Technological forces will continue to have a major impact Directors need to be in tune with community expectations Diversity is an enduring challenge
The Chair of the future is not one person who possesses all the skills, experiences and traits that companies will need to prosper in the lead up to 2025. The Chair of the future is a leader who will understand what is needed, and how, when and where to find it.
Korn Ferry interviewed 28 Chairs and business leaders in Australia with an interest in board governance for their latest report: The Chair of the Future – towards 2025. The study found that Chairs of the future will be multi-dimensional in their approach and equally comfortable applying a conservative regulatory mindset to risk as they are recognising and supporting technology-enabled innovation.
The foundational skills of a Chair will remain, however the interviewees agreed that the long-term impact of Covid-19 will be keenly felt and will influence board composition and the attributes of the Chairs who lead them. The study found that boards require a strong and courageous leader who thrives in an ambiguous environment to lead our companies to 2025.
When asked to identify the most important attributes for the Chair of the future, business leaders cited resilience, agility, high EQ, courage and curiosity. The most frequently mentioned issues that will be prevalent in 2025 were technology, ESG, regulation and diversity.
According to the study, technological forces will continue to have a major impact on how companies conduct business in the coming years, and Chairs will ensure the NEDs on their boards have the right mix of experience and understand the challenges and opportunities that a greater reliance and exposure on various aspects of technology will bring. Tim Nelson, CEO of Korn Ferry Australasia noted: “This doesn’t mean they will have core technology skills, but more that they understand the role and potential of technology to transform business models. Digital risk is growing along with developments in technology, with cyber-risk clearly a clear and present threat.”
The leaders interviewed for the study also provided insights on the importance of diversity. They feel diversity needs to broaden beyond gender to attract directors with diverse cultures, education, work history and exposure to a diverse range of experiences. They also indicated that Chairs must be skilled at making diversity truly inclusive so that multiple opinions and perspectives contribute to decision making at board level.
Respondents to the study recognised that community expectations of Chairs and the boards they lead have changed over the past few years, and this will continue. Boards are operating in an environment of increased transparency and with that, a stronger voice from community stakeholders. Directors need to be in tune with community expectations of the companies they represent as part of their governance role.
Australia’s highly regulated environment will continue. The amount of compliance that a board needs to attend to increases most years, and this has in turn increased the workload of directors partly due to the vast amount of information to absorb in board papers. Alexandra Goodfellow, Vice Chair of Korn Ferry Australasia said: “Regulatory compliance is a growing component of the market rather than a leading indicator and we need to embrace regulation as both cautionary and a driver of opportunity. Chairs and NEDs also need to be satisfied that they deeply understand where risk lies within the organisations and, where it contributes to value creation.”
ESG reporting has been growing in prominence for some years and will be more dominant in 2025. Social license to operate, which is linked to ESG, requires deeper understanding by corporate Australia. Shareholder activism will also increase, and Chairs will need to be able to manage divergent shareholder interests and community expectations.
Boards need to understand the importance and influence of stakeholders who are not investors but who are affected by decision made by the company – as employees, community or consumers – deserve to be heard.
The views among Chairs in relation to business activism and advocacy were mixed. For some, issues that are important to the operation of the company should be addressed within the company but not necessarily in public forums. Others felt where the business case was solid, then public advocacy is warranted.
There were also Chairs who noted that there are political and social issues that are important to their stakeholders – including their employees – and relate to their purpose. It is therefore appropriate that the company have a view and state it publicly.
There are some current features of board oversight that will amplify as we journey towards 2025. They will provide both challenges and opportunities for Chairs, and, depending how companies manage each, will reveal strengths and weaknesses at board level.
It is unsurprising that resilience was nominated as a key strength of directors by the Chairs interviewed for this report for, they were in the middle of testing the resilience of their boards and their response to Covid-19 at the time of our interviews. Their response to Covid-19 demonstrated how important it is for Chairs to create the conditions for an agile and adaptive organisational culture.
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Note to editors: The research undertaken by Korn Ferry, included 28 interviews including; Chairs of 18 ASX listed companies. The superannuation industry fund sector was represented by two Chairs, three CEOs and one Chief Investment Officer. Korn Ferry also spoke to three representatives of proxy adviser firms. The interviews were conducted between March and June 2020.
For the complete study, The Chair of the Future visit: [link here]
Patrick Allaway, Chair BoQ; John Atkin, Chair AICD & Qantas Super; Ilana Atlas, Chair, Coca Cola Amatil; Debby Blakey, CEO, HESTA Super Fund; Michael Carapiet, Chair, Link and iCare; Gordon Cairns, Chair Origin Energy and Woolworths; David Clarke, Chair, Charter Hall; Phillip Chronican, Chair, NAB; Neil Cochrane, Chair, Aware Super; Louise Davidson, CEO, ACSI; Mark Delaney, CIO, Australian Super; Paula Dwyer Chair, Tabcorp and Allianz Australia; Sir Rod Eddington, Chair, Lion; Phillip Foo, CGI Glass Lewis; David Gonski, AC, Chair ANZ Bank; Rick Holliday-Smith, Chair ASX and Cochlear; Vas Kolesnikoff, ISS Governance; Catherine Livingstone, Chair Commbank; John MacFarlane, Chair Westpac; Rebecca McGrath, Chair Oz Minerals; Hamish McLennan, Chair REA and Rugby Australia; Robert Murray, Chair Metcash; Pat O’Sullivan, Chair, Carsales; Bernard Reilly, CEO Sun Super; Deanne Stewart, CEO Aware Super; Anne Ward, Chair Colonial First State & Red Bubble; Peter Warne, Chair Macquarie Bank; Karen Wood, Chair South32.
About Korn Ferry
Korn Ferry is a global organisational consulting firm. We work with clients to design their organisational structures, roles, and responsibilities. We help them hire the right people and advise them on how to reward, develop and motivate their workforce. And, we help professionals navigate and advance their careers.