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News update

Q&A with Governance Institute

Megan Motto FGIA speaking with Catherine Maxwell FGIA FCG

Do companies have directors’ parental leave policies?

Given the changing demographics of Australian non-executive directors, some companies have recently been considering whether parental leave policies should also apply to non-executive directors. Some provide for directors’ parental leave in the general company parental leave policies, others address the issue in the board charter, and some treat parental leave as a leave of absence.

Whatever approach a company chooses to take it is important to consider:

  • the circumstances when the leave may be granted
  • for what period
  • whether a director continues to receive board papers while on leave, and
  • whether directors’ fees continue to be paid to a director.

Other issues to think about include:

  • the extent to which there is liability for breach of directors’ duties while on leave
  • whether shareholder approval might be required if any amount paid exceeds the approved salary cap
  • how to make disclosure in the remuneration report.

Some companies have introduced directors’ ‘stay in touch’ days during parental leave to ensure welfare is monitored, allowing the director to stay in touch with the business. The impact of a director taking parental leave will also be greater for smaller companies where there are fewer directors and fewer directors to serve on board committees.

For more information about the changing demographics of Australian boards see the Governance Institute of Australia and Watermark Search 2023 Board Diversity Index.

What is the practice around non-committee member directors attending all board committee meetings?

It varies. In some companies while all directors have a standing invitation to attend all board committee meetings, they generally do not attend except for Remuneration Committee meetings to review and approve any executive bonuses and prior to the announcement of results. At other companies and the chair’s expectation is that directors attend all board committee meetings.

There can be some practical difficulties involved in directors attending all committee meetings particularly with large boards where directors live in different time zones and participate in meetings remotely. Some companies found it was easier for all directors to attend all committee meetings when all meetings were held in person.

Companies where directors attend all board committee meetings report that it works and assists in ensuring coordination and the sharing of information between committees. They report that directors choose to attend all committee meetings for their own information and education.

I keep hearing about ChatGPT. Where can I access reliable information about generative AI?

Chat GPT is a type of artificial intelligence (AI) known as ‘generative AI’. It is capable of producing ‘new’ content which differs from the information from which it is derived. Other examples of generative AI systems include BardAI, Bing AI, Co Pilot and DALL-E. They enable the generation of natural language text, software code, artworks and more.

Australia’s Chief Scientist has released a Rapid Response Information Report on Generative AI which explores the opportunities and risks of applying these technologies over the short to medium term and provides examples of strategies put in place by advanced economies since the launch of models like ChatGPT. The Australian Department of Industry, Science and Resources is also conducting a consultation on safe and responsible AI.

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