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The future of the governance professional

  • New report from Governance Institute predicts changes to the role of the governance professional by 2025.
  • Artificial intelligence and machine learning in business will change the role of the company secretary by making the role more interesting.
  • Governance professionals will still need to have a solid understanding of financial, legal and IT issues, but will also require a greater range of soft skills.

A new study on the future of the governance professionals paints a picture where boards will increasingly face more complexity, regulatory oversight, technology disruption and reporting demands from stakeholders.

The study, conducted by Governance Institute of Australia in May, consisted of three parts: eleven initial interviews with leading governance professionals, an online survey which drew 285 responses and a roundtable attended by ten governance experts.

First, some good news. Although just over a third of study’s online respondents believed technology will disrupt their role by 2025, most participants across all parts of the research agreed that there will still be a need for humans to oversee machines and to make qualitative judgments.

Many said the growing use of artificial intelligence and machine learning in business will change the role of the company secretary by making the role more interesting.

Roundtable attendees believed that machines are likely to be better than humans at taking minutes, gathering information, highlighting what is relevant and packaging it all up for directors.

But they pointed out that machines don’t have the same emotional intelligence and creativity as humans: at this early stage of their development, machines also lack the ability of humans to see nuances, read facial expressions or grasp boardroom dynamics.

Overall, there was agreement that machines would take over a lot of the menial tasks of governance professionals, freeing them up to take on more value-added tasks.

This meant the role of the governance professional would shift from being a ‘secretary’ to becoming more of a ‘trusted adviser’ to the board, or from minute-taker to thought leader.

The bad news is that governance professionals are likely to face a more challenging landscape. Nearly 80 per cent of those responding to the online survey believed increasing complexity would play a vital or important part in changing the governance professional’s role by 2025.

Technology, they said, is helping organisations of all sizes to scale up faster and move into new jurisdictions. Boards are also increasingly under the microscope from the regulators, investors, proxy advisers, staff, customers and activists.

This scrutiny has been sharpened following the banking royal commission and appears to be broadening to all Australian organisations, not only banks and insurers.

Implementing regulatory reform was top of mind among governance professionals across all parts of our study, with 80 per cent of online respondents describing it as the most important challenge they face today or as very important.

Many participants expect the customer to also be a growing focus — after all, the key message from the banking royal commission was that organisations need to foster a culture that prioritises customers over profits.

Some noted that investors and proxy advisers are likely to boost their scrutiny of director appointments from now on. Others saw shareholder activism growing and large industry super funds continuing to flex their muscles on issues they viewed as important.

As a result of these developments, stakeholders were expected to demand more information and transparency on policies related to areas such as climate change, remuneration, diversity, conduct and culture.

Because directors will have so much access to data by 2025, governance professionals are predicted to become the filters or ‘curators’ of information rather than being the ‘givers’ of information. Participants generally agreed that they won’t be giving directors more information, just better-quality information.

A common feeling was that boards are pushing back now on how much information they receive and can absorb. In turn, the company secretary will need to push back harder on management to provide shorter, more relevant information to the board.

According to the study’s report, which will be released at Governance Institute’s national conference in Sydney in September, governance professionals will still need to have a solid understanding of financial, legal and IT issues, but will also require a greater range of soft skills. These would include:

  • Great judgment.
  • Curiosity and a drive to get to the bottom of a problem and think outside the square.
  • The ability to zone in on the core information required by the organisation and prioritise different information streams.
  • The capacity to see the world in a broader and more nuanced way than management and then to work out how all the disparate pieces of information fit together.
  • Good communication, collaboration and negotiation skills as well as the emotional intelligence to understand human behaviour and boardroom dynamics.
  • The ability to liaise at all levels of the organisation, with all types of stakeholders. And, to be ‘Switzerland’ — that is, to be fair and stay neutral in disputes.
  • The capability to run ‘common sense’ checks over sophisticated datasets and ensure they are correct — not just relying on machines, or assistants, to do so.
  • An understanding of systems and processes across the organisation.
  • A grasp of the mechanisms needed to reshape the organisation’s culture.
  • Project management skills, including strong time management and multi-tasking skills.

In addition to these skills, participants across all parts of the study believed that in order to keep pace with rapid changes and the broader set of issues affecting their organisations by 2025, governance professionals will have to continually maintain and improve their knowledge base and skills set.

This would mean completing a mix of short and long courses from various educational bodies, lots of reading, conferences and seminars, and embarking on other forms of life-long learning. Having a broader network and/or a mentor was also seen as very valuable, especially in being able to learn from other people’s mistakes.

Other governance predictions

  • Directors may need to look at limiting their number of board appointments as their role becomes more complex and demanding of their time.
  • There will be a stronger focus on board renewal and the maximum tenure of board members. That could open up boardroom seats and make room for increased levels of boardroom diversity, especially for non-traditional candidates from outside the C-suite.
  • The growing complexity and rising number of issues that boards will have to deal with may result in more deliberations being pushed out into sub-committees.
  • There won’t be more board sub-committees, but some traditional committees will beefed up in order to better align culture and risk — for example, remuneration in context of culture. Sub-committee meetings may become longer or be held more frequently.
  • There will be more Millennials on boards and they are likely to place greater emphasis on ethics and social good than on ensuring risk systems and structures are in place. They will also potentially be less rigid in their understanding and style and keener to push the envelope.
  • The governance world will grow. Super funds are already having to lift the bar on their governance, but by 2025, more not-for-profits and organisations managing large pools of money will be required to do the same. More small to medium sized entities will also embrace governance as they become aware of its many benefits and as they grow.
  • Scrutiny of both director and executive pay will rise. Governance professionals may have to lend their legal expertise to help simplify long term and short-term incentive plans which are becoming more complex and may not be achieving what they are meant to.
  • The role of the company secretary will increasingly be separated from other roles such as CFO and general counsel.
  • In addition to the CEO and CFO, company secretaries will also have stronger relationships with the chief risk officer, chief technology officer and chief human resources officer.
  • Company secretaries may also be asked to sit on the boards of other organisations to gain different perspectives to support their own internal roles.

Download the full report here 

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