From the free text responses, the vast majority of directors agree with Justice Hayne’s comments that they must carefully balance the interests of shareholders, customers, employees and the community in the Boardroom.
“This is not new. Directors must act in the best interests of the company. This naturally, therefore, includes giving thought to how the company interacts with all its stakeholders in the interests of good business.”
“To be honest, I think we have always considered all stakeholders in our decision-making. Perhaps this is making it a little more formal.”
“I have always felt Boards need to balance all stakeholder interests for the good of the company.”
“The best interests of shareholders, over the long term, should be consistent with the best interests of employees, customers and other stakeholders.”
At the same time, NEDs are acutely aware of the difficulty in appropriately balancing all stakeholders’ interests in the face of the relentless demands of the market.
“The challenge often lies in the short term view shareholders take of a company’s performance and lack of tolerance for longer strategies.”
“The time horizons of institutional investors and that of the company are generally misaligned with investors having a much shorter horizon. This puts pressure on the relationship between the company and its investors.”
"The pressure being applied by some shareholders and proxy advisers is significant. With many shareholders being judged on their short term performance there is little scope for decisions that may take time to pay off”.
“Our company is very focused to ensure there is an appropriate balance between the interests of all parties. However, the investment community (particularly equity analysts) pay scant regard to anything other than financial results.”
"In the short term we need to make investments in technology and digital so as to make our longer term performance more sustainable. We are constantly concerned about whether shareholders will support a short term diminution in dividends in the interests of longer term returns.”
"While there is clearly no easy answer, a number of NEDs commented on the need for improved transparency and communication."
“This is where communication with shareholders about rationales behind the decisions is vital. Shareholders ought to take a longer term view and accept the fact that year-on-year growth in returns is sometimes unrealistic.”
“The challenge is around explaining the strategy and decisions to the market.”
“We need to get better at explaining to shareholders why we take measures that have long term payoffs. What we know is that taking short term decisions is costly in the long run.”
Partner, PwC Australia
Tel: 612 8266 3034
Senior Executive Advisor, Risk Consulting, PwC Australia
Tel: +61 421 056 456
Partner, People and Organisation, PwC Australia
Tel: +61 (2) 8266 2420
Partner, Strategy& Australia
Tel: +61 (2) 8266 1299