New Zealand National governance conference opening address – October 2019
National Governance Conference, New Zealand
Opening Address: Global Future of Governance
Edith Shih FCIS FCS(PE), International President, ICSA
Distinguished guests, members and friends, good morning. I would like to thank Governance New Zealand for this opportunity to meet and speak at this National Governance Conference today.
My remarks today will be very much divided in two halves. First, I want to take this opportunity to bring us up to date on the actions and initiatives which our global institute is progressing on behalf of our members. Secondly, I would like to offer some of my own thoughts on the theme of today’s conference - “The Global Future of Governance”.
As many of us know, the new name of our global Institute – The Chartered Governance Institute – was approved by members in September 2018. The Supplemental Charter with this new name was sealed on 16 September this year and the new name will be officially launched next month, on 5 November. The new name reflects a re-positioning of our Institute that has been taking place over the last decade. Our Institute has become the premier global qualifying organisation for Chartered Secretaries and Chartered Governance Professionals. It is the natural home for anyone involved in governance work, whatever sector they may work in and whatever their professional background – including company secretaries, directors, compliance professionals, lawyers, accountants and risk managers.
For this transformation, we have updated and reshaped our qualifying programme and continuing professional development services to ensure that we are giving our new recruits, as well as existing members, the reinforced skill set they need as governance professionals. The New Qualifying Programme (NQP) includes an updated curriculum in applied governance, corporate law and company secretarial practice, as well as a greater emphasis on risk management, finance, decision-making, strategy and boardroom dynamics. The NQP has already replaced the International Qualifying Scheme in a number of divisions, whilst its full implementation is expected to take place in all divisions during 2020.
We have also adjusted the way our Professional Standards Committee (PSC) works; the PSC has implemented a Quality Assurance (QA) framework to assess a division’s capacity to deliver the qualifying programme. I look forward to seeing full accreditation under the QA framework being awarded to all divisions soon.
Alongside these initiatives, our Institute has also been busy implementing the new Chartered Governance Professional and Affiliated Membership qualifications. The Council has agreed to change the post-nominals to accompany the name change. The new post nominals are 'FCG' for Fellows; 'ACG' for Associates and 'CG(Affiliated)' for Affiliated members. Members who have attained the Chartered Secretary and/or Chartered Governance Professional designations are also able to add 'CS' and/or 'CGP' after their post nominals as appropriate.
Turning now to the theme of this conference, I recall the oft-expressed warning against making predictions, especially about the future. It’s extremely wise advice. Let me be amongst the many people who fail to follow it.
I believe that we stand on the threshold of a revolution in governance. Indeed, I believe we are already in it. There are many elements to this revolution. In my brief remarks today, I would like to touch on some of these.
The development of corporate governance in its modern form can be traced back to the early 1990s, notably the publication of the Cadbury Report in the United Kingdom. Since then, and reflecting those origins, corporate governance in the developed and developing economies has been marked by a strong focus on listed companies. However, we are seeing a widespread decline in the number and economic importance of public and listed companies relative to other capital-raising structures. Businesses and investors are increasingly turning to other structures such as venture capital, private equity, hedge funds, family offices and sovereign wealth funds.
Some of these have existed for many years: others, such as crowdfunding, are more recent. But, despite their massive growth and the importance of their role in the global economy, their governance has not been subject to the degree of attention, transparency and oversight which has been devoted to listed companies. I expect this to change, and I think it should change.
I also expect governance to continue the trend of recent years to reach beyond accounting and financial, and encompass much wider aspects of environmental and social performance. Perhaps as recently as 10 to 15 years ago it would have been rare for any company to report on its carbon emissions. Now, this would be expected of any responsible undertaking - as would reporting on its performance across a sweep of deliverables, such as on diversity, supply chain management, community investment and much more. The scope of this reporting will only increase in the years to come.
We will also see governance continue to recognise the duties owed by business not only to shareholders, but to a much larger group of stakeholders. Identifying those stakeholders, deciding upon the nature of the obligations owed to them, measuring performance in meeting those obligations and the manner of reporting will be a growing component of effective governance. The focus on delivery of shareholder value will gradually merge into a broader notion of sustainable corporate performance.
Governance processes, policies and disciplines will also extend to organisations and entities which deliver a greater range of economic, social, cultural and environmental value - whether in the private sector, the public sector or the third sector of non-governmental, charitable and community organisations. Any undertaking which plays a substantial role in the well-being of society, especially one which enjoys the privileges of external funding and limited liability, will become the subject of heightened expectations of good governance. This will make a positive difference. By way of illustration, New Zealand is renowned for sporting excellence. It is world leaders in sports such as rugby, cricket and netball, to name just a few. It is also renowned for excellence in sports governance. The two are not unconnected. I understand that, as recently as the Cricket World Cup, some commentators attributed the relative performance of the New Zealand and Sri Lankan teams less to the talent of their individual players, but to the difference in the quality of governance of the two cricket authorities in developing and maximising that talent.
It is because of the expansion of governance expectations and standards to a much wider field of entities that it is no longer appropriate to speak of “corporate governance”. As the title of this conference rightly expresses, we must now think, speak and act in terms of “governance”, full stop.
Finally, the impact of new and emerging technologies on governance will be immense. It is also the most difficult aspect of the future to foretell. I think, albeit with due hesitation, that this impact will have at least two dimensions.
The first is that governance standards and requirements will need to evolve rapidly to enhance the controls, performance and transparency of companies which are carrying on forms of business hitherto unknown. We are already seeing this in the way in which companies such as Google, Facebook and Amazon are subject to growing questioning and scrutiny. Those and, for that matter other longstanding businesses which adopt new technology, will face greater obligations in matters such as data management, data privacy and cyber security. They will also need strengthened governance processes in order to discharge those obligations.
Secondly, new technology will provide governance practitioners with better tools to perform their role. In the IT field we will progress rapidly from corporate secretarial software systems through governance management and reporting systems to the era of Artificial Intelligence. I am unsure quite how AI will affect governance. However, I am absolutely sure that this will not undermine the relevance and importance of our work. On the contrary, it will enhance our capabilities and, in so doing, the quality of what we do and the value we bring to all stakeholders.
All of the trends I have suggested have several things in common: they are irreversible, they are expanding, they are accelerating and they all present great opportunities. I say with confidence that there has never been a better time to be a governance practitioner. And there has never been a better time than now to reflect on the future of governance.
We cannot predict the future. But we can prepare for it. In that spirit, I greatly look forward to joining in your debate and deliberations today.
Auckland, New Zealand
1 Oct 2019
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