All articles in Volume 12 Issue 17

Alarming global employment shortages revealed

5 Sep Lead Image

A new report by Boston Consulting Group (BCG) has revealed some alarming trends for the 25 major economies, including Australia, that represent over 80 per cent of the total world GDP.

The report entitled “The Global Workforce Crisis: $10 Trillion Risk” is a sobering study of workforce trends to 2030. The trends for individual countries vary widely and each will have a direct impact on Australia’s own growth.

In Australia, where we see unemployment rising, it is noteworthy to see that despite BCG’s prediction of GDP growth of above 3 per cent, we will “experience a severe labour shortage by 2030”.

Similar shortages will occur in China, perhaps resulting in reduced growth, while India’s demand for labour will exceed supply until 2030, thereby helping growth until that time.  

In Europe, all countries except Italy show a labour shortage, while Asia Pacific is mixed, as is the Americas. However, the report shows that by 2030, most countries will face labour shortages.

It calculates the value of GDP lost as a result of these shortages as US$10 trillion. 

While the report does not make recommendations for rectifying the problem, it suggests four fundamental actions:

  • Boost productivity by improving employability of underqualified and less educated workers.
  • Increase workforce participation by encouraging women, raising retirement age, jobs for the elderly, increased working hours.
  • Increased immigration – limited to those sources with workforce surpluses.
  • Higher birth rates.

What’s the purpose of a strategic plan?

There are some classic management themes that simply do not tarnish with age, and while strategic planning has recently been considered de rigeur for board involvement, in many instances the process has overtaken its true purpose.

A classic article from business legend McKinsey Quarterly, first published in 1973 and recently re-published, clearly shows how strategic planning was embraced from the early 60s to become a main task of the CEO

Of course, 50 years later there is some debate that strategic planning is now a key task for the board. In some cases strategic planning has however become a task in which the process becomes the focus, rather than one that leads to action. In any case, the McKinsey article provides clarity of thought to enable directors and the CEO “to make the crucial leap from plans to decision”.

It states that much strategic planning results in a five-year plan, starting with a much expanded mission statement, five-year financial plan and five-year market share graphs. However, these rarely produce true growth or change.

The fundamental purpose of strategic planning, it says, is to come up with the strategic decisions that need to be taken now.

Boards need to ask: “What do we need to do now as a result of this plan?” If there are few or no decisions to be taken, then it is probable the document is more a budget that a strategic plan.

Speak up for tax reform

Australian businesses have been invited to express their views on the current tax system and the impact it has on their operations.

Accounting practice BDO is calling for submissions on GST, corporate tax rate, capital gains tax, superannuation and the FBT system by 31 October 2014.

The responses from its fourth annual BDO Tax Reform Survey will be released in early 2015 and will inform BDO’s contributions to the federal government’s tax reform white paper as well as pre-Budget submissions for 2015-16.

BDO said many small business owners, entrepreneurs and large corporations all continue to grapple with the current taxation system and remain uncertain about when and if genuine reform will occur. 

The survey will aim to gauge whether opinion has changed from the previous consensus that showed 95 per cent of respondents believed the government has been tinkering around the edges of tax reform for too long.

Last year’s survey also showed GST remains a contentious issue with 95 per cent of respondents wanting the tax included in any reform discussion; 67 per cent suggesting all GST exemptions should be abolished; and 59 per cent wanting the GST rate increased to fund the abolition of state payroll taxes and stamp duties.

Rural women recognised with inaugural scholarships

The Australian Institute of Company Directors has announced the 30 recipients of its inaugural board diversity scholarships for women in rural and remote areas.

Co-funded with the Australian government, the awards are part of the broader Board Diversity Scholarship program that allows high potential women across Australia to complete Company Directors’ educational courses.

Senator Michaelia Cash, the Minister assisting the Prime Minister for Women, announced the scholarship recipients ─ who reside in areas from Alice Springs to Mt Isa, Broome and Bourke.

More than 300 women from rural and remote areas across Australia applied for the program.

“The calibre of applicants shows the depth of skill that exists outside our major metropolitan areas. The recipients all have a strong commitment to their communities and a desire to apply the highest standard of governance to local organisations,” said John Colvin, CEO and managing director, of Company Directors.

The rural and remote scholarships were the first of 140 to be awarded in the Board Diversity Scholarship program. Applications for another 70 scholarships for women who are seeking to transition from their executive career to a board career or non-executive directors seeking to advance their directorship career  will open on September 10.

The final 40 scholarships will be awarded to women in male-dominated sectors, with applications due to open in February 2015.

The full list of scholarship recipients and further information on our scholarship program can be found here.

Has the AGM reached its use-by date?

A recent survey shows 47 per cent of direct investors have never been to an AGM, so should the system be changed?

Findings from the GPS-Melbourne Institute Leading Index of Shareholder Confidence shows 47 per cent of people who directly own shares in ASX-listed companies have never attended an AGM while only 5.3 per cent of retail investors went to an ASX-listed AGM last year.

As such, it is no surprise that 49.9 per cent of retail investors agreed that they would “support a change in which shareholder voting was undertaken separately and companies hold an information-only meeting”.

The managing director of proxy advisory and corporate governance consulting firm GPS, Maria Leftakis, says this means that a radical change is needed to re-engage shareholders. Of course, it could also be interpreted that shareholders are simply happy with the way things are. Whatever the reason, it is clear that proxy voting by mail changed the need for attendance in the 1970s and the advent of online voting has shifted the goal posts again.

Leftakis says: “Already, large corporations in the US are conducting online-only voting in web-based meetings that shareholders can click into, have a say via a chat facility, then vote on each resolution as it’s presented. This is where we think the future of voting is heading.

“But what shareholders are telling us is that they really want quality time with directors to hear more about the future outlook and strategy of the company, as opposed to a retrospective discussion on financials”.

Issuance underwriting fees skyrocket

Top companies conducting share issues must ensure they oversee the capital raising process to avoid paying too much in underwriting fees.

Research from the Australian Council of Superannuation Investors (ACSI) has found that companies are paying more than twice as much in rights issue underwriting fees than benchmark modelling suggests the service should cost.

It suggests that company directors need to understand the model used by the underwriter in order to determine its fee and whether the premiums associated with the service are appropriate.

This is particularly important given their duty to ensuring the best outcome for shareholders, who inevitably foot the bill, said ACSI’s CEO, Gordon Hagart.

The results show that over a period of three years, companies have in aggregate paid underwriters, typically investment banks and stockbroking firms, a premium of more than $170 million, approximately $2.7 million per raising above the theoretical value of the risk.

It also emerged that average underwriting fees are more than 60 per cent higher than 20 years ago despite market innovations having dramatically reduced the time required to complete a rights issue, thereby decreasing underwriting risk.

Small business advocate gets some teeth

Small businesses will shortly be invited to comment on draft legislation that will cement the Small Business and Family Enterprise Ombudsman as a powerful asset in the small business community.

The announcement follows a period of consultation by the federal government and will see the transition of the Small Business Commissioner into the Small Business and Family Enterprise Ombudsman.

Minister for Small Business, The Hon Bruce Billson MP said this new method for small businesses to interact with the Commonwealth will make it easier for the sector to access assistance.

The Ombudsman will provide straightforward, honest advice that will help businesses understand disputes and how they can be avoided in the future.

As part of its key responsibilities, the Ombudsman will be a:

  • Commonwealth-wide advocate for small businesses and family enterprises.
  • Concierge for dispute resolution service.
  • Contributor to the development of small business friendly. Commonwealth laws and regulations. 

The Ombudsman will also seamlessly link with the government’s Single Business Service to help small businesses easily find out about other government services and programs, including general business advice.

The Australian Small Business Commissioner will continue to operate while the finer details of the Ombudsman’s new role is established.

NED fee pool announcement

New requirements for resolutions to increase the non-executive director fee pool have been announced by the Australian Stock Exchange (ASX), with those planning a resolution at an annual general meeting (AGM) encouraged to take note of the recent amendments to Listing Rule 10.17.

In addition, a notice of meeting will now need to include details of any securities issued to a non-executive director under Listing Rule 10.11 or 10.14 with the approval of the holders of the entity’s ordinary securities at any time within the preceding three years.

Listed entities must hold their AGMs within five months of their financial year end. Under listing rule 15.1.17, draft notices of general meetings that contain resolutions for listing rules purposes must be submitted to the ASX for review before they are sent to security holders.

The ASX has stated that it may take five business days to advise on whether it objects to a draft document and may extend the time that it needs for review. It has asked all listed entities to bear these timings in mind when submitting their draft notices.

Those requiring waivers from any listing rules in connection with the notice of AGM should allow additional time and seek advice from their listings adviser.

Peter Macourt appointed Prime Media Group director

Former Foxtel director and current Sky New Zealand chairman, Peter Macourt GAICD has been appointed a director at Prime Media Group. He will stand for election at the firm’s annual general meeting on 20 November 2014.

Meanwhile, Peter Evans MAICD and Pat Grier AM MAICD have both advised the company of their intention to step down from the board at the same AGM.

Charter Hall Group director and chairman Kerry Roxburgh announced his intention to retire at the end of the company’s annual general meeting on 12 September 2014. Roxburgh has been a non-executive director and chairman of the group since April 2005.

Former Investec Bank (Australia) CEO, David Clarke, who was appointed a non-executive director at the firm in April this year, has been appointed chairman-elect. 

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The opinions in Boardroom Report do not necessarily represent the views of the publisher nor the publication. Every effort has been made to ensure accuracy, but no responsibility is accepted for errors. All rights reserved.