Getting on top of regulations is a priority for boardroom chairs. Pictured: Climate Change Minister James Shaw. Photo / Mark Mitchell
Getting on top of regulations is a priority for boardroom chairs. Pictured: Climate Change Minister James Shaw. Photo / Mark Mitchell
Board chairs have seen their roles and responsibilities increase dramatically over the past few years as corporate governance becomes more complex.
The pace of change has accelerated as the power of institutional investors and societal scrutiny has increased.
The trend toward greater transparency and accountability means the traditional activities ofcorporate leadership have become more challenging.
So what makes a great board chair? And how should they respond to mega forces such as climate change, income inequality and digital disruption?
“Those that stand out to me are those who can support, motivate and inspire the leadership team,” says Forsyth Barr managing director Neil Paviour-Smith.
This year’s finalists are Mark Verbiest from Meridian Energy and Summerset Group, Prue Flacks from Mercury and Dame Therese Walsh from Air New Zealand and ASB Bank.
Boards are increasingly being called upon to navigate the challenges presented by climate change, racial injustice, economic inequality and numerous other ESG issues.
Improving governance in this area is crucial as directors are increasingly required to consider the impact on financial statements and other corporate disclosures.
“Education is a great starting point,” Paviour-Smith says.
“Ensuring you are on top of the changing regulatory environment and what this means for business operations is now part of a board member’s remit. The Institute of Directors has some great resources to help board members confront and respond to climate-related business issues.”
Climate change is posing an ever-larger legal risk to boards and the Herald has reported how most NZX-listed companies were “grossly underestimating” the time and cost involved in New Zealand’s new climate reporting regime.
New Zealand’s new climate reporting regime - the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act comes into force next year. It requires all NZX-listed companies with a market capitalisation over $60 million to report their climate-related risks.
Chapman Tripp partner Roger Wallis earlier this year told the Herald an initial cost-benefit analysis indicated it would be a multi-$100,000 cost for the first report for companies.
“I think people have underestimated that regime and we are going in at the bleeding edge at the moment, so the XRB standards will require more extensive disclosure of greenhouse gas emissions than the [US] SEC will.”
Paviour-Smith says having climate change as a standing agenda item for board meetings may be helpful – at least until the board is comfortable that the business is appropriately addressing the issue.
“Board ownership of policies and practices related to climate change would ensure regular reporting on how a company is tackling the issue,” he says.
“The board should also be asking questions around how enterprise risk management is integrating risks such as climate change into broader risk management strategies.”
One dangerous side-effect of ESG is greenwashing and scandals continue to hit the headlines.
Regulators in the EU, UK and US are investigating ESG funds amid growing concerns asset managers keen to sell products are promising more than they can deliver.
“Accountability at the board and leadership level with regular reporting and ownership of policies will ensure the company starts its journey on the right foot,” says Paviour-Smith when asked to comment on the issue from a governance point of view.
“Ensuring the right resources are in place, supported by appropriate knowledge levels and ongoing education, are key factors. An organisation must be authentic and transparency (such as stakeholder reporting) can help with this.”
Driving sustainability from the boardroom requires moving from making a commitment to action.
“It’s worth thinking about the organisation not trying to do everything at once – it can be a huge agenda. The board needs to understand where the greatest impact can be delivered, understand what motivates staff and clients, understand the trade-offs that will be faced with business as usual and ensure all elements come together within a cohesive strategy.”
The Deloitte Top 200 Awards were established in 1990 and are held annually to recognise and applaud outstanding individual and management team performances among New Zealand’s largest companies and trading organisations.
Last year’s winner of the chair award was Patrick Strange.
All the Deloitte Top 200 winners will be revealed at a gala event on December 8. The event will be live-streamed on the NZ Herald website on this page.
Chairperson of the Year finalists – Sponsored by Forsyth Barr
Meridian and Summerset chair Mark Verbiest. Photo / supplied
