6 Sep 2019

Companies' board model faces challenges in the digital era

11:39 am on 6 September 2019

The existing board model of companies needs to change to cope with challenges from digital disruptions and regulatory changes, a report says.

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A report by the Institute of Directors and law firm MinterEllisonRuddWatts identified new technologies, cyber risk and climate change as key issues directors have to contend with.

It also said directors were expected to be more accountable and face increasing risks of being held personal liable for their decisions.

The institute's general manager of governance leadership Felicity Caird said boards had not kept up with changes, often weighed down by reports to read and compliance, which cut into the time needed to address strategic and performance issues.

"Despite significant change in the operating environment, boards have been functioning in much the same vein for decades.

"Boards' traditional ways of working need to be challenged for directors to continue to add value and fulfil their governance responsibilities in the future."

The paper suggested "robo" directors could be a real possibility.

"The future boardroom will unquestionably be digital," Ms Caird said.

MinterEllisonRuddWatts partner and head of corporate law Silvana Schenone said the legal landscape was also changing, with increasing potential liability for directors, the rise of class actions, active regulators and litigation funders holding directors to account.

"We want to see directors focusing on strategic and big issues as opposed to spending time on a level of detail, which actually management is capable of handling," she said.

"And that's a fine line because we're also seeing that directors are becoming more and more involved with the day to day running of the business."