, and is changing, in response to clever people doing clever things. If you want new solutions to your governance challenges, perhaps the answers lie in reading widely and adapting thinking from other areas (transplant therapy may be a step too far, to be fair) to your expertise in governance.

Complexity is real, but so is the power of human thought. 

 

Day two

Award-winning think-tanker Dr Reuben Abraham, appearing as a keynote speaker with assistance from the Asia New Zealand Foundation Te Whītau Tūhono, kicked off the day by urging New Zealanders to think differently about business opportunities in India.

Forget free trade deals, he said, because . . .  what’s in that for India? Forget dairy exports, too, because the country already has a dairy industry that dwarfs ours. But don’t forget the demand for education, safe and easy tourism opportunities, and that India could be a source of capital and foreign investment.

With offices in the UK and India, Dr Abraham was very aware there are lessons from the world’s fastest-growing economy that New Zealand could take on board. One was its digital public infrastructure system that enables digital payments to anyone, anywhere, through any bank, and bypasses the big tech monopolies. And there are no transaction fees – a change that could be extremely beneficial to our SMEs.

For New Zealand businesses to build relationships with India – or more specifically, a region at a time of that vast country – we must make ourselves visible, he said. And that means visiting and meeting people face-to-face. Indians recognise our leading cricketers, so perhaps they could be our brand ambassadors?

In a ‘Conversations we can’t have’ session, The Aotearoa Circle Chief Executive Vicki Watson argued that ‘nature’ needs a seat at the board table. It’s not just a nice idea. The Circle has a legal opinion from Chapman Tripp that directors have a duty to understand foreseeable “nature-related risks” and take them into account in their decision-making.

Regulation and mandatory reporting on this issue is likely to emerge during the next few years, Watson said, probably at a faster rate than we saw climate governance reporting develop. So directors with an understanding of our water system, land use and how to avoid degradation of the environment are going to be in high demand.

A panel discussion on ‘The Provocation: have boards lost control?’ was run under the Chatham House Rule to encourage the participants to speak freely, but there were a couple of general themes that can be shared.

While the overall quality of governance in New Zealand is improving, some boards are simply not performing at the required level. They need to assess themselves and make change.

Overzealous regulation and increasing personal liability can take power out of a board’s hands, meaning no matter how well they operate they may struggle to deliver for an organisation. There was widespread agreement in the room that the Companies Act, in particular, urgently needs an overhaul, perhaps a replacement. Thank you to Dentons for their support of this session.

Another panel, facilitated by Alastair Miller from Kordia’s cyber security division Aura, shared perspectives on the privacy implications of AI usage.

There was a sobering quiet in the room when directors were reminded AI is not just something an organisation can adopt, or not. It may well be upgraded into your existing software and systems without your knowledge. This 'shadow' AI is just one unseen incursion because there was widespread feeling some staff would be using AI in their roles already, whether the organisation had said to or not.

Interestingly, competent staff were seen as less likely to be use AI (because they feel they don’t need to), while junior or low-skilled staff were more likely to use it. This pointed to one of the great promises of the technology, that it could lift the productivity of an underperforming part of the workforce.

Several panellists suggested New Zealand does not have enough people who understand AI to be confident the technology will be rolled out securely, and in accordance with privacy requirements. The onus was put squarely on directors to upskill themselves, their boards and their staff to manage what will be a huge shift in the way we do business.

That theme continued with a presentation from Amazon Web Services New Zealand Country Manager Tiffany Bloomquist. She reiterated the importance of directors taking a personal interest in AI to ensure it was applied effectively in their organisations.

She argued that AI implementation needs to start with strategy. It can then be considered in light of how it will help deliver that strategy. “Don’t do AI for the sake of AI,” she warned.

Amazon’s surveys suggest 79 per cent of Kiwi workers want to be upskilled in AI, and that it will be important to ensure staff, as well as directors and managers, are made familiar with the technology and the privacy requirements associated with it.

Researcher Maryanne Garry was up next, warning you don’t have to have a personality disorder to think you are better than average. We almost all think we are better than average in some areas – such as driving or our profession – despite it being a statistical impossibility.

The warning for boards was it can be difficult to understand our own capabilities and weaknesses. In fact, those of us with the weakest abilities have been shown (in several psychological tests) to rate ourselves more highly than truly skilled people rate themselves. Which is a very good argument for boards to seek external feedback on their performance.

Normal people can also believe things that aren’t true, and remember things that didn’t happen, Garry says. Maybe we really do need help from AI?

The final speaker offered a governance perspective from the United States. Peter Gleason is the CEO of the US National Association of Corporate Directors and sits on the International Integrated Reporting Council. In a ‘fireside chat’ with IoD Chief Executive Kirsten (KP) Patterson CMInstD, he noted that governance has changed a lot in the past few decades.

In the 1980s, he recalled, directors were considered the “parsley on the fish”, a bit of garnish that looked good, but you wouldn’t really want to eat it. Today, boards are expected to be professional and the pressures on them are growing. The increased scrutiny from stakeholders, including investors, staff, the media and regulators, has brought a strong focus on boards creating long-term value. This resonated strongly with the gathered New Zealand directors.

Gleason noted areas where the US experience differs from our local governance model. One is in the litigious nature of America, with climate-reporting requirements being challenged in court almost immediately they were published. Another was that the upcoming presidential election is creating a level of huge uncertainty not familiar in other democratic societies.

But many of the concerns top of mind for Kiwi directors are shared by their US counterparts. Cyber security, AI, the pace of change, finding good talent for organisations and climate governance were all on his list.

He closed his chat by thanking KP for her work as the current chair of the Global Network of Director Institutes, a role Gleason has also held.

“Governance is a community,” he told the room. “You are not in this alone.”