Overcoming short-termism

  • Date:01 Sep 2015
  • Type:Company Director Magazine
John Brogden explains the need for a new framework for debate about public policy reform.


Any competent company director would not govern a company the way we govern the country.
 
This is not a comment on individual politicians, political parties or bureaucrats. It is recognition that we require a new framework in which to conduct policy debate to overcome the short-termism and reactive arguments that commonly drive decisions of national significance.

The application of basic principles of good governance would encourage long-term vision and responsible risk-taking, the lack of which is currently strangling public policy debate to such an extent that sensible reform is too often impossible. Good governance also facilitates a culture in which responsible risk-taking is encouraged rather than ignored for fear of stakeholder backlash.

On 26 August, the Australian Institute of Company Directors (AICD) was one of 80 attendees at a National Reform Summit in Sydney convened by The Australian Financial Review and The Australian. The summit highlighted significant challenges that confront our nation in an effort to refocus policy debate. Leaders from organisations such as the Business Council of Australia, the Australian Council of Social Service, Australian Industry Group and National Seniors Australia were also in attendance.

The summit addressed issues that are dominant in the minds of all Australian boards.  A survey conducted by the AICD in April this year, for example, found that directors overwhelmingly agree there is an urgent need to promote productivity, resolve the infrastructure deficit, implement tax reform and address the ageing population. There is also an urgent need to eliminate duplication of responsibilities between federal and state governments.

More than 30 per cent of the 540 survey respondents were not-for-profit directors, 50 per cent were from private business and 13 per cent from ASX-listed companies. So it’s fair to say the survey results show that a broad range of directors – not just those from “big business” – are willing to back thought-out policy initiatives that will position Australia for the future.

Close to 80 per cent of our diverse membership, for example, are in favour of either raising the rate of GST, broadening its base or both. Low productivity growth was rated by respondents as the biggest economic challenge facing Australian business and a further poll conducted by the AICD last month indicated directors believe tax reform and education/training should be the focus of efforts to boost productivity growth.

It is arguable that the key players in the national policy debate have the same overarching responsibilities as directors of an organisation. Directors’ duties to act in the best interests of a company and in good faith, for example, requires them to balance a multitude of competing interests and not allow personal interest to override board decisions.

This duty also demands that they recognise the inherent flaws in decisions which are purely motivated by short-term objectives.

Excessive short-termism can result in missed opportunities, under-investment in key areas and a reduction in the capacity for innovation. These are all-too-familiar outcomes in Australia.
If these high-level principles were accepted as a prerequisite for debate, we could avoid the hyperbole and uninformed opinion that for too long has encouraged policymakers to shy away from controversial tax reform, for example, or to woo voters with popular incentives that provide no benefit to the long-term national good.

We might also then foster a culture in which considered risk-taking is recognised as a core responsibility of our policymakers.

The decision by former treasurer Paul Keating to float the Australian dollar in 1983 and the Howard Government’s ambitious introduction of the GST in 2000 are oft-quoted examples of the strides that can be made when policymakers are allowed to embrace a vision that can’t be explained in a sound bite, but is an undeniable opportunity to enhance the future prosperity of the nation.

Directors are eager participants in the national reform debate and the AICD aims to be part of the ongoing conversations that will ideally create a new framework for the critique and analysis of the strategies that will guide the future of the nation. This, after all, is what good governance is about.