Mistrust in institutions is fairly universal but that doesn’t mean that trust in all institutions has dropped, just our formal institutions, Governance Institute of Australia CEO, Megan Motto told CEDA’s Economic and Political Overview audience in Sydney.
“I reflect on the Uber experience, 50 years ago you were told not to get into a car with a stranger and then taxis came along, and we happily got into a car with a stranger with a certain colour car and a thing on the roof,” she said.
“These days we plug our personal address into an app so that a stranger through technology can come to our home and pick us up and take us somewhere else, and that can all be tracked through an institution.
“So, trust is certainly still there it has just dissipated from our traditional institutions through to our non-formal institutions.
“What we need to do is to figure out how CEOs and how boards can reinstate that trust.
“One of the things that employees are finding is that they trust their leaders when they take the lead on social issues.”
Ms Motto said that it's incumbent upon the business community to step forward in social debates.
“We look at Alan Joyce with the Yes! debate, we look at the business community's response to climate change, including the big energy companies who are taking a far and away larger step towards mitigation activity and towards carbon neutral activity, than governments are allowing for in the current policy malaise,” she said.
“When organisations take that leap and move outside of just the agency theory of return of share to shareholders, that's when employee trust tends to spike.”
Ms Motto said in social debates policy and politics are failing us somewhat.
“When you look at the changeover of prime ministers, of the dismantling internally in parties, of the oscillation between the parties over the last 20 years, we just can't sit around and wait for there to be policy certainty,” she said.
“So the business community is setting those long-term targets for themselves.
“I think the business community is also stepping forward because they’re understanding that what is good for the cohesion of society is good for business, it's good for long-term economic growth and therefore it's the tide that raises all boats.
“There is a broader recognition that we need to deal with for example the feeling of inequity of the sharing of the productivity and economic growth that we've had over the last 27 odd years.
“Unless we can tackle those issues and bring society along with us then we're really going to be fighting over pieces of the pie, rather than increasing the pie over the long term.”
Also speaking on CEDA’s panel was First State Super CEO, Deanne Stewart who said large super funds like the one she heads are taking responsible ownership very seriously.
“You'll certainly see players like ourselves for example take the lead on divesting from tobacco,” she said.
“First State Super was one of the first to divest from tobacco that then had a ripple effect across other super funds and before you know it actually became a global phenomenon which was just fabulous to see real leadership here in Australia.
“I think you're beginning to see that happen through climate change as well, so you saw yesterday's announcement with Glencore for example capping their coal production and one of the impetuses for that was the Climate Action 100+ group.
“In both having really robust conversations with the likes of Glencore but also plenty of other organisations whether that be BHP, Origin, Santos for example that actually recognise they've got a job to be done and it's not flicking a switch overnight but actually a real issue and we need to solve that over time.
“I think it’s actually a really positive and responsible form of ownership and I think you'll see more and more of that occur in the future.”
Ms Stewart said the key to good governance is understanding the cultural drivers right throughout an organisation and ensuring that there's congruence.
“From a governance perspective are you ensuring that there's congruence to the culture and the values you're setting up, and what I mean by that is, there is no organisation I've walked into that doesn't say we put our customers first and we are one team,” she said.
“But if you just leave that with policies and ticking the box and making sure that is what's discussed at board level, versus actually really testing for congruence through things like being out and seeing the effect we're having on members, on customers, seeing what is being said in complaints, customer feedback those sorts of things.
“I think that we'll see much more of a shift of are we setting high enough standards and is there congruence throughout the organisation and I think that's what the community is crying out for.”
Ms Stewart said transparency and diversity also play a role in good governance.
“I think the greater organisations can show transparency whether that's reporting their view, what they're doing around climate change, what they're doing around gender diversity, that transparency I think helps lifts the bar and provides a complete view to the market as to how they're doing,” she said.
“And are you well equipped to actually understand community expectations and have the voice of the customer heard, do you really understand the issues of the day of your community and your customers?
“I think that also brings in an issue of board diversity and I don't mean just diversity of gender, I actually mean is your board and management team diverse enough that they themselves represent the community and understand the community and I think if you looked at a lot of boards in Australia the answer would be no.
“That's not a short-term fix though, that's a longer-term fix, but I think diversity of board is also an issue that would help address community expectations.”
Other speakers at the Economic and Political Overview in Sydney included:
Premier of NSW, the Hon. Gladys Berejiklian
Commonwealth Bank of Australia Chief Economist and Managing Director, Economics, Michael Blythe
Shadow Treasurer, the Hon. Chris Bowen
NSW Opposition Leader, Michael Daley MP
Asialink Business CEO, Mukund Narayanamurti
Read a copy of the Economic and Political Overview 2019 here.