Regulatory reform is driving the governance agenda in Australia, with 80 percent of governance professionals in the country seeing the implementation of these reforms as the most important challenge they face today. And it’s changing the way future governance professionals are expected to perform their duties.
This is just one of the research findings from the Governance Institute of Australia, a 110-year-old body with 7,500 members, all company secretaries, governance leaders and risk managers from some of Australia’s largest organizations. The Institute knew that the future of governance was of utmost importance in the country following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which found large failings in governance across the industry. To investigate the future of governance, the Institute undertook a three-step research process to collect valuable insights.
The final report, sponsored by Diligent and LexisNexis, is based on interviews with senior governance professionals and a survey of almost 300 members of the governance community. It found that increasing complexity, regulatory change and technological disruption will impact the governance profession greatly by 2025, with more than 83 percent of governance professionals expecting their roles to change by 2025.
The evolution of the company secretary
Future governance professionals will no longer just face traditional financial reporting standards. There is an increasing amount of regulatory change across the globe, and governance teams must now prepare regular reports to third parties on non-financial metrics such as diversity, sustainability and company culture. That’s perhaps why 80 percent of respondents to the Governance Institute of Australia’s research said that regulatory changes will be vital or very important in driving governance changes in the future.
As this burden grows, it’s expected that the role of the company secretary could increasingly be separated from other roles such as that of the CFO and the general counsel. The company secretary will need to build stronger relationships outside the realm of the CEO and the CFO, extending their influence to the chief risk officer, chief technology officer and chief human resources officer. This will help the company secretary to take on an even stronger role as trusted advisor to the board.
Respondents believe the role of the company secretary is likely to evolve in the following ways:
- From secretary to trusted adviser to the board
- From minute-taker to thought leader
- From servant of the board to conscience or moral compass guiding the board
- From simply collating and supplying information to becoming curator, analyzer and adviser on that data and pointing to where to find more
- From supplying answers to stimulating wider thinking by proactively raising the right questions
- From being process based to being principles based
The board will never be the same again
And with all these changes in the air, board directors may need to limit the number of board appointments they take on. The role will become increasingly complex and demanding of their time, and it’s expected that a stronger focus on board renewal could lead to a maximum tenure for board members, opening up seats and making space for increased levels of boardroom diversity. The number of sub-committees may also rise to help overstretched boards deal with the growing complexity and number of demands they face, and this will all be done under the spotlight of greater scrutiny on remuneration and executive pay.
The complexity of boardroom decision-making is expected to rise as regulation increases, and the boundaries of which areas the board is accountable for will become increasingly blurred. The board will be expected to take responsibility for things they can’t control, such as environmental impacts or unintended consequences of operating activities, and they will be doing so increasingly under the public eye. Citizen journalism and whistleblowing make it harder to sweep mistakes under the carpet, and shareholders expect organizations to meet incredibly high standards.
One of the big drivers of change in the boardroom, though, will be the ascent of Millennials. This generation places greater emphasis on the common and social good, and ethics will likely take center stage in the world of governance.
Gaining more time for strategic thinking through the use of technology
Yet governance professionals are feeling somewhat unprepared for this future. Just 4 percent think future generations of governance leaders will be ready to face these challenges, while 9 percent said that they themselves were prepared. It’s important, then, that governance professionals around the world don’t wait for the future to make use of available technology – software and automation are impacting the workplace right here, right now.
Three-quarters of the Institute’s respondents expect technological disruption to have a vital or very important impact on the future governance professionals’ role by 2025, with the growing use of artificial intelligence and machine learning in business changing the role of the company secretary – and making it more interesting.
Respondents believe AI and machine learning will change the role of future governance professionals by:
- Improving the quality of information that the board receives
- Taking over more routine administrative tasks
- Making the role more interesting and high level
Entity management and governance technology providers have developed systems that are specifically designed to improve efficiency through automated workflows, and to increase transparency and accessibility through cloud-based hosting.
While technological disruption is one of the biggest drivers of governance changes, entity management software, such as Diligent Entities, is designed to improve the working lives of future governance professionals and to ease the burden of governance and compliance. Entity governance management helps organizations to centralize, manage and effectively structure their corporate record to improve entity governance, better ensuring compliance, mitigating risk and improving decision making.
Diligent Entities also integrates seamlessly with Diligent Boards – which helps fulfill the boards’ ability to meet the challenges of modern governance through the right tools, analytics and insights – and a secure file-sharing platform to create the Governance Cloud. The only integrated enterprise governance management solution, Diligent’s Governance Cloud enables organizations to achieve best-in-class governance and to step into the future of the profession.
Get in touch and request a demo to see how Diligent Entities can help future governance professionals to meet the future head-on, and get the right information to the right people at the right time.