ASIC’s Joe Longo to directors: if it were an easy gig, anyone could do it

The corporate cop appears to have had enough of directors complaining their jobs are getting too hard.

ASIC chair Joe Longo takes a tough-love approach with directors. Picture: Aaron Francis/The Australian

Australian Securities & Investments Commission chairman Joe Longo has squared up against company directors complaining about higher regulatory burdens, telling them to get on with the job and act with integrity.

Speaking at an AICD event in Melbourne on Thursday, Mr Longo acknowledged the “dynamic and evolving set of challenges” facing directors but, per his reputation, made his position clear: “Being a director isn’t easy – if it were, anyone could do it.”

“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,” Mr Longo told the governance summit.

“If we also add changes to regulatory settings, mandatory climate disclosure, cyber security, and AI – just to name a few – it may seem 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.”

While the growing expectations on directors may appear, to some, too much to ask, this was not the case, he argued.

“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. When that happens, you have a good chance of having a business that doesn’t just comply – it thrives,” he said.

Addressing criticism of principles-based regulation, Mr Longo argued that the approach should not be viewed as problematic: “This principles-based approach is the key to a director finding that right balance. Running a business necessarily involves judgement. And judgement means using high-level principles to help find the best way forward,” he said

“...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.”

On ASIC’s increased focus on sustainability and greenwashing, Mr Longo conceded the incoming climate-related reporting requirements would impose new obligations on directors but said they would also create opportunities.

“The reporting requirements need to be seen in the overall context of the objective of the reporting regime ... directors and the boards they sit on and the companies they run will actually and ultimately benefit from more disclosure across the economy,” he said. “Why? Because you yourselves are in fact users of the information prepared by other entities. Access to more climate-related information on these other entities in your value chain can support you in better managing climate change-related risks and opportunities, and in potentially preserving or enhancing shareholder value,” Mr Longo said.

The same is true of increased scrutiny of cyber preparedness, he added.

Directors needed to show they were balancing all stakeholders’ interests and not solely focused on profit, he told the audience.

“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.”

Mr Longo’s comments come after Woolworths chairman Scott Perkins spoke of how he and his board tried to balance the competing interests of stakeholders.

“Our duty is to act in the best interests of the corporation … that requires us to think more broadly than just customers, or just the community,” he said.

“It’s now really well understood that when you get the balance of the flywheel right, it works in favour for everyone. You get longer-term customer lifetime value, more engaged people.”

Mr Perkins on Wednesday downplayed the impact of food price hikes as Australians struggle through a cost-of-living crisis, arguing that energy, rent and healthcare costs had all increased more than food prices.