Boards expect more scrutiny

Shareholder scrutiny on corporate governance practices will increase over the next few years, Deloitte Dunedin audit partner Mike Hawken says.

With many organisations still feeling the effects of the Global Financial Crisis (GFC), it was not surprising to find that 76% of directors surveyed by Deloitte globally and 83% of New Zealand directors surveyed saw the level of shareholder scrutiny increasing in the next few years.

However, increased shareholder activism need not have negative implications, he said.

Many New Zealand directors said the increased scrutiny, especially for closely held shareholdings, might have a positive impact on sharpening the focus of boards on corporate governance practices.

The Deloitte ''Director 360: Degrees of Progress'' survey was released on Thursday.

The survey provided perspective on the views and concerns of directors serving on boards around the world. The results were based on interviews with 288 directors in 19 countries, including 29 directors from New Zealand.

It also asked directors to identify the top three issues for boards over the previous year and for the next two years.

Mr Hawken said the GFC and recovery was the dominant issue facing New Zealand boards over the next two years, with 52% of directors identifying it as a key issue. That was followed by a focus on talent management (31%), capital management (28%) and strategy (21%).

In contrast, a focus on strategy had overtaken the GFC and recovery as the top issue for directors globally, as well as for Australian directors, he said.

''It's striking that New Zealand directors have a materially higher focus on the GFC compared to their Australian counterparts, which may reflect more optimism about the recovery across the Tasman.''

Overall, the statistics still showed a positive story for New Zealand, Mr Hawken said.

The focus on talent management and strategy over the next two years suggested many businesses were looking forward and rethinking their strategies.

''Obviously, an important part of that will be finding the talent to implement them.''

Diversity was seen as important by nearly half of the directors surveyed. But in New Zealand, nearly 60% of directors said their boards had introduced diversity policies, guidelines and/or goals for board composition.

A third of New Zealand directors highlighted the importance of diversity of skill sets as distinct from ethnic and gender diversity.

''For many New Zealand directors, this focus on diversity extends from the boardroom to their organisations, citing opportunities for increased diversity to enhance business performance,'' he said.

Risk oversight remained a top priority for boards. New Zealand directors were aligned with their counterparts around the world, agreeing that time spent on risk oversight would not decrease.

A majority of surveyed directors (68%) reported that sustainability and corporate social responsibility were becoming more important to the board.

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