Directors miss another opportunity to lead

Directors have failed to seize the business efforts needed to improve culture,

The Institute of Directors (IOD) this week released a ‘‘brief for boards’’ on sexual harassment.

It made me mad for several reasons. The flippant reasons are because it is a silly title and it was hidden on the website.

The serious one is because it was a box ticking exercise that missed a huge opportunity to take ownership of business culture in New Zealand and to make some much needed changes.

It told directors it was their role to set the tone for healthy values including addressing unwanted comments or physical contact, persistent and unwelcome social invitations and unprofessional conversations and behaviours,

It’s great it’s being addressed but this is a weak effort from an organisation that has already shown itself unwilling to lead.

In November last year, Sir William Gallagher offended some of a Waikato IOD audience by claiming the Treaty of Waitangi was a farce.

What did the institute do – belatedly tweet that it ‘‘apologises for any offence caused at our Waikato Branch Christmas event. These views were personal and not reflective of the IOD’’.

Right, got that. What the institute didn’t do was to rescind Sir William’s 2005 Distinguished Fellow Award.

That would have been strong leadership.

And now again, instead of taking a leading role, it meekly reminds directors of their legal obligations and states the bleedingly bleeding obvious.

What about standing up and shouting from the rooftops something along the lines of ‘‘this is unacceptable and here’s how we can help stop it’’.

If former prime minister, and now company director, Sir John Key can publicly say that companies need to show they are about more than just profit then why isn’t the institute taking the helm on this issue.

This is what Key said in an AFR Weekend interview:

‘‘The question in the modern boardroom of Australia is, ‘is it just about making money?’.

‘‘Is that solely the scorecard you will be judged on? That is probably what the analysts will tell you they are looking at but is that what you will look at as directors?

‘‘I think the answer is no, it has to be about reputation and wider corporate social responsibility. It doesn’t mean you are not there to make money. If your company doesn’t make money, you go out of business,’’ Mr Key said.

Mr Key pointed to the royal commission into financial services as an example of the risks business face unless they articulate a wider purpose and speak out on broader social issues.

‘‘Revenue is not the sole issue you worry about when you run a country – you have to worry about equity and justice and social responsibility. I think that’s true of companies now too; it is not a matter of just sole profit,’’

For goodness sake, the institute’s own Boardroom publication had a cover story on Key’s move into governance where it writes: ‘‘Directors are increasingly called on to consider the place of their organisations in society and the economy as well as steer business strategy’’.

Yet this week’s briefing fails to show how.

Hello left hand? Come in right hand?

The new Labour-led Government is equally clear about its commitment to more than just the financial bottom line. Environmental policies, gender pay and lifting the minimum wage are just some of the examples.

So we have a former PM speaking up and a new Government with a clearly stated view, although it’s early days, so we don’t yet know if talk will translate through to action.

What is needed next is a commitment by business. Directors and the Institute of Directors, as leaders of business, have missed an important opportunity.

That’s disappointing.