Data governance one of top five issues for NZ directors in 2018
- 08 March, 2018 06:30
Each year, our Governance Leadership Centre puts together the top five issues for New Zealand directors in planning their organisational strategy. Composed of local and international trends, the top five issues allow directors to stay ahead of the curve, and build resilient organisations that can adapt to changing times.
This year, trust and confidence, ethical behaviour and engagement with shareholders rank highly as organisations adjust to a digital environment where good and bad news can spread fast.
At the same time, the growth of data and its automation means that there is a high demand for skilled workers who are able to process and protect this data. The premium on these workers has created a highly competitive environment that boards must negotiate.
Our research lists the top issues for directors in 2018:
Trust and confidence. Last year’s Edelman Trust Barometer shows a global decline in trust in government, media and business. This is reflected in New Zealand, where only 47% trust business, 46% the government, and 29% the media. The reasons for this decline are complex (the Global Financial Crisis, the rise of “fake news”, and growing disparities between rich and poor are just a few factors). For businesses, this means the need to build trust through working on our “license to operate”, and creating legitimacy within our communities. Boards can aid in this process through working on their reporting processes and how they tell their story.
Ethical behaviour. Ethics covers conduct risks such as fraud and corruption, but it also covers the culture that we cultivate around our business. The growth of social media has amplified this, meaning that stakeholders can feed back on what they think of organisations. The Weinstein scandal is a good example of this, where thousands of women joined the #metoo movement to demand safe and healthy places to work. Boards need to think about how they can set the tone from the top, and create positive cultures through asking the right questions of management.
Shareholder activism. This is a global trend that is beginning to spark in New Zealand. Scrutiny is emerging around issues such as CEO and director pay, company performance, but also on environmental issues, such as human rights in the supply chain or climate change. Investors are divesting funds from fossil fuels, and according to figures from 350.org, the total value of institutions that have announced partial or full divestment from fossil fuels due to climate issues has now surpassed $6 trillion. Back home, the Super Fund has shifted 40% of its divestments to low carbon funds. Directors will need to adapt to greater demands for transparency in reporting, with the new NZX Corporate Governance Code placing greater emphasis on disclosure.
Data governance. Data is both a blessing and a curse – the better we are able to use our data, the more we are able to serve our customers. However, the more data we hold, the more responsibility we have, and the more vulnerable we are to data breaches. For boards, the introduction of Europe’s General Data Protection Regulation legislation will be a major project for many companies as they adapt to specific privacy requirements for any companies which have employees and customers from the UK. Access to skilled cybersecurity and data professionals will continue to be important in 2018.
Access to skills and talent. This is the era of what McKinsey called the 'War on Talent', where companies compete to attract the best staff. In our 2017 Director Sentiment Survey, 54% of directors cited constraint in the labour quality and quantity as causing barriers. In the tech industry, this War on Talent is particularly evident, where workers with specialised skill sets and in high demand are increasingly becoming “gig workers”, who jump from one job to another. For boards, this means thinking about how to retain and keep talent in a more competitive environment.
Kirsten Patterson is the CEO of the New Zealand Institute of Directors.
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