The corporate regulator has delivered a stern message for any of Australia’s company directors who bemoan high expectations and lengthy obligation requirements.
Increased expectations does not need to mean decreased profits or a greater workload, according to Australian Securities and Investments Commission chair Joe Longo.
“Being a director isn’t easy; if it were, anyone could do it,” he told an Australian Institute of Company Directors summit on Thursday.
“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.”
Longo drew on Greek mythology to make his point.
“It seems to some that being a director is like Sisyphus in the ancient Greek myth: Forever pushing a boulder up the hill, only for it to roll back down again each time it seems the task is complete,” he said.
“But is that the reality? I think not.”
When it came to understanding directors’ responsibilities under corporate laws, Longo advised a principles-based approach was vital.
“The breadth of directors’ duties under the Corporations Act might be misconstrued as vagueness, because the principles don’t specifically tell you, ‘do this, do that’,” he said.
“But the reality is, that this principles-based approach is the key to a director finding that right balance.
“Running a business necessarily involves judgment and judgment means using high-level principles to help find the best way forward.”
Curiosity allowed businesses to run successfully and profitability, Longo said.
“History tells us that it’s the directors who don’t employ curiosity and judgment, who don’t apply themselves to asking questions about their business, who are at risk of not understanding the risks of that business,” he said.
“And if you don’t understand the foreseeable risks, that’s when you run into trouble.”
Longo encouraged directors to take an active stance of curiosity and start asking the right questions to understand their business and how it made money.
“When that happens, you have a good chance of having a business that doesn’t just comply – it thrives,” he said.
– AAP
