Championing best business practices and effective corporate governance in PNG.
We keep our members informed of any and all
regulatory changes across
the various sectors.
We are calling for all boards in PNG to strive towards gender parity.
We deliver in-house programs to ensure
your team understand their respective roles and responsibilities.
Our insights, diagnostic tools and network of consulting directors
allow your board to
perform at its best.
Background and Overview
Directors need sufficient time and energy in order to be effective representatives of shareholders' interests. Directors' responsibilities are increasingly complex as board and key committee memberships demand greater time commitments. Investors are increasingly keen to ensure that directors of companies have sufficient time to devote to their board roles, and concerns can be raised if a director has a significant number of directorships and therefore competing time pressures.
To address this issue, IDAPNG has an "overboarding" policy in many markets which includes a recommended maximum number of directorships which an individual should hold in various circumstances. Such an approach is also followed in many voting policies of individual institutional investors.
The IDAPNG Corporate Governance Code – PNG's best practice code – specifies a recommended limit for executive directors of no more than one ASX or PNGX non-executive directorship. Although there is no stated limit in the Code for board chairmen or for other non-executive directors, the Code emphasises that "all directors should be able to allocate sufficient time to the company to discharge their responsibilities."
Key Changes Under Consideration
The Companies Act includes a reference to directors' care and diligence but does not refer to a recommended maximum number of board seats which directors should hold, or the time commitments necessary to provide an adequate service.
The change under consideration is for the policy to make explicit reference to a recommended maximum number of board positions, and indicate that IDAPNG may recommend against directors considered overboarded. This approach is consistent with IDAPNG policy, and the proposed policy limits are as follows:
Executive directors are not expected to hold other executive or chairmanship positions. They may, however, hold up to two other non-executive directorships.
A board chairman is not expected to hold an executive position elsewhere, or more than one other chairmanship position. The chairman may, however, hold up to three other non-executive directorships.
A non-executive director who does not hold executive or chairmanship positions may hold up to four other non-executive directorships.
In assessing outside directorships and board positions, only publicly-listed companies will be counted.
The proposed policy also states that a stricter view may apply (case by case) for directors who serve on the boards of complex companies, or those in highly regulated sectors, or who chair a significant number of board committees. When applying this policy, IDAPNG will consider the nature and scope of the various appointments and the companies concerned, and if any exceptional circumstances exist.
Intent and Impact
This policy is intended to provide clear guidance on the treatment of directors with multiple board roles, given how important it is for directors to have sufficient time to devote to their roles. The proposed policy wording also incorporates a degree of flexibility to take into account exceptional circumstances, and will ensure that there can be consideration on a case-by-case basis of directorships that may be different in nature. For example, it is recognised that a directorship of an investment trust board may be different to that of the board of an operating company.
In terms of potential impact, this policy is likely to result in a small increase in the number of vote recommendations against individual directors.
Request for Comment
Do you agree that setting a recommended maximum limit on the number of board roles a director can hold is a useful enhancement to governance policy in Papua New Guinea?
Do you agree with the proposed limits outlined herein, or are there alternative limits or factors which should be considered?
DIVERSITY, EQUITY AND INCLUSION (DEI)
Background and Overview
As the decision-making body at the highest level of organisational leadership, boards play a critical role in creating an organisation that prioritises, supports, and invests in diversity, inclusion, and equity - whether in the hiring of an executive, the determination of strategy, the allocation of resources, or the goal of serving the community with authenticity, the board’s leadership on diversity, inclusion, and equity matters.
We believe that all organisations work effectively and with authenticity when they are led by boards that are:
DIVERSE: The individual leaders who serve on boards are a reflection of an organisation’s values and beliefs about who should be empowered and entrusted with its most important decisions. We believe that all organisations can better achieve their missions by drawing on the skills, talents, and perspectives of a broader and more diverse range of leaders, and that the diversity of viewpoints that comes from different life experiences and cultural backgrounds strengthens board deliberations and decision-making.
INCLUSIVE: The most effective boards work to build a culture of trust, candor, and respect — none of which is possible without a culture of inclusion. Boards that cultivate an inclusive culture ensure that all board members are encouraged to bring their perspectives, identity, and life experience to their board service. An inclusive board culture welcomes and celebrates differences and ensures that all board members are equally engaged and invested, sharing power and responsibility for the organisation’s mission and the board’s work.
EQUITY-FOCUSED: Boards play a critical role in helping organisations understand the context in which they work and how best to prioritise resources and strategies based on that reality. An awareness of how systemic inequities have affected our society and those an organisation serves enables boards to avoid blind spots that can lead to flawed strategies, and creates powerful opportunities to deepen the organisation’s impact, relevance, and advancement of the public good.
Prioritising 'Diversity and Inclusion'
For a board to perform at its highest level, board diversity, and inclusion needs to be approached as a top priority. Boards have to stop relying on their traditional practices that are based on recruiting from within the inner circles of those currently on the board and recruiting from the same stream of leaders that circulate on boards throughout the corporate community in Papua New Guinea. These practices serve to ignore the wider pool of eligible board candidates in the country.
Setting and Achieving DEI Targets
It’s one thing to put out a statement about committing to diversity, equity, and inclusion. It’s entirely another matter to get the ball rolling and monitor your organisation's progress toward it. While making advancements to expand diversity and inclusion, a formal values statement around diversity, and inclusion is a good first step, and you don’t have to stop there.
In creating your annual strategic plan, be sure to include specific goals for incorporating diversity and inclusion into every aspect of your company's work and monitor them for progress. A good place to begin is with your board. Diversity within your organisation begins at the top. As you look around the boardroom, can you affirm that your board is inclusive and represents a broad demographic of people?
From there, can you see evidence that diversity and inclusion extend to your staff, volunteers, committees, vendors, suppliers, and partner organisations? If not, it’s time for your board to start discussing how to translate your commitment to diversity and inclusion into action. An excellent place to start is with your hiring and recruitment practices.
With the benefit of professional development, your company may be able to draw out budding talent that could benefit your organisation. A few ways to implement professional development are to provide opportunities for education, advancement, leadership training, and mentorship programs. Proactively identify people that have high potential and match them with seasoned professionals with stellar reputations.
Beyond identifying diverse populations to serve within your organisation, it is crucial to communicate the opportunities they have to serve on your board or committee. Boards should be encouraging these individuals to express their interest in being involved or taking on leadership positions.
The baby boomer generation is retiring from the workforce in record numbers. As they transition out of their fields, they provide a minefield of knowledge and experience for diverse, marginalised individuals who are thirsty to demonstrate their talents and abilities. By tapping into the baby boomers as a resource for finding mentors, your organisation gains the potential to mentor people internally and prepare them for leadership positions within your company.
Above all, your board should consider that fostering a culture of inclusion is a continual process. Your commitment to diversity and inclusion must extend to accepting diverse opinions, perspectives, and lifestyles, in word and deed.
Making a Commitment
Identify specific DEI strategies that your organisation and board will commit to and create a plan for how you will alleviate barriers and create access. Effective DEI strategies will help better support employees, build culture, and create a thriving business.
Continually track and measure your efforts against your DEI action plan to maintain your focus on how you’re progressing toward these goals. It’s best to assign this task to a key committee or create a specific committee that will have the planning and oversight responsibility. Don't expect the work to be accomplished through a one-session training or retreat.
It’s not unusual to become complacent, impatient and to lose your momentum over time. The practice of monitoring your performance and ensuring regular accountability reviews will ensure that you stay the course. Through prioritising diversity, equity, and inclusion, your board is committing to transformational work that will benefit your organisation and build value.
Intent and Impact
While many companies have been putting diversity, equity, and inclusion into greater focus over the last few years, there is still significant room for improvement. Boards need to take this opportunity to not only continue the conversation, but to implement and uphold more impactful strategies to see real, lasting change within their respective organisations.
Studies have shown that companies with pro diversity policies performed better and had greater resilience during crises. The reason for this is clear: more diverse companies have greater levels of innovation.
Request for Comment
We define diversity as a measure of difference in identity; things like gender, ethnicity, age, sexual orientation, ability, or religion. Inclusion is a respect for and appreciation of these differences – the deliberate act of welcoming and valuing diversity and equity.
Would you like to see different identities serving on boards in PNG?
Do you think that setting diversity targets will address the prevalence of homogeneous boards?
Can we realistically elimiate group-think and unconscious bias on boards?
Do you believe we can achieve gender parity on boards by 2030?