On the 2013 agenda

Shareholders will take more notice of board and director performances in 2013, according to the first of two reports by global consultancy Deloitte. And directors will face 10 important governance issues according to the second report.
The first report, “Director 360: Degrees of Progress”, expects shareholder scrutiny of corporate governance practices to increase over the next few years. The finding is based on in-depth interviews with 288 directors in 19 countries, including 29 New Zealand directors.
The aftermath of the global financial crisis (GFC) is still evident in the world’s boardrooms, according to the survey. Unsurprising therefore, 76 percent of directors globally and 83 percent of New Zealand directors expect shareholder scrutiny of their actions to increase over the next few years.
That’s not necessarily bad news, according to Deloitte’s New Zealand head of audit Peter Gulliver. “Many New Zealand directors think increased scrutiny, especially for closely held shareholdings, could have positive impact by sharpening board focus on corporate governance practices,” he says.
For most New Zealand directors (52 percent), recovering from the GFC is the dominant board issue. The preoccupations after that will be talent management, according to 31 percent, capital management (28 percent), and strategy (21 percent). By contrast, directors globally ranked the focus on strategy as their highest ranked governance consideration, ahead of GFC recovery.
Australian directors are more focused on strategy than recovery. “Perhaps that reflects more optimism across the Tasman,” says Gulliver. “Still, the survey reflects positive story for New Zealand. The focus on talent management and strategy over the next two years suggests businesses are looking forward and rethinking their strategies.”
A couple of other findings stand out. Nearly half (47 percent) the directors surveyed thought more board membership diversity delivered more balanced global business strategies. And 59 percent of New Zealand directors said their boards had introduced diversity policies, guidelines and/or goals for board composition.
Risk oversight is still top board priority. New Zealand directors are aligned with their global counterparts on this one. They agree there won’t be any reduction in time spent on the issue and even thought that increased focus on risk might undermine focus on other key areas.
Sustainability and corporate social responsibility (CSR) aren’t, however, likely to be issues of diminishing focus. majority (68 percent) of directors consider this bracket will become increasingly important to boards.
The second report, “Directors’ Alert 2013: Lead or be Led”, identifies 10 issues directors and boards can expect their organisations to face this year. Again it is the result of global survey and suggests that in the post GFC business environment, boards that lead rather than being led, will be more successful. They will, the authors suggest, more likely adapt “strategies to turn challenges into opportunities and leverage compliance requirements to their advantage”.
The report doesn’t provide solutions to the identified challenges. It ranks them as important issues that boards can expect to encounter in order to help directors and managers develop strategies and options to address these future challenges, to mitigate risk and to “seize opportunities”, says
Gulliver. It does, however, include set of questions around each issue to promote board discussion.
The 10 key issues Deloitte thinks directors and boards may face in 2013 are:
• Finding the best value for cash
• Getting ahead of the next regulatory wave
• Developing risk-aligned strategies
• Strategy: the key to winning the war
for talent
• Expecting the unexpected
• Innovating for growth
• Creating superior performance environment
• Cutting through the “white noise” in performance reporting
• Identifying the board’s number one priority
• Maintaining long-term consistency and short-term flexibility.
To read or download the full Director 360 report, go to www.corpgov.deloitte.com/nz.