Institute of Directors CEO Kirsten Patterson indicates ‘robots’ will soon be part of, if not are already part of, boardrooms in New Zealand.
“We might not see a robo adviser sitting on a chair, but what we will see is greater reliance on artificial intelligence led data and analysis,” explains Patterson, during the launch of the IoD 2017 Directors’ Fees Report.
There are lots of opportunities for directors who have the ability to aggregate and distil trends, adds Una Diver, director at EY, which partnered with IoD on the report.
Diver says a CIO moving to the professional director space would be thinking, 'How can I demonstrate my skills around data, artificial intelligence and cyber that will position me to be attractive to my governance career?'
“I don't think two years ago many people talked about cyber risk in the same way as they are talking about it now,” says Diver.
Directors need to comfortably lead through change and uncertainty
“So if we look ahead at the trend in directorships, it will be around thinking about when boards are considering their skill matrixes. How are we covered for digital, particularly about cybersecurity?"
“The big thing directors need to be is to be able to comfortably lead through change and uncertainty, adds Patterson.
“More and more they are being asked to deal with a level of regulatory and liability responsibility in very detailed level. They have to be able to get right down from a helicopter view to be able to assess those issues.
"Those issues coming across the board are really complex ones."
“We spend days in strategic planning sessions, talking about a three-year goal,” observes Diver. "Yet, we know the pace of decision making, of change, is getting faster.
“Faster access to data means things are more transparent and impacts are very quick,” says Diver. “We need to make sure the people who are governing our organisations are comfortable with that environment and can truly govern in that environment.”
Apart from upcoming trends boards need to prepare for, the two note positive information around remuneration for New Zealand directors and diversity around the board.
The latest report finds that pay disparity between male and female non-executive directors has dropped by more than half over the past three years.
In 2015 the pay difference between male and female non-executive directors was 21.6 per cent, in 2017 the gap was down to 9.9 per cent.
“The challenges of disruption and the modern world, call for modern and diverse boardrooms,” notes Patterson. “So it’s pleasing to see that the gap between male and female non-executive director fees continue to close.”
Non-executive director fees had a moderate increase to $44,000 up 2.3 per cent from $42,994 in the 2016 year. For non-executive chairs the median fees also increased less than in 2016. The median non-executive chair fee increased from $54,000 to $55,000.
She says key skills required of directors are now emerging that were not critical five years ago, with cyber skills being one of them – increasing the scope of risk oversight.
“There is also more expectation, especially from institutional investors, that boards must play an increasingly meaningful and prominent role in shareholder engagement that extends beyond general meetings.
Diver says, “The risk and compliance landscape for directors is likely to change significantly in the next 12 months, as boards get to grips with the NZX’s new corporate governance code.
“The code, which mandates higher standards of transparency and disclosure in areas such as director and CEO remuneration, auditing and health and safety monitoring, will inevitably increase directors’ workload.
This is the third year the IoD has worked with EY to undertake the annual IoD Directors’ Fee Survey, and this year saw a boost in survey participation, making it the most comprehensive to date.
There was more than double the participation rates from non-executive directors on Maori and iwi boards, while input from non-executive directors identifying as from other ethnicities was up 82 per cent.
Faster access to data means things are more transparent and impacts are very quick... We need to make sure directors can truly govern in that environment
The forward-looking board
Patterson says forward-looking boards have diversity of thought around the table. This is important so that when the board is looking at complex and uncertain issues, each person will bring a slightly different perspective.
“When you piece those different perspectives together, it gives you insight.”
She points out having diversity alone in the board is not enough. It is one thing to get diversity around the board, it is another thing to get it work effectively.
“You need to ensure you have board dynamics environment, where people can participate,” says Patterson.
She says the need is for directors who are well connected to their shareholders and stakeholders.
They are scanning the environment, reading a lot, engaging with different networks and management teams and consider geopolitical issues and consumer trends, says Patterson.
“What is happening in the digital space in terms of technologies coming through? What are opportunities and threats as a result of these changes?”
‘Go beyond the dashboard’
“The best directors are collectors, are curious and are curators,” says Patterson. “They are out collecting information, are interested about what is happening and are curious about a range of topics, and are able to curate that information really well."
Diver says the not for profit sector can be a launching pad for the director role. This is a complex and challenging sector that is always looking for support, she explains.
Have some governance education that helps you think about the role from a new lens, adds Diver.
“Show how you can demonstrate your governance skills in your current jobs. Provide great advice to the board and potentially put your skills in other sectors.”
Patterson, on the other hand, says those who can transition from executive to governance roles, particularly those coming from a specialist discipline, “are able to ask great questions”.
“You are going beyond the dashboard, [thinking] how do I get the insights out?”
Send news tips and comments to firstname.lastname@example.org
Follow Divina Paredes on Twitter: @divinap
Follow CIO New Zealand on Twitter:@cio_nz
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.