All articles in Volume 13 Issue 20

Technology experts increasing priority for boards

Technology experts on boards

Keeping abreast of technological opportunities and risks is an increasing priority for boards. In a recent article from the Harvard Business Review, technology expert Jean-Louis Bravard, who is a non-executive board member for London and Partners and the chair of Dot London, discusses the need for boards to have a technology expert.

Researching the professional experience of non-executive directors at major banks listed in Britain. Bravard said that like almost every other major industry today, banking relies on hugely complex and enormously expensive technology.

“I was curious as to whether the individuals charged with corporate governance would have any more than a layman’s knowledge of IT. I discovered that only one bank had a board member with some direct experience in technology. In that case it was as a sales executive,” he says.

“I’m afraid this is typical not just in banking but across most major industries. Technology is the most important agent of change today; hardly any industry is immune to both its value-creating and disruptive potential. I perceive a large gap between the direct experience of non-executive directors and the experience required to challenge and support chairs and CEOs to bring the best technology to their business.”

Fiona Balfour FAICD, a non-executive director who chairs a number of technology committees, believes technology governance in most corporations needs to be strengthened at management and board levels.

“Most organisations fail to recognise technology as one of the four levers in strategy. The others being human capital, brand and capital itself. Technology is the fourth great lever. It is increasingly fundamental for strategy.”

She adds: “I strongly support the hypothesis of appropriate technology expertise at board level and would argue strongly in its favour, provided that the company sets up a corresponding technology governance process at management level which interacts with the board committee and governance structure.

Graham Bradley AM FAICD, non-executive chairman of Stockland Corporation, urges caution against over-reliance on “expert” directors.

“Boards are at their best when they are a collaborative decision making group,” he adds, “where everybody is contributing even if they’re not a technical expert.

“If you are someone who is on the board because you have a particular expertise, your job is to educate the rest of the board, not necessarily to make them equal experts, but to help them understand the issues and encourage them to raise any issues – including those that may not align with your view.”

How to boost your board’s understanding of technology.

Bravard offers the following principles to ensure corporate governance includes sufficient oversight of technology:

  • Hire a techie to your board. Give priority to individuals with “scars” – with both successes and failures and who continue to be involved with technology.
  • Don’t rely entirely on advisers. Many boards rely on technical advisers and consultants to assess their firm’s technology needs. Too often, this advice is generic and is used to reassure management that it is not falling behind rivals, leading to the predominance of the lowest common denominator.
  • Ask tough questions about technology spending. Using Moore’s Law, zero-based budgeting would call for technology spending to fall each year by about 30 per cent; in most companies spending goes up by at least 5 per cent each year, often due to legacy code that leaves companies vulnerable to new entrants.
  • Understand the cyber threat. New technology opens up vulnerabilities even as it creates value. Total security is not possible, but understanding the risk-benefit trade-off is essential.

For more information, see All boards need a technology expert.


ASIC funding plan under the spotlight

The Federal Government’s plan to adopt an industry-funding model for the corporate regulator has raised some concerns among the business community.

 

The proposed ‘user-pays’ model for the Australian Securities and Investments Commission (ASIC) would mean that industry will fund the regulator through two streams: levies for each sector, and fees for ASIC services.

 

In its submission to Federal Treasury, the Australian Institute of Company Directors said that while it supports the proposal in principle, more consultation is needed and more “meat on the bones” is required to convey how the new model will work in practice.

 

“We support a funding model that ensures the regulator is well funded and has the necessary financial resources to perform its regulatory and oversight role in the capital markets,” said AICD’s General Manager, Advocacy, Louise Petschler.

 

“However, it should be acknowledged that any industry funding may ultimately be passed on to consumers as these fees and levies are likely to be incorporated into the cost base of corporate entities.”


Once the funding model has been determined, the AICD proposes that additional processes or performance metrics should be put in place to ensure ASIC manages its costs in a transparent way.

 

“The consultation paper is silent on what checks and balances will be included in the system to ensure that ASIC accurately accounts for its costs in a manner that enables companies to accurately determine the costs that ASIC incurs in the performance of its regulatory activities,” said Petschler. 

 

Various market participants have questioned this approach.

 

“There is concerned that this change may impede ASIC’s independence and that certain market participants may be able to assert undue influence on the regulator,” said Petschler.

 

“It is important that when developing this model, that these concerns are addressed and that appropriate measures be put in place to minimise this risk.”

 

The AICD has proposed that a longer transition period be considered to enable ASIC to monitor for any unintended consequences of the changes.

 

For more information, see AICD’s submission in response to Federal Treasury’s consultation paper, Proposed Industry Funding Model for the Australian Securities and Investments Commission.


Proposed accounting standards changes for NFPs

When the Australian Accounting Standards Board (AASB) released Exposure Draft (ED) 260 earlier this year, concerns were raised over the proposed change to the way not-for-profits (NFPs) recognise income in financial reporting. Leo Tutt, audit director at William Buck, said the draft would be far too costly and technical for many smaller NFPs and charities to administer and had called on the AASB to reconsider the change.

“The last thing we want is NFPs wasting their scarce resources on complying with technical accounting standards,” he said.

Mike McDonald, principal at accounting firm Moore Stephens in Queensland, says that Moore Stephens strongly support the AASB’s decision to develop NFP-specific requirements and guidance to replace the current income recognition requirements in AASB 1004: Contributions. However, the income recognition requirements in AASB 1004, particularly the reciprocal and non-reciprocal transfer distinction, do not, in their view, currently facilitate consistent or informative reporting by NFP entities.

“We do have concerns regarding both the conceptual and practical implications of the AASB’s proposals to essentially overlay the principles in IFRS 15(Revenue from Contracts with Customers with additional recognition criteria for the purpose of application to NFP entities),” says McDonald. “If adopted, we do not believe it would facilitate improved financial reporting of income, particularly government grant funding, by NFP entities.” 

For more information, see Reporting Change a Big Burden for Small Charities.


Shareholders demanding cyber safeguards

The latest AMP Capital 2014-2015 Corporate and Governance report finds that shareholders are increasingly seeking assurances that the companies they invest in are considering data and cyber security at board level.

The report argues that given the significant reputational and financial implications of cyber security breaches, cyber and data security can no longer be considered purely a technology issue and should be included in discussions between shareholders, company management and boards. 

Karin Halliday, manager, corporate governance at AMP Capital, said that while data being collected and stored is beneficial, it can also be detrimental.

“Companies need to be increasingly vigilant in protecting the integrity and privacy of data and systems. While it may be costly for companies to implement processes and systems to adequately protect their data, not doing so could potentially be even more costly. News of data breaches can travel quickly and put a company’s reputation and financial stability at immediate risk.”

AMP Capital’s research found data security matters now, more than ever before. The report offers recommendations for precautionary measures for companies to take, including:

  • Identify the data, intellectual property and processes that are core to the success of the company and which must be protected.
  • Understand how security breaches could occur.
  • Educate staff on the importance of data and cyber security, including the implications of breaches.

Also highlighted in the report were numerous ways systems and data could be compromised. Ninety per cent of breaches can be put down to the actions of people.

Cyber and data threats could come from the following areas:

Internal threats

  • Staff being careless: accidentally sending emails to the wrong people, losing a memory stick, sending data via public WiFi.
  • Staff being malicious: information sent to a competitor, sensitive data improperly accessed by system administrators or IT personnel, fraud and disgruntled employees.

External threats

  • Social engineering that relies on staff being tricked by people to act contrary to their proper security processes.
  • Phishing, where third parties attempt to gain access to sensitive data by using websites or emails that appear legitimate.
  • An ex-employee accessing data.
  • A thief stealing a laptop computer.
  • Hackers or competitors monitoring data flows, or espionage.
  • Malware and viruses. (CryptoLocker is an example of malware – once activated it encrypts files and, akin to a kidnapping, payment of a ransom is required to regain access to files.)

Other threats

  • Natural disasters and physical equipment failure.

Support for women to join senior leadership ranks

Supporting more women into senior leadership roles was the focus of a recent roundtable convened by newly appointed Minister for Women and Employment, Senator the Hon Michaelia Cash and President of Chief Executive Women (CEW), Diane Smith-Gander.

The Australian Institute of Company Directors (AICD) attended the October forum, alongside leaders from business, government and the private sector. The meeting sought to identify opportunities for business and government to collaborate on how to better support women to attain senior leadership roles.

“The roundtable was a positive and productive forum. Views were shared on board and diversity targets, strategies to drive greater female representation in senior management, and structural challenges to workforce participation,” says Louise Petschler, General Manager of Advocacy at the AICD.

Rhian Richardson, AICD’s Board Diversity Manager, adds that the AICD continues to push for greater gender diversity on Australian boards. “We are calling for the boards of ASX 200 companies to commit to a minimum of 30 per cent female representation by the end of 2018 and support this target by becoming members of the Australian chapter of the 30% Club.”

Minister Cash used the forum to announce the federal government’s commitment to help fund CEW scholarships and fellowships to support women’s participation and leadership in science, technology, engineering and mathematics (STEM) industries. The AICD has also partnered with government on scholarships to support governance education for women.                                   

The event was the first in a series of meetings that will address the barriers and discuss best practice for supporting women into senior leadership positions. The federal government has stated that outcomes from these discussions will inform economic reform agenda.

The roundtable also coincided with the release of the latest statistics on women on federal government boards, where the headline figures showed a decline against the government’s gender diversity target of 40 per cent. AICD’s Acting Chair, Yasmin Allen FAICD, and Managing Director and Chief Executive Officer, John Brogden, have written to Prime Minister Malcolm Turnbull, urging a recommitment to the government’s gender diversity targets as a priority.

For more information, see:

For practical guidance on increasing gender diversity in your organization, see McKinsey & Company article, Gender equality: Taking stock of where we are.


STEM for growth

A focus on STEM (science, technology, engineering and mathematics) subjects in Australia’s school curriculum is the key to unlocking future innovation in business.

This is the view of Matt Barrie, prominent entrepreneur and founder and chief executive officer of Freelancer.com, a global online freelancing and crowdsourcing marketplace.

To fire up innovation in the technology field, Barrie says we have to start in the classrooms and encourage students to start taking STEM (science, technology, engineering and mathematics) subjects.

“Australia is falling behind in what it offers in the school curriculum compared to the rest of the world. We are educating for a world that was 50 years ago,” he said.

“Take a look in the classrooms and you’ll see we have a declining number of students enrolling in STEM subjects. This is due to the curriculum that should be changed to encourage students taking on more technology-related subjects. A subject like maths is no longer compulsory for the higher school certificate anymore. The result is a declining number of students entering the technical field,” he says.

Barrie adds that higher standards must be set. “The bar needs to be raised higher and teachers need to up-skill in this area, along with increasing their understanding of the importance of the connection between careers and technology.”

Other challenging factors include the fact that Australia is an expensive country in which to operate.

“Rents are high and we are geographically remote from other nations. It can be tough to build a start-up out of Australia. We haven’t created the financial support and venture capitalists are not having much success in Australia. Traditionally it has been quite tough to re-finance; although in certain areas this is changing,” says Barrie.

He adds that the current framework protects incumbents and as a result provides a barrier for new entrants. “There are lots of rules and regulations in place and what can happen is these can create shields that protect a number of incumbents and stop new entrants from coming in and being innovative. Some of these should be questioned and asked if they still make sense in this changing world. The rate of change has accelerated.”

Barrie is calling for a national imperative to embrace technology and make it a significant contribution to GDP. 

"One upside is that you can build a start-up relatively cheaply.  There is a huge world of opportunity for starting a business. The whole world of human knowledge is online, you can hire freelancers, design something, use a software package or training; it’s all there.  This is quite a phenomenal time to start a business or turn a business around. It’s all there in front of you, all you need is motivation.”

One development is the launch of an Innovation Hub by the Australian Securities and Investments Commission. It aims to provide innovative start-ups with informal assistance throughout the early stages of their development.

More information, see ASIC's Innovation Hub


Practical guides to business in Asia

Australian businesses looking to tap into growth opportunities in Asia are encouraged to make use of the country starter packs developed by Asialink Business.

The Asialink Business Country Starter Packs are a “how-to” guide for businesses of all sizes looking to get started or expand in Asia. The first release of the suite of guides covers four countries, including China, Indonesia, Korea and Thailand.

The guides have been launched in response to market research conducted by Asialink Business, which acknowledges Australia’s strong interest in Asia and found that there were gaps in information available to businesses looking to engage with Asia.

The starter packs have received the support of Federal Assistant Treasurer and Minister for Small Business, the Hon Kelly O’Dwyer MP.

“The Government recognises that many Australian businesses are actively seeking help to overcome the challenges they face doing business in Asia. I am confident that the Asialink Business Country Starter Packs will be a valuable tool for small businesses looking to engage with Asia,” she said.

Each guide offers practical case studies and highlights specific opportunities in different markets, and provides business, marketing and legislative information to support in country planning strategy and operations.

Key points include:

  • Seek professional advice and speak to industry experts.
  • Build relationships with local counterparties, but be patient. It can take time.
  • Understand local culture and prepare for meetings with local business partners. Be flexibile and open to any differences.

For more information, see Asialink Business Country Starter Packs.


Dr Margaret Byrne, management consultant, executive coach and expert on leadership and change management reiterates these points, and emphasises the importance of developing cultural competency when conducting business abroad.

“When it comes to Australians operating in Asia, the chance of clash is enormous because of a mismatch in fundamental assumptions and expectations about roles, about relationships, [and] who should do what and when”, says Dr Bryne, who was a featured speaker at the AICD’s 2015 Company Directors Conference in Kuala Lumpur.

She offers six practical tips to Australian businesses and boards looking to enhance cultural relations in Asia:

  1. Listen more and talk less: While certain behaviours such as being assertive and independent may be perceived as leadership traits in Australia, the preferred way of communicating in Asia is listening centred.
  2. Practice picking up hints and inference: Understand that communicating by inference, indirectness or implication in Asian cultures is common place. Australian businesses and boards should practice picking up hints and non-verbal cues in interactions with Asian counterparties.
  3. Build rapport and trust: Australian businesses should seek to establish trust in Asia by demonstrating qualities such as compatibility and accessibility. Focus on demonstrating trust in the way that it works for your counterpart.
  4. Clarify meaning: Australian business leaders should regularly seek to clarify meaning and clear up ambiguities.
  5. Share the intention behind words, but remain strategic: Australian business leaders should not be afraid to share the underlying meaning and intention behind their words, but should strike a balance by understanding the appropriate forum for discussion. Decision making in Asia is a lot more like caucusing and lobbying than open negotiation.
  6. Be personal and authentic: In order to make long term connections with Asian counterparties, Australian business leaders should focus on being authentic and sincere.

For further insights on successful cultural relations and doing business in Asia from Dr Margaret Byrne see:


Hunter Hall appointments

Hunter Hall Global Value has appointed Paul Jensen as an independent non-executive director. It has also appointed Hunter Hall group founder, Peter Hall AM as a non-executive director.

Hall is executive chairman and executive director of Hunter Hall International and chief investment officer of Hunter Hall Investment Management.

Jensen has over 30 years’ experience in financial markets and the investment industry. He is a fellow AICD and is currently a director of Future Generation Investment Company, Sandon Capital Investments, WAM Capital and several private companies. He is also the chairman on Lilla Foundation.


Kinetic Super has announced the appointment of Jodie Leonard as an independent director to its board. Leonard will replace John Plummer, who is retiring from the Kinetic Super Board following the completion of his second and final term.

Leonard’s board experience spans the private, government and not-for-profit sectors and she is currently a non-executive director of Beyond Bank Australia and Racing Victoria Limited. She is also a member of the Beyond Bank Australia risk committee and chairs the Beyond Bank Australia Foundation.


Rob Elliott, AICD's Executive Director of the Governance Leadership Centre, has been awarded the status of Honorary Adjunct Professor at the Macquarie Graduate School of Management. The title was conferred in recognition of Elliott's expertise in the field of governance.

Elliott was appointed the leader of the Governance Leadership Centre when it was launched by the AICD in late 2014. The aim of the Centre is to encourage “over-the-horizon” thinking and encourage leaders to drive organisational performance that contributes to economic growth and social benefit.