1. Governance gap or expectation gap?

In the aftermath of the Royal Commission and related enquiries, Australian directors are reflecting on their performance and how Boards need to respond.

Many say the core challenge is not a large gap in governance, but rather a widening gap around expectations of Boards. 

loading-player

Playback of this video is not currently available

Read Transcript...

Some two-thirds of NEDs felt their Boards have already responded or do not need to respond to recent governance developments in a significant way. 

Having said that, in addition to the third making significant change, many other NEDs commented that their companies will need to make some change - if not significant - of a more moderate nature.

Steps to further improve governance 

Close to three-quarters of NEDs say their Boards are now investing more time influencing and assessing culture, changing remuneration policies and practices, and improving their management reporting. 

Plus more than half are making other governance changes such as evolving their committee structures and/or refining their operating rhythm, more deliberately and explicitly setting the tone from the top, and more clearly setting expectations for management and more robustly challenging management.  

A number of NEDs commented that the changes they were making reflected commercial catalysts and natural progress.

The majority, though, did acknowledge that their thinking and actions were in direct response to the findings of the Royal Commission and related enquiries. 

Unrealistic expectations?

Governance expectations have heightened for many Boards - and change is required -  largely as a result of evolving community expectations, and in particular, we believe, around what is considered to be fair for customers. The extent of the change typically depends on the nature of the company’s business, with greater implications for those that are large/highly complex/B2C compared to those that are smaller/less complex/B2B.

There is, however, a genuine and major concern amongst NEDs that the expectations have gone too far.  Seven out of 10 directors see a widening expectation gap around the role and purpose of the Board. They believe that much of the community does not understand what Boards actually do, and that this misunderstanding is leading to unrealistic expectations being placed on Boards and their directors. 

Contact us

Peter van Dongen

Chairman, PwC Australia

Tel: +61 (2) 8266 3378

Mike Codling

Partner, PwC Australia

Tel: 612 8266 3034

Debra Frances

Senior Executive Advisor, Risk Consulting, PwC Australia

Tel: +61 421 056 456

Emma Grogan

Partner, People and Organisation, PwC Australia

Tel: +61 (2) 8266 2420

Michelle Kam

Partner, Strategy& Australia

Tel: +61 (2) 8266 1299

Follow PwC Australia