• Coping with new business paradigms
• Attracting and keeping the best leadership talent
• Problems caused by the growth of regulation
• How to grow the business
• How to improve operational excellence
• Risk management
• Globalization

New Business Paradigms (20%)
Pressure to drive business value has taken on new urgency with private equity continuing the pressure on public companies. Can quarterly earnings-driven public companies learn something from competitors who are finding new ways to unlock value? One director told us: “Privatized competitors are focusing very clearly on value – not earnings – and they have a clear view of the worth of each key asset in a company’s portfolio.”

Features which many public companies are pondering are:

• Hands-on boards, with directors holding equity that can produce large returns
• Crystal-clear understanding by management about what is expected of them, also with “significant upside opportunity”
• Longer-term view of the performance of the business over, say, three to five years, against the shorter-term view taken by institutional investors 

Talent acquisition and retention (20%)
Directors reported that talent constraints were delaying the implementation of strategies. Companies in the services sector rated this as their No.1 concern. We found that companies are placing increasing emphasis on developing a company culture and policies that attract and retain talent.  

Rigorous succession planning for directors as well as senior executives is now standard practice in many companies. Despite an increase in directors’ fees, there is still a perception that directors are underpaid. While chairmen reported an increase of 92 per cent in fees over the past four years, from $A237,000 to $A456,000 and directors by 72 per cent from $A112,000 to $A192,000, workloads have increased dramatically. 

Some directors said they were paid the equivalent of $A3,000 a day, which was considerably less than what they would earn as a consultant, with less risk.

Problems of regulation (20%)
Corporate governance regulation has increased with the collapse of several prominent companies, but most directors felt that regulation had gone too far. Boards are now spending between 30 and 50 per cent of their time on governance issues, particularly financial services companies and businesses with operations in the United States. This is leading to a reduction in the amount of time available for issues such as business strategy and senior management and board succession. According to our study, concern about the potential risk to directors’ personal assets as a result of corporate difficulties is leading to a reduced willingness by those qualified to be directors, to serve on the boards of public companies.

How to grow the business (15%)
The ability of boards to help drive growth opportunities came in two major forms, according to the directors we interviewed:

• Domestic growth, in which a company would capture market share from rivals by coming up with differentiated offerings. This could only be achieved by a management team with superior business management skills.
• Overseas growth, which is dependent on finding the right executive who can absorb the Australian business model and apply it locally with the same quality, ethics and values that have made the company successful in Australia. 

Operational excellence/media scrutiny (10%)
Directors continue to be interested in how they can implement processes to drive out costs, improve the use of their company assets, bring in new technologies – and attract the best people to execute these strategies. Many companies have projects under way to improve their processes. Operational excellence is seen now as simply a requirement for staying in business.

Risk management (10%)
Managing business risk is seen by directors as critical in today's environment where regulation might too easily create a risk-free environment which stifled innovation and risk-taking. “Boards need to make sure that there is an appropriate balance to risk,” says one director. “Business is about taking managed risks.” Some directors also express a fear that in order to manage risk, boards might delve too deeply into management matters and thus blur the line between board and management accountability. 

Globalization (5%)
Many directors told us that globalization is a major issue facing the bigger Australian companies, because globalization increases competition and leads to lower prices, reduced margins and reduced market share.

But on the flip side, many directors felt global markets are also creating new opportunities. More Australian companies are looking to put international directors on-board, but there are logistical issues with this, including the need for frequent international travel. But many companies are using video-conferencing for more frequent meetings.