There are big changes in the Boardroom. No longer is a board appointment a licence for long lunches, memberships of the club and an entry in Who's Who. The stereotypical overweight cigar-smoking board members are being replaced by energetic, committed and generally younger men and women. The new board members take their responsibilities very seriously, working closely with management to achieve results for their stakeholders.

What's behind these changes?

Several important factors are at work in today's boardrooms. The first and perhaps most persuasive is the director's exacting obligations under the tough new federal and state legislation. New provisions of the Corporations Act 1989 and the Australian Securities & Investments Commission Act 1989 are a response to the excesses of the 80's. They are designed to place responsibility for a range of company failings squarely on the shoulders of directors. Directors may be personally liable for company debts if the company continues to trade when insolvent; directors may be guilty of an offence if statutory documents are not lodged on time; action may be taken against directors by ASIC if statements to potential investors or shareholders are misleading or omit material information.

Similar onerous provisions which can hold directors personally liable may be found in environmental protection, occupational health and safety, trade practices, taxation administration and public corporations legislation.

Furthermore, Directors and Officers Liability Insurance does not protect directors from breaches of these Acts. The penalties are severe and can include a long jail term. Whether board appointments are paid or honorary, executive or non-executive, the same penalties can apply. This has serous, and often misunderstood implications for most Australian corporations and their directors.

The second major factor is the widespread call among shareholders, institutional investors and the community for higher standards of corporate governance. Directors are increasingly subject to scrutiny by stakeholders, requiring them to be more responsive to ethical, environmental and other issues that go well beyond the traditional focus on shareholder wealth. The non-executive director is seen as bringing independence and objectivity to ensure that the CEO and executive directors are accountable.

These key factors also impact on the structure and role of the board:

The need for companies to adopt a global outlook, requiring directors to have international experience

The aggressive competition that follows removal of tariff barriers and other forms of regulation, calling on directors to respond quickly to changing conditions

The wide range of important issues at board level and the rate of market and technological change, require a comprehensive balance of skills, experience and operational knowledge of the business.

Here are some guidelines which may help the board to cope effectively with these challenges:

The objectives and roles of the board and its committees should be agreed and documented

There should also be agreement on how the performance of the board and the CEO will be measured

All directors should be familiar with the key provisions of the Corporations Law and other relevant legislation

Clear unambiguous guidelines should be established relating to share dealings, conflicts of interest, attendance at meetings, dealings with company staff and succession/retirement

An audit committee should be formed comprising independent, non-executive directors. (Large companies may also establish due diligence, capital investment, shareholder relations and remuneration committees)

All directors, particularly external directors, must have a thorough understanding of the operational and market aspects of the business

The mix of skills on the board should be reviewed as the needs of the business change.

Whether a small private concern, a listed company or an incorporated body, a well-structured, well-informed and well-managed board of directors is a vital ingredient for business success.