Regulation reset

With an election fast approaching, there are a number of key challenges the next federal government will need to address, writes AICD CEO Mark Rigotti MAICD. 

Issues such as the cost of living and the housing crisis are painfully obvious for many Australians. What’s not always so obvious are the underlying structural problems that need to be addressed, many of which have been allowed to languish in the too-hard basket for too long. 

Feedback from our members leaves us in no doubt what you think government needs to do — starting with tax reform, lifting productivity and workforce skills, targeted infrastructure investment and, of particular concern for the AICD and our stakeholders, the issue of regulation — or overregulation, to be more precise. ASIC chair Joe Longo has issued a call to arms on regulation, describing the level of complexity in the system as a “clear and present danger” undermining businesses’ ability to operate effectively — and having a negative impact on outcomes for consumers. 

The AICD strongly supports ASIC’s call, and much of our work is focused on achieving a more effective, sensible and less complex regulatory framework for directors to operate within. A simpler and targeted regulatory framework will benefit companies, the economy and society more broadly. Regulatory overload reduces the ability of boards to focus on productivity, innovation and value creation, producing a more risk-averse environment. Indeed, 61 per cent of directors surveyed for our latest Director Sentiment Index said compliance and regulation was the major factor impacting their board’s risk appetite. 

Most directors understand their job is not an easy one, nor should it be. We all accept that regulation plays a critical role in protecting consumers and investors. But it needs to be proportionate and targeted, which in turn will assist to improve productivity.

A good starting point would be for both major parties to announce what red tape could be repealed within the first 100 days of the next term of government. 

Governance lessons

Some key lessons have emerged over the past year, which directors should focus on in 2025. Recent experiences have seen the market put corporate governance firmly back in the spotlight — and not in a way that makes comfortable reading for Australian directors. 

Firstly, tolerance for corporate misconduct is very low, given the difficult economic times and the fact that many in the community are feeling financially and psychologically stressed. This puts heightened focus on leaders, including directors. 

Secondly, while loyalty is an enviable quality in a personal setting, professionally, that loyalty must lie to the company rather than any individual, even an ostensibly high-performing CEO. The failure to have at least one suitable candidate able to step into the breach, even temporarily, if a CEO leaves suddenly, exposes the company to too high a risk.