ASIC chair urges directors to act honestly

The Australian Securities and Investments Commission chairman has called on company directors to comply with their duties, admitting the role was difficult amid developments in technology and ESG but not impossible.

Speaking at the Australian Institute of Company Directors Australian Governance Summit this morning, ASIC chair Joe Longo made some remarks about directors and their responsibilities.

Mr Longo said complying with directors’ duties might be difficult but the corporate watchdog expected directors' duties and responsibilities to be done.

“Is it impossible for directors to comply with their obligations? A tough question,” he said.

“We’re all well aware of the ever-increasing complexity of the business world, and it’s pretty clear that this complexity carries over into the role of directors and boards – and this continues to put pressure on the traditional division of governance responsibilities between boards and senior executive management.

“Spoiler alert – I’m going to say it’s not impossible to comply.

“It’s tough love but being a director isn’t easy – if it were, anyone could do it. Good directors run successful, profitable businesses.

“That’s not going to happen unless every director takes an active stance of curiosity and starts asking the right questions – to understand their business, and how that business makes money.”

In his keynote speech, Mr Longo presented four questions for directors to ask themselves regularly.

Mr Longo said directors should ask themselves whether they were acting honestly, putting the company first, have a continuous curiosity to understand all aspects of the company's core business and the risks associated with it, and if they were challenging management to ensure your understanding is well-founded while getting trusted professional advice.

“Ask these questions, not just once, but again and again,” he said.

“If the answer is yes – not just once, but again and again – then you will get to a point where concerns about complying with your directors’ duties won’t keep you up at night.”

Some of the matters Mr Longo said directors should be across include developments in artificial intelligence and other technology, particularly amid high-profile cyberattacks, sustainable finance and ESG.

Mr Longo said new obligations imposed on directors, including climate-related reporting, presented new opportunities.

“I often get asked what advice I’d give directors on this compliance question. They don’t want to be at risk of being investigated, prosecuted or sued. And I understand that,” he said.

“But the first thing I’d say is – not all new obligations on directors necessarily mean an increased burden.

“Nor do they necessarily make it harder to balance the scales between profit and legal requirements.

“The point is that increased expectations don’t mean decreased profits or a meaningless list of endless tasks. They mean better business.”

Mr Longo admitted being a director was a tough gig with complexities.

“The fundamental reality is if you’re acting in good faith and want to run a profitable business, and not fall foul of what’s expected of you in terms of the law, that’s hard work,” he said.

“You have to get the balance right: You have to put customers’ interests first, show them you’re not just there to make a profit, that you are acting with integrity, that you are doing the right things by your staff and by your local community.

“Absolutely that’s hard work. But with an attitude of curiosity about your businesses, it’s not impossible.”