Board Directors Confidence in Coalition Wanes - Report

Directors’ confidence in the Coalition Government, including Not for Profit board directors, has diminished on the eve of its first budget over concerns about low productivity and regulatory red tape, according to the latest Director Sentiment Index (DSI).

The Australian Institute of Company Directors’ DSI measured the opinions and future intentions of the director community with the latest survey showing that overall director sentiment has fallen 6.8 points since the last survey.

Some 37 per cent of Board Directors who took part in the survey came from the Not for Profit sector. The report is being launched in Sydney today, attended by Not for Profit Board Members including representatives from the Benevolent Society and Redkite.

The survey, which was conducted from March 31 to April 13, found that less than 30 per cent of directors believe the Federal Government’s performance is having a positive impact on both their business decision-making and consumer confidence.

The Institute says this was a significant turnaround from the last survey for the second half of 2013, taken immediately after the Federal election, when almost 70 per cent of directors expected the new government to have a positive impact on their business decision making and 80 per cent expected it to boost consumer confidence.

Overall low productivity growth is now viewed by directors as the biggest economic challenge facing Australian business, followed by global economic uncertainty and too much regulation or ‘red-tape’.

The Index shows that more than 90 per cent of directors believe that the level of ‘red-tape’ has increased or remained unchanged in the last 12 months, while nearly 40 per cent of directors expect a decrease in the coming year.

Directors estimate ‘red-tape’ compliance consumes an average of 23 per cent of their total board commitment. Forty per cent believe this commitment has increased in the past 12 months.

Benevolent Society board director Kathleen Conlon said one of the government’s key messages was about reducing red tape but more action needed to be seen in this space.

“Being part of a Not for Profit board, the ACNC was seen as a positive step and the Government’s move away from this needs some further consideration,” she said.

“The Government’s election slogan was ‘open for business’ but we haven’t seen much of that yet in terms of reducing red tape and the repeal of the ACNC.

“Red flags have also gone up for business in terms of less consultation than we had hoped.”

Redkite Board Chairman Geoff Brundson said for the Not for Profit sector, the concern was around increasing tax imposts on high income earners who were consistent givers to charity.

“Imposing a deficit tax is an important aspect for the Not for Profit sector as it is likely to have an impact on the funds it regularly relies on,” he said.

Pessimism remains regarding the effect of legal judgments on director liability, with more than 40 per cent of directors maintaining that legal judgments negatively impact their willingness to continue on a board or accept new board appointments.

Almost 70 per cent of directors identify preparing/paying taxes and workplace health and safety as the aspects of their business most affected by ‘red-tape’.

Ninety per cent of directors believe that the current level of government spending on infrastructure is too low. The Institute says this is the seventh survey in a row in which about 90 per cent of directors have held this view.

Almost 30 per cent of directors perceive Environmental, Social and Governance (ESG) issues to be very important, a slight increase from the second half 2013 results. A higher proportion of directors believe that ESG regulations relating to climate change, occupational health and safety and industrial relations will decrease over the next two years.

The Index shows that more than 60 per cent of directors state that they are actively seeking to increase diversity of their board in terms of skills, and more than 40 per cent in the area of gender.

“The results suggest the honeymoon period for the Coalition has ended. Directors have indicated that productivity growth is now their biggest economic challenge, followed by issues such as excessive regulation and a lack of spending on infrastructure,” Company Directors’ Chief Executive Officer and managing director John Colvin said.

“Directors are more pessimistic about the future health of the Australian economy, with just under half expecting it to be weak over the next 12 months. For the first time in the three-year life of the DSI, directors expect the US economy to outperform the domestic economy in the next year.

“The DSI results clearly highlight the issues that directors believe the government must tackle to improve their operating environments, facilitate investment and ultimately create more jobs for Australians.

“The top five issues that directors believe the Coalition should address in the short term are infrastructure, productivity growth, taxation reform, industrial relations and international competitiveness.”

The Australian Institute of Company Directors Not for Profit Manager Phil Butler said: “We are heading into tougher economic times, which means that directors need to think strategically about how they can best secure their organisation’s future.

“Directors also need to consider how any proposed changes in areas such as tax may impact their organisations. For example, will donations from the community decrease if income tax rates change?”

The Index also shows that close to 60 per cent believe the government should either defer or abandon its paid parental leave scheme. Only eight per cent expressed support for the original plan to provide benefits to women who earn up to $150,000, which has been scaled back since the survey was taken, while more than 40 per cent said it should not be implemented at all.

Further, the efficiency of Federal bureaucracies was not ranked highly among the issues the government should address in the short term and, in fact, the number of directors concerned about it has fallen sharply since the last DSI in the second half of 2013.