Governance Directions
What defines accountable leadership in today’s complex world?
Creating your first AI policy: A practical guide for business leaders
IN THIS ISSUE
4 CEO Memo
7 13 19 21
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Keynote address on leadership and accountability to the Governance and Risk Management Forum
Future fit or falling behind? Lessons from recent governance research
When purpose melts: The Ben & Jerry’s dilemma
Beyond disclosure: Rethinking conflict of interest as a governance risk
Creating your first AI policy: A practical guide for business leaders
Aboutthe Governance Institute
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CDear members:
At Governance Institute, we’ve always believed that governance must evolve in step with the world around it That’s why we’ve made it a priority to help organisations navigate the complex, fast-moving landscape of artificial intelligence From thought leadership to training, we’re working to ensure that as AI adoption grows, governance keeps pace
Our 2025 AI Deployment and Governance Survey Report found that around two-thirds of organisations have yet to develop AI training programs. That’s a big gap, and a clear sign that many are still grappling with how to build the skills, frameworks and oversight needed to use AI responsibly It’s one of the reasons we’re focused on providing practical, trusted guidance to help bridge that divide
One of the most topical areas we’ve explored recently is the use of AI in preparing draft board minutes In a joint statement with the Australian Institute of Company Directors (AICD) titled Effective Board Minutes and the Use of AI, we’ve unpacked the role AI might play in minute-taking. It’s a timely look at how boards and governance professionals can modernise their practices without compromising rigour, accuracy or legal compliance. So, what's the takeaway? AI tools can assist, but they don’t replace human judgement Risks include transcription errors, misinterpretation of technical terms, and even the potential for AI recording to stifle open, honest boardroom discussions
The joint statement outlines important safeguards: setting clear AI policies, ensuring careful review of AI-generated drafts, limiting transcription of sensitive discussions, and regularly testing tools for compliance. It also reinforces a key point that board minutes are not transcripts, they should reflect decisions and the process behind them, in line with section 251A of the Corporations Act.
We explored all of this in the recent webinar, Board Minutes in the Age of AI, co-hosted with AICD A big thank you to our expert speakers, for sharing their perspectives and outlining the need for strong governance, clear policy, and human oversight
Looking ahead, we’re continuing our collaboration with AICD and will be releasing a new joint statement in June, this time offering updated guidance on Annual General Meetings. It will include a practical checklist for company secretaries and directors, and we look forward to sharing it with you.
I want to also highlight an important event in Canberra on Wednesday 18 June, the National Whistleblowing Symposium, a partnership between Governance Institute of Australia, Transparency International Australia, the Human Rights Law Centre and the Whistleblower Justice Fund With Senate inquiries and key legislative reviews underway, this is a critical moment to push for stronger whistleblower protections The event will feature powerful stories from whistleblowers, insights from legal experts, and tools to help strengthen your own organisation’s approach I encourage everyone to attend this important event to launch whistleblower reform principles, hear expert insights, and workshop strategies for impactful Senate inquiry submissions.
Thanks, as always, for your ongoing support We’re proud to lead on these important issues, and to stand with you as governance continues to evolve in the age of AI
Best regards, Katrina
Katrina Horrobin, Interim CEO Governance Institute of Australia
SYDNEY
KEYNOTE ADDRESS ON LEADERSHIP AND ACCOUNTABILITY TO THE GOVERNANCE AND RISK MANAGEMENT FORUM
Karen Wood, Chair South32
22 May 2025
I have been asked to talk about leadership and accountability and to comment on what I have learned over the years that drives accountable leadership.
These are vast topics to which I cannot fully do justice, but I will be glad to offer some perspectives.
In doing so, I want to frame my comments in the context of an operating environment for business that is as complex, turbulent, and volatile as any I have worked in
The challenges faced by business today are significant and, in my view, require very particular leadership skills Challenges like the need to balance the often-competing interests of an ever-increasing number of stakeholders
While this is true in all sectors, forgive me while I give an example of how this need for balance manifests in my industry.
Work in the resources sector is done in environmentally and socially sensitive areas and the extraction of resources has a societal and environmental impact.
Some of the commodities extracted are used to generate the energy necessary to power the economy and on which industry depends.
Others are required to transmit energy, and yet more are essential to modern life, for our buildings, cars, technology, and countless other uses.
The extraction, processing and use of these commodities impacts nature, specifically the climate and biodiversity
and hold voting rights – and other stakeholders like impacted communities – have to be weighed
I know other sectors share the challenges of balancing stakeholder needs, as much as we share the challenges of the complex backdrop for business
Beyond the world of resources, we are in a period of massive technological change.
Each one of us knows the joy of working with leaders who demonstrate those traits, just as we know what it is like to work with those who don’t practice them.
Where the governance of technology and data is at the forefront of the battle for global power and influence, and where the potential for its use is enormous, but so too is the potential for misuse
We are in a world of geopolitical instability
Where the international collaboration needed to address some of our most pressing issues is under
for problems that are systemic in nature and require long-term thoughtful policy – is high
It is against this backdrop that I want to offer four principles of leadership that I think are critical for the times we are in
They are what might be described as higher-order characteristics that go beyond personal leadership attributes – attributes like self-awareness, composure, emotional intelligence, presence, humility, agility, authenticity.
That is not to say these are not important or even critical.
Each one of us knows the joy of working with leaders who demonstrate those traits, just as we know what it is like to work with those who don’t practice them
I am also not ignoring the importance of the character of the individual leader We know that a leader’s personal values will drive decision-making and can influence followers and ultimately, organisations.
The four principles I am offering are not in the context of leadership that is about position or authority, or indeed the “how” of leadership, but rather, leadership of people in a more dynamic interplay between individuals 1
Something which I think is essential in this operating environment.
First, is the ability for connection – leadership that understands the interdependency of human beings.
To harness the talents of others one needs to connect, and I suggest to effectively connect one needs to be prepared to invest in knowing others.
David Brooks the well-known writer with the New York Times suggests that to build a community – be it large or small – involves “performing,” what he describes as, “a series of small, concrete, social actions well”2
This is particularly relevant when you consider that all of our work is done inside communities of one kind or another.
Actions like being able to disagree without poisoning a relationship, revealing vulnerability, being a good listener, recognising others . These are not skills that are easily taught and yet this complex and volatile world arguably needs them more than ever. 3
The second is a product of connection and is the ability to foster inclusion in a diverse workplace
We need leaders who are inclusive because we need workplaces that are diverse
No leader can come to terms with the dynamic environment I spoke about earlier without looking for many sources of data and input – quantitative and qualitative – from different perspectives and different experiences.
Stereotypes are unlikely to provide the answer, and reinvention is constantly required. To reinvent, one needs to be open to enquire, to learn, to be prepared to hear contrary views while avoiding judgement, to recognise and set aside inherent biases and embrace differing points of view.
To harness collective energy and promote the exchange of ideas and information and be confident – but not certain. By this, I mean to be sufficiently confident to allow for different views but not so absolutely certain it becomes impossible for others to input contrary views
Actively seeking out these various inputs requires leaders to park their egos and relish diversity To take advantage of the full pool of talent
It also requires leaders who are curious
Time and again I have participated in leadership decisions where the defining attribute that secured a promotion was that the contender was curious to learn, to try new ways – to be open to failure and willing to be wrong.
We ask ourselves: why does the business in which I spend so much of my time exist and where does the work I do fit in?
Curiosity is easier to foster when you surround yourself with diverse views – and you give licence to hear them
In this complex and volatile world, the ability to understand difference is surely more important than it has ever been – and difference can only be understood if it is present. To practice these traits requires the third of my principles which is courage.
The courage to persevere in the face of challenge and criticism to understand one’s own fears and capacities. To be prepared to be vulnerable as a point of connection – requires courage
And this takes me to the fourth principle and arguably the most important – that of purpose
When I talk of company purpose, it is tempting to talk about the purpose of business itself – what some academics call its meta purpose which implies some moral dimension.
Over the years, there has been fractious debate on the role and purpose of business, with a wide spectrum of views from the notion that companies should “stick to their knitting” and focus first and foremost to the delivery of profits for shareholders, to those who advocate for a business purpose where decision making is based on an assessment of the business’s contribution to wellbeing for all 4
Here in Australia, this debate is not new, but it was amplified in the context of social issues like the recent Voice referendum or same-sex marriage
Tempting as it is, attempting to define the purpose of business as a whole is beyond the scope of this morning’s address.
It is something on which a company’s board and its shareholders can and should align – not least because of the implications for company strategy.
Importantly, employees can also align to a purpose statement
We know that people who are able to live their personal purpose through the work they do are going to be more motivated, more productive, and more connected to their colleagues We also know that employees commonly describe their sense of purpose as being defined by their work.
The author Daniel Pink suggests that in the 21st century three things motivate us as workers. One is our desire for some autonomy – the urge to direct our own lives. Another is the opportunity to master a set of skills, and third, is the yearning to do what we do in the service of something larger than ourselves – that is – some purpose.5
We ask ourselves: why does the business in which I spend so much of my time exist and where does the work I do fit in?
In other words, does the professed purpose relate to what the business does, does it fit with its long-term financial performance – which is after all a necessary pre-condition to survival – and the contribution it makes to society.
But to be effective it must be real and framed in a way that everyone – whatever work they do and wherever they do it – can see how they play their part in helping the company to fulfil its purpose.
Defining purpose requires an understanding of the lived experience of employees across an organisation, sometimes in locations far removed from head office
That understanding of lived experience requires leaders who lead through connection, and who are inclusive of input from diverse voices
It follows that purpose is a critical principle of leadership and as such should – in my mind – be owned by a company’s pre-eminent decision-making body – its board.
Earlier I spoke about balancing stakeholder interests. To that end purpose should be the test against which decisions are made, competing interests are reconciled, and trade-offs are explained.
A company’s purpose should be of utmost interest to stakeholders – including shareholders – because it is from purpose that strategy is formulated
Surprisingly, it is rarely used by company leaders to explain decisions or by shareholders when making investment decisions or when they are seeking to better understand outcomes
Disaster preparedness, biodiversity,To define a company’s purpose pre-supposes a clear understanding about what the business does, the contribution it makes to the social structure and the environment in which it operates, and the vision and values that are important.
Given my view of its importance, let me go further and suggest that it is also the foundation for accountability – that is – what individuals should be accountable for, and to whom accountability is owed
Let me attempt to draw that link In doing so I want to focus on the role of the board starting with defining purpose and ending with its accountabilities
Of course, each company has a governance framework which at its best links all decisionmaking – at whatever level – to the pursuit of the company purpose.
It is the company purpose that frames the company strategy and, while many inside and outside the company may contribute to formulating strategy, the board is its owner
This requires an understanding of the prevailing conditions in which the business operates because while purpose should be timeless, strategy needs to adapt to meet changing conditions
The clearer and the more real the purpose – the more straightforward the strategy development process becomes.
From the strategy comes the work of management in execution.
Defining purpose requires an understanding of the lived experience of employees across an organisation, sometimes in locations far removed from head office.
In this phase of its work, the board determines how it will oversee that execution, how it will monitor the controls that it has imposed, how it will review business results, and how it will assess the capability of those charged with delivery
Central to effective governance – and therefore accountability – is the transparency of these expectations.
Expectations take many forms. At one end of the spectrum, they may be highly prescriptive, while at the other, they may be broadly cast within high level limits such as the obligation to make decisions that are consistent with – and in pursuit of –purpose and strategy
Whatever form a board adopts in setting its expectations, accountability flows
But that requires a clear view of not only what the board or management are accountable for but to whom that accountability is owed – whether it is the company itself, its shareholders, other stakeholder groups, or regulators
Purpose informs each step – the stakeholders to be considered, the strategy, risk tolerance, expectations of management, the measurement of performance, and therefore accountabilities – for what – and – to whom.
Purpose statements do not always play the part that I am suggesting they could. Too often they are ineffective because they are not real, they are too far removed from the realities of the work that is done –such that people cannot make that all-important connection and find meaning in what they are doing
They are not “owned” by leaders and used to frame or explain decisions or indeed outcomes
They are not used to justify inevitable trade-offs, and they are not interrogated by owners or other stakeholders
All these things conspire to reduce the efficacy of a tool that in my view has a very real part to play in effective leadership and accountability
Alignment behind a strong and clear purpose can drive the right behaviour, lead to impactful outcomes and help to foster a sense of pride to be associated with a company.
If we can develop and articulate purpose while connecting with people, taking an inclusive approach and hearing different perspectives, and having the courage to speak up then we will be well-placed to face the challenges of this complex and volatile world
FUTURE FIT OR FALLING BEHIND? LESSONS FROM RECENT GOVERNANCE RESEARCH
By Dr Turlough Guerin FGIA
Drawing on a review of several key 2024 reports, including the Governance Institute of Australia’s Future of the Board, the AICD’s Notfor-Profit Governance and Performance Study, highlights from the Association Board Survey 2024, and a global academic study on ESG governance, this article outlines the recent shifts in boardroom expectations and practices. Some of the more surprising insights include:
Only 10% of NFPs are using AI regularly, despite 75% seeing potential productivity benefits
While ESG is widely discussed, only 24% of organisations have integrated climate risk into their formal risk frameworks
Despite rising expectations of directors, less than half of associations conduct formal board evaluations
This article synthesises some of the most important and revealing findings to examine how Australian boards are evolving, and the challenges they must address to remain effective.
1. The professionalisation of governance: Increasing director remuneration
Director remuneration has been a growing trend across various sectors, reflecting the increasing responsibilities and complexities of governance roles. Yet this raises a conundrum that many not-for-profits are reluctant to confront: should they pay their directors? Despite mounting expectations around governance, compliance, and strategic engagement, many NFPs maintain a strong cultural resistance to board remuneration, often citing volunteerism, mission alignment, or financial constraints. However, avoiding this conversation may limit an organisation’s ability to attract and retain skilled board members.
24% of NFP directors are now remunerated, up from 13% in 2015
Associations and charities are following corporate trends, acknowledging that competitive remuneration attracts skilled board members and enhances governance quality
Insight: Boards should assess whether director remuneration is appropriate for their organisation’s complexity and financial capacity As expectations for governance professionalism rise, boards may struggle to attract qualified candidates without financial incentives.
2. ESG and climate governance: A growing boardroom priority
Recent research underscores the strategic imperative for boards to move beyond compliance and embed sustainability into their core functions.
A global academic study of 1,500 firms found that organisations with ESG-literate directors or dedicated sustainability committees are significantly more likely to embed ESG into corporate strategy, treat it as a long-term value lever, and outperform their peers. In contrast, ESG oversight in many Australian boards remains underdeveloped, often centred on reporting and compliance rather than integrated governance
In September 2023, the Taskforce on Nature-related Financial Disclosures (TNFD) released its final recommendations, establishing a new global framework for identifying and managing naturerelated dependencies, impacts, risks, and opportunities The TNFD complements the existing TCFD (climate-focused) framework and reflects growing investor and regulatory concern around biodiversity loss and ecosystem degradation.
Although currently voluntary, the TNFD is gaining momentum rapidly. More than 300 organisations across 46 countries have already committed to align with its recommendations, and regulatory incorporation is on the horizon. The EU’s Corporate Sustainability Reporting Directive (CSRD) is expected to include nature-related disclosures, and the Australian Government has signalled intent to strengthen nature-based sustainability reporting within its broader climate disclosure reforms commencing in 2025
Boards will need to engage with frameworks such as TNFD’s LEAP process (Locate, Evaluate, Assess, Prepare) to evaluate and respond to nature-related financial risks and opportunities. Governance bodies should ensure directors are equipped to oversee these issues as part of broader ESG strategy and enterprise risk management.
Insight: Directors must broaden their understanding of ESG to include nature-related risks and opportunities As nature-based regulatory and market expectations increase, governance bodies that do not act may expose their organisations to emerging risks including investor scrutiny, noncompliance, and reputational damage
3. Cybersecurity and digital transformation: A governance imperative
Australian boards are increasingly recognising cybersecurity and AI governance as critical risks, but gaps remain in preparedness
19% of NFPs experienced a cyber incident in the past year, with social services (25%) and health (22%) among the highest-affected sectors 84% of boards discuss cybersecurity annually, yet smaller organisations lack dedicated resources to address threats
AI adoption remains slow, with only 10% of NFPs using AI regularly, though 75% see AI’s biggest value in improving productivity.
Insight: Cybersecurity risk oversight is no longer optional. Boards must ensure they have directors with digital literacy and develop robust risk mitigation frameworks. The slow adoption of AI suggests many boards may not be fully leveraging emerging technologies, which could limit innovation and efficiency, as well as exposing their organisations to increasing risk
4. Board Structure and composition: Shifting leadership models
Australian governance structures are evolving, with key changes in leadership selection, board size, and gender representation
The majority (751%) of Australian association boards elect their President/Chair, ensuring leadership is chosen based on governance experience rather than external elections. Boards in Australia average 9 directors, consistent across associations and NFPs.
Gender diversity is stronger in Australia (44.1% female directors) compared to earlier years, though further progress is needed in some sectors.
Insight: The trend towards board-elected leadership strengthens governance by ensuring qualified leaders are chosen based on merit. However, gender diversity efforts should continue to be prioritised, particularly in sectors where board representation remains skewed
5. Succession planning and board evaluation: A weak spot in governance
This issue also features in global governance research, which finds that high-performing boards typically rely on formalised structures, such as nomination committees and regular board evaluations, to build long-term effectiveness The lack of such frameworks in many Australian boards reflects a governance maturity gap when benchmarked against international best practices Insight: Boards must implement stronger succession planning frameworks to ensure leadership continuity and board effectiveness. Regular evaluations can enhance performance by identifying skill gaps and governance weaknesses before they become risks.
6. The future of Australian governance: Where to next?
A recent global academic study also found that boards with dedicated ESG committees or sustainability-literate directors are more likely to deliver long-term value and treat ESG as a core strategic lever.
This aligns with Australian trends, where ESG is a boardroom priority but not yet universally embedded in strategy and performance frameworks Australian boards should consider appointing ESG-literate directors or establishing dedicated sustainability committees to strengthen oversight and impact
Australian governance bodies, whether in the NFP, association, or corporate sectors, are grappling with increasing complexity, requiring a proactive approach to leadership, risk management, and strategy. Key governance areas that require immediate attention include:
Building ESG and climate risk oversight capacity to align with growing regulatory expectations
Enhancing cybersecurity preparedness and digital literacy to mitigate emerging threats
Investing in structured board evaluations and director training to ensure continuous governance improvement.
Strengthening succession planning and leadership renewal to future-proof organisations.
As governance challenges evolve, boards must stay ahead of regulatory changes, stakeholder expectations, and digital transformation. Those that embrace forward-thinking governance models will be best positioned for long-term success
Questions for directors and governance professionals
These questions are designed to prompt selfassessment, spark boardroom dialogue, and guide governance renewal in the face of new risks and expectations Directors and governance professionals are encouraged to reflect on the following:
Do we have the right mix of skills, experience, and perspectives on our board for the challenges of the next five years?
How are we embedding ESG and climate governance into our strategic planning and risk management?
Is our board adequately informed and resourced to oversee cybersecurity, AI, and digital transformation?
Are we using a board skills matrix to guide recruitment, succession planning, and development?
How well are we fostering a culture of accountability, inclusion, and continuous learning
, , g , ( ) , , ( ) p g Impact: A Global Study of 1,500 Firms." Journal of International Financial Markets, Institutions & Money, Volume 89, Article 102345.
5.TNFD. (2023). Recommendations of the Taskforce on Nature-related Financial Disclosures. Taskforce on Nature-related Financial Disclosures. Retrieved from https://tnfd.global/recommendations
Turlough Guerin is Honorary Fellow, University of Melbourne and Former CEO, Landcare NSW and Former Chair Ag Institute of Australia. He can be contacted at turlough.guerin@hotmail.com or 0439 011 434.
Purpose is why an organisation exists, and social purpose is the strategic commitment by leaders of organisations to having a positive social impact on multiple stakeholders through their operations
It can be problematic when the claims organisations make disconnect with what society or regulators expect, which is referred to as purpose washing, similar to green washing.
Conversely, organisations may also be accused ofpurpose pushing, championing social causes in ways that appear opportunistic or polarising, especially when misaligned with their core business or stakeholder expectations
Purpose provides an anchor for organisations to decide what they do and why, but can create tensions, particularly between social logic and commercial logic (Gulati et al., 2022, HBR).
However, we argue that organisations can, and do, have many different purposes depending on who you ask, investors might prioritise financial returns, customers may care most about product price and quality, while employees or communities might focus on the company’s stance on social issues These purposes aren’t mutually exclusive; they must work in harmony to reflect the full complexity of what an organisation stands for
WHENPURPOSE MELTS:THEBEN &JERRY’S DILEMMA
Adjunct Associate Professor Tracey Dodd & Professor Will Harvey
For organisations founded with a strong purpose like Ben & Jerry’s this can lead to sticky situations. The company states on its website that “Ice cream can change the world. We have a progressive, nonpartisan social mission that seeks to meet human needs and eliminate injustices in our local, national, and international communities by integrating these concerns in our day-to-day business activities”.
They go on: “We love making ice cream, but using our business to make the world a better place gives our work its meaning Guided by our Core Values, we seek in all we do, at every level of our business, to advance human rights and dignity, support social and economic justice for historically marginalised communities, and protect and restore the Earth's natural systems. In other words: we use ice cream to change the world.”
When Unilever acquired Ben & Jerry’s in 2000, it wasn’t a serving of the usual business merger. It was the blending of two different perspectives, Unilever with a broad purpose to “brighten everyday life for all,” and Ben & Jerry’s with its bold commitment to progressive social activism
The outcome of this blend of stakeholder perspectives has not been sweet Ben & Jerry’s and its parent company have found themselves in a series of legal and corporate disputes
In March 2025, Ben & Jerry’s filed a lawsuit against Unilever, alleging that the multinational giant had wrongfully dismissed its CEO, David Stever. The legal battle follows a series of tensions between the two companies, particularly over political stances.
Unilever had reportedly tried to muzzle Ben & Jerry’s when it publicly criticised the Israeli government’s actions during its conflict with Hamas and took aim at U.S. President Donald J. Trump. Matters escalated further in April 2025, when Unilever threatened to withdraw funding from the Ben & Jerry’s Foundation, a US-based non-profit that supports social justice initiatives
The rift appears to stem from differences in strategic priorities, with Ben & Jerry’s leadership suspecting that opposition from the Unilever board is influenced by Nelson Peltz, who joined the
company in 2022, aiming to bolster shareholder returns following a period of financial uncertainty. Now, Ben & Jerry’s is pushing for greater independence, but Unilever has firmly rejected any notion of selling the brand.
Purpose provides an anchor for organisations to decide what they do and why, but can create tensions, particularly between social logic and commercial logic (Gulati et al., 2022, HBR).
This tension is not unique to Ben & Jerry’s and Unilever We are witnessing that purpose statements and delivering on social purpose is tough to navigate in a polarising context, for instance the backlash with Bud Light and Dylan Mulvaney, or Harley Davidson and Accenture reneging on previous DEI commitments
Ongoing tensions regarding offer several lessons for businesses navigating purpose-driven partnerships.
First, alignment of purpose is essential. When organisations fail to ensure that their purposes resonate with key stakeholders, they risk reputational and relationship damage
Second, managing stakeholder relations is inherently challenging, especially when power dynamics are skewed The asymmetry between a global conglomerate like Unilever and a brand with a strong, independent identity like Ben & Jerry’s highlights the complexity of balancing diverse interests.
Third, when entering a partnership, it’s critical that both parties’ purposes can exist in harmony to sustain alignment over time.
This article by Dr Tracey Dodd and Professor Will Harvey is adapted from a forthcoming book chapter titled “Social purpose and stakeholder marginalization” co-authored with Professor R Edward Freeman at the Darden School of Business, University of Virginia for the Oxford Handbook of Social Purpose Professor Harvey at the Melbourne Business School, is one of the editors of the forthcoming Oxford Handbook of Social Purpose, which is due to be published later this year Dr Dodd is a senior lecturer at the Adelaide Business School, University of Adelaide and Adjunct Associate Professor and Academic Lead of Governance at the Governance Institute of Australia.
BEYOND DISCLOSURE: RETHINKING
CONFLICT OF INTEREST AS A GOVERNANCE RISK
Sean Johnson
In today’s governance landscape, where institutions operate across boundaries of jurisdiction, expertise and affiliation, conflicts of interest (COI) have become more than just ethical red flags They represent structural risks to trust, credibility and performance Yet, the tools we use to manage them, primarily disclosure and recusal, remain stuck in an outdated paradigm
If we want to protect integrity without sacrificing insight, it's time to abandon a binary view of conflict and embrace a risk-based model designed for complexity.
Importantly, this article adopts the lens of ethical hazard, a concept that frames conflicts of interest not as breaches of integrity but as conditions that increase the probability of compromised judgment Unlike general risk, which may relate to operational failure, financial loss or reputational harm, an ethical hazard focuses specifically on impaired decisionmaking due to overlapping interests
This framing moves beyond compliance-driven logic and opens the door to prevention, proportionality and governance design
From misconduct to management
For decades, COI frameworks have framed conflict as a matter of personal misconduct or fiduciary failure Rules in Australia’s Legal Profession Uniform Law and the ABA Model Rules in the US reflect a binary logic: either a conflict exists or it doesn't, and the response is procedural, not strategic This binary approach is not incidental as it reflects the regulatory system’s preference for certainty and defensibility Categorical rules are easier to codify, monitor and enforce, particularly in litigation or disciplinary contexts. However, they often fail to reflect the messy reality of governance roles, where influence and affiliation do not always equate to impropriety.
As a result, organisations are left with blunt instruments that over-penalise complexity and underaddress subtle ethical tensions.
But modern governance doesn’t operate in black and white. Decision-makers frequently hold overlapping roles. Experts bring institutional affiliations. And the line between influence and bias is often subtle, fluid and context-dependent
In this environment, a blunt prohibition does more harm than good, excluding the very expertise we need while failing to address deeper structural risk
The problem with disclosure alone
Disclosure remains the default response to perceived conflict, but it's not a solution. Research shows it can have paradoxical effects: reinforcing moral complacency, inviting stakeholder cynicism or becoming a tick-the-box exercise that substitutes for real risk management
TAs behavioural ethicist Sunita Sah has shown, disclosure can ironically license biased behaviour rather than restrain it, a phenomenon she terms the paradox of disclosure. Stakeholders may perceive that simply declaring a conflict resolves it, reducing scrutiny or due diligence. Worse still, individuals who disclose may feel morally "cleared" to proceed, despite unresolved ethical hazards This illusion of transparency can damage institutional trust more than silence
As governance bodies and professional panels become more complex and interdependent, relying on disclosure alone may create the illusion of transparency while trust quietly deteriorates
There are three interrelated problems with the prevailing approaches:
First, over-simplification rendering a complex ethical risk as binary, as the traditional approach treats all conflicts as equal.
Second, they fail to address systemic and perceived conflicts, where bias may not be actual but is reasonably inferred by stakeholders. As Kevin McMunigal has argued, even the perception of compromised judgment can erode institutional legitimacy, making stakeholder trust a key ethical consideration.
Third, in jurisdictions like Australia, the lack of a national, harmonised approach, and the absence of a choice-of-law mechanism for legal ethics, creates compliance ambiguity and exposes institutions to regulatory and reputational risk As Crystal and Giannoni-Crystal have shown in the US context, multi-jurisdictional legal work magnifies these challenges, particularly where practitioners must navigate conflicting or vague ethical standards. In other domains, such as, research and clinical ethics, ethics adjudication systems are often idiosyncratic and complex.
Recusal or consent
Delegating conflict of interest (COI) decisions either to individual conscience or collective board judgement, while well-intentioned, often leads to inconsistent outcomes and defensive governance. In the first case, individuals are expected to selfrecuse, typically without clear procedural guidance.
While this can demonstrate ethical awareness, it may also result in excessive risk aversion, particularly where individuals fear reputational fallout. Valuable expertise is lost, and stakeholder perceptions of bias may still linger. In the second case, boards make the determination collectively, assessing whether a conflicted individual should remain involved
Although this approach seeks fairness, it is often driven by opinion rather than structured criteria, leading to variability across cases and exposing decisions to challenge In both scenarios, the absence of a consistent, evidence-informed framework means that full recusal becomes the path of least resistance, not necessarily the most appropriate outcome, but the one easiest to defend.
A tiered conflict model addresses this gap. By offering clear, proportional guidance based on risk factors such as proximity, influence, and perception, it enables defensible and consistent decisionmaking, preserves institutional insight where appropriate, and strengthens transparency and stakeholder confidence in the process.
Moral failure v ethical hazard
The underlying challenge to shift the approach to conflicts of interest from a legal risk to an ethical risk. Where COI is treated less as evidence of moral failure and more as an ethical hazard, a condition that increases the probability that judgment will be impaired. . Applying foundational risk management principles offers a practical pathway to reform.
Considering a conflict of interest as ethical decision, requires consideration of two variables:
Likelihood: How probable is it that a secondary interest will unduly influence primary obligations?
Severity: What is the potential magnitude of harm or institutional damage if that influence occurs?
By conceptualising conflicts of interest as a risk, rather than a transgression, the ethical conversation from blame to prevention and proportional response.
Tiered, risk-Based model
What if conflict could be mapped, not just declared? Drawing on behavioural ethics and governance research, a new tiered model classifies conflict into four levels, each with a proportional response Instead of flat disqualification or naïve neutrality, this model guides organisations to assess conflict based on:
Proximity to the matter. Potential to influence.
Stakeholder perception. Institutional role.
The characterisation and response matrix makes clear the actions
Table 1: Characterisation and response matrix
Tier 1: No Involvement
Tier 2: Indirect Influence
Tier 3: Direct Involvement
Tier 4: Critical/Systemic Conflict
No institutional, professional, or personal tie to the matter under discussion.
Institutional or collegial affiliation exists (e g , same university or faculty) but no recent or active involvement
Individual has current or recent role in the matter under review (e g , role in preparing an accreditation submission)
Role is inherently incompatible with impartial judgment (e g , consultant to applicant institution)
Example: Indirect influence
Consider a professional standards committee within a member-based organisation tasked with reviewing an accreditation application from an education provider. One committee member has no direct involvement in the provider’s current operations or submission. However, they previously served on a joint working group with the provider’s director two years ago and continues to sit on the same national advisory panel.
While there is no ongoing relationship or financial interest, a reasonable observer might perceive the potential for influence
Under traditional conflict protocols, the committee member might voluntarily or be asked to fully recuse themselves, leading to the loss of valuable sectorspecific insight. Under a tiered framework, however, this is assessed as a Tier 2 conflict, an indirect or perceived affiliation.
Full participation without restrictions
Participation allowed with enhanced transparency and procedural safeguards (e.g., declare interest, abstain from vote).
Full recusal from deliberation and decision-making
Disqualification from the process or board
The committee member declares the relationship transparently, participates in discussion to provide contextual knowledge, but abstains from voting on the accreditation decision. This approach maintains both procedural integrity and decision-making quality, and ensures transparency through proper documentation.
Alignment with guidance
The model aligns with guidance from governance bodies such as the Australian Public Service Commission , which recommends managing perceived as well as actual conflicts, and the IMD Global Board Center, whose governance compass outlines multi-dimensional models for ethical oversight.
While these frameworks often stop short of prescribing procedural responses, the tiered model here bridges that gap, offering a structured typology that maps risk levels to specific governance actions
This model is consistent with the AICD’s Guiding Principles of Good Governance , which emphasise risk oversight, ethical culture, and contextual judgement over prescriptive compliance.1
Rather than replacing legal rules, a structured tiered approach supports directors in meeting their governance obligations with clarity, proportionality, and confidence. Governance Institute of Australia (GIA) have also emphasised the need for proportionality in ethical governance, reinforcing the shift away from binary assessments
This model creates space for “hybrid participation”, especially in Tier 2: individuals can engage in discussion (preserving institutional memory), but abstain from final decisions (protecting procedural integrity)
While most conflicts can be managed within the fourtier model, some complex or systemic cases require an additional mechanism for ethical clarity and procedural defensibility.
Figure 1: Tiered conflict model
However, there are boundary scenarios where the conflict is not easily categorised, or where the governance implications extend beyond the individual to the structure or process itself.
These are situations in which relying solely on individual judgement or board consensus can introduce uncertainty, inconsistency, or reputational risk.
In such cases, escalation to an independent ethics panel or conflict governance body provides a procedural safeguard and institutional clarity
Consider the following scenario: a national health accreditation body is reviewing a renewal application from a major clinical training provider A panellist, a doctor, has no direct relationship with the applicant organisation
However, she currently serves on the national board of the same profession and recently contributed to a set of policy reforms that directly shaped the standards now being used in the review.
Managing the boundaries: When ethics panels are necessary
In many cases, the tiered model offers sufficient clarity to guide appropriate conflict of interest (COI) responses.
While she brings valuable expertise, her institutional role raises concerns about structural entanglement.
Is her involvement a perceived bias or a systemic conflict? Would her participation undermine stakeholder trust, even if no impropriety exists?
This is a classic Tier 4 scenario, one that transcends personal interest and enters the realm of role-based incompatibility Rather than leave the decision to the board’s discretion or individual conscience, the matter can be referred to an ethics panel for independent assessment
The panel determines that the dual role presents a systemic conflict and recommends disqualification from this cycle of review The decision is documented transparently, preserving both procedural integrity and the panellist’s professional standing.
Ethics panels serve an essential function at these boundaries. They offer a structured, independent mechanism for:
Assessing conflicts that involve structural or systemic entanglements; Supporting defensible decision-making where policies are unclear or overlapping; Reducing the risk of internal friction or perceptions of improvised governance
By embedding ethics panels within the conflict governance infrastructure, particularly for higher-tier cases, organisations can manage complexity without resorting to overly cautious recusal or ad hoc decisionmaking
This reinforces trust not only in the individuals involved, but in the integrity of the institution itself
Embedding ethics into governance systems
A scalable conflict of interest model doesn’t work in isolation It must be embedded into the DNA of governance operations:
Tier-based conflict declaration integrated into digital registers and meeting processes. Independent ethics panels to adjudicate borderline cases.
Training, too, becomes critical, not jus rules are, but in how to think contextu influence and stakeholder confidence
While the tiered conflict model offers and defensible framework, its success requires awareness of common imple challenges. One barrier is organisation where legacy systems or cultural habit simple disclosure-based models. To ad the model can be phased in incremen with the inclusion of tier-based fields conflict registers or committee agend requiring full structural overhaul.
A second barrier is resource constrain in smaller organisations that may lack for formal ethics panels or influence m such cases, a proportional approach, s rotating peer review panels or a basic protocol, can offer meaningful oversig minimal complexity
A third challenge lies in change mana shifting from individual judgement to assessment can initially be perceived a bureaucratic. This can be mitigated th targeted training that frames the mod for improving procedural fairness, not professional judgement. Addressing th early strengthens the model’s credibil supports sustainable integration into g practice
Why structure matters more suspicion
At its heart, this approach reframes co interest management from being abo to being about system design Structu systemic conflicts, where bias is embe individuals, but in roles or networks, a rules focused solely on personal gain cases this is where the potential of un and/or benefit reside
Designing better governance means recognising that trust isn’t just about preventing bad decisions It’s about visibly demonstrating that institutions take influence and perception seriously, and that they can navigate complexity without resorting to oversimplified fixes
The Australian Charities and Not-for-profits Commission (ACNC) provides helpful guidance on recognising and disclosing actual, potential and perceived conflicts of interest. This tiered model builds on that foundation, offering a structured pathway to not just identify, but respond to conflicts with consistency, transparency and proportionality, particularly in complex or hybrid governance environments.
Why this matters now
In a world of increasing complexity, including multistakeholder boards, global legal teams and hybrid institutions, the blunt instruments of yesterday no longer serve the governance challenges of today. COI is no longer just about impropriety It’s about risk, perception and system credibility A risk-based model doesn't just manage conflicts, it signals institutional maturity
Sources
It shows stakeholders that the organisation can make ethical decisions without excluding insight, and can build trust without oversimplifying complexity
Future applications might include automated COI detection using AI, ethics dashboards for real-time governance monitoring or regulatory reform that builds proportionality into conduct rules
What’s clear is that we can no longer afford to treat COI as a checkbox or a procedural nuisance. It is a strategic governance issue, and how we manage it will determine the resilience, and legitimacy of our institutions.
About the author
Sean Johnson FGIA is a governance advisor, company secretary, lawyer and Senior Research Fellow in the College of Business, Law and Governance at James Cook University. He is a Qld State Councillor of the Governance Institute of Australia and the author of the forthcoming books, The Modern Association Playbook and The Economics of Modern Associations His research work focuses on institutional capability, policy governance, and the design of ethical civic infrastructure
Australian Charities and Not-for-profits Commission, 'Managing Conflicts of Interest: A Guide for Charities Retrieved from https://www.acnc.gov.au' (n.d.)
Australian Institute of Company Directors, 'Guiding Principles of Good Governance.' (2017)
Australian Public Service Commission, 'APS Values and Code of Conduct in practice' (2023) Commonwealth of Australia
Cossin, Didier and Abraham Hongze Lu, 'The four tiers of conflict of interest faced by board directors' (2021) <https://www.imd.org/research-knowledge/corporate-governance/articles/the-four-tiers-of-conflict-of-interest-facedby-board-directors/>
Crystal, Nathan M and Francesca Giannoni-Crystal, 'Choice of Law and Risk Management for Conflicts of Interest' (2022) 16 Charleston L Rev 1
Governance Insatitute of Austalia, 'Good Governance Guide: Conflicts of Interest' (2019) McMunigal, Kevin, 'Conflict of interest as risk analysis', Conflict of Interest in the Professions Oxford University Press, Oxford (2001) 61-70 [trans of: Conflict of Interest in the Professions Oxford University Press, Oxford
Sah, Sunita, 'The paradox of disclosure: shifting policies from revealing to resolving conflicts of interest' (2023)
BY TRACY SHEEN
If your business doesn’t yet have an AI policy in place, you’re already exposed Recent data highlights just how quickly the landscape is shifting IBM’s Global AI Adoption Index 2024 found 42% of enterprises have implemented AI governance frameworks, while another 37% are actively developing them In Australia, Deloitte’s State of Generative AI in the Enterprise report shows over 60% of senior executives expect generative AI to significantly impact operations within two years.
This isn’t a niche concern. AI tools are already embedded in everyday workflows across most industries. Whether or not your organisation has formally adopted them, chances are your team is experimenting. The specific tools don’t matter. The risk does.
Without a clear AI policy, your people are operating without a safety net opening the door to reputational damage, compliance breaches and potentially harmful outputs
This isn’t scaremongering It’s strategic governance An AI policy is not a dusty legal document It’s a dynamic guide, setting the tone for safe, ethical and effective use of emerging technologies across your organisation And it’s no longer a nice-to-have it’s a leadership imperative
Every business needs an AI policy
Even if your organisation hasn’t formally rolled out an AI tool, it’s highly likely someone on your team is using one drafting an email with ChatGPT, refining a proposal with Copilot, or streamlining admin via Gemini The point isn’t which tool it’s that they’re already in use That means the question is no longer if you need an AI policy it’s how soon you can get one in place
The risks are real. Just ask the Melbourne lawyer who submitted a court brief drafted by ChatGPT, only to discover it contained fabricated case law
a professional misstep referred to the Legal Services Board for investigation The real disruption may lie elsewhere: professional indemnity insurance.
If AI is influencing legal, financial or strategic advice, how will you prove a qualified human signed off? The line between human expertise and machinegenerated output is already blurry. In time, I believe insurers will demand greater transparency and may refuse cover where accountability is unclear.
Regulatory frameworks are also accelerating The EU’s AI Act is now official Here in Australia, the Federal Government has introduced a Voluntary AI Safety Standard, a clear signal that regulation is coming Whether your organisation is global or local, the compliance bar is rising This isn’t about doom and gloom It’s about being prepared
A well-crafted AI policy empowers your people to use these tools with confidence ethically, safely, and in line with organisational values. It also protects the business from costly missteps and reputational harm.
What should your AI policy include?
Drafting your first AI policy doesn’t need to be overwhelming but it does require clarity, consistency and forward thinking Whether you're tackling this in-house or with external support, the following components are essential:
Purpose and scope
Define the policy’s objective and clarify which teams, tools or workflows it covers
Approved use cases
Specify where AI tools can be used, such as marketing content or ideation, and where they shouldn’t, including legal advice or processing personal data.
Human oversight
Reinforce that AI should support, not replace, human judgement Final decisions must remain a human responsibility
Data and privacy
Outline what data can and cannot be input into AI platforms, especially third-party tools. This is vital for compliance and risk management.
Tool vetting & security
Establish a process for evaluating and approving new tools. Whether managed internally or via IT/security teams, this ensures consistency and control.
If AI is influencing legal, financial or strategic advice, how will you prove a qualified human signed off?
Transparency & disclosure
Clarify when to disclose AI involvement internally, externally and in client interactions. Trust and accountability depend on it.
Ethical use & bias awareness
Encourage vigilance around errors, omissions or embedded biases AI is only as good as the data it learns from
Training & accountability
Identify who owns the policy and how it will be rolled out, updated and communicated. Ongoing training is essential as the tech evolves.
Keep your policy simple, flexible, and scalable It should grow with your business not stifle it
And above all: write it in pencil AI is changing fast, and your policy must evolve with it
Build internally or bring in experts?
Whether you develop your AI policy in-house or bring in external expertise depends on your capacity, risk profile and how you're currently using AI If your team is experimenting with lowrisk, off-the-shelf tools, a lightweight policy created internally with input from legal, compliance and IT may suffice If your business is deploying AI in complex, customerfacing or regulated environments (such as finance, legal or healthcare), expert guidance is advisable.
An external lens can help align your policy with emerging standards and best practice and ensure your governance stands up to scrutiny. In either case, appoint a policy champion within your business someone responsible for monitoring tool usage, facilitating training, and adapting the policy as new challenges emerge
An AI policy isn’t a set-and-forget document And it’s certainly not about curbing innovation It’s about enabling the safe, strategic use of technology that’s already reshaping how we work. In my experience working with organisations across Australia one thing is clear: the earlier you start, the smoother the ride.
Deloitte’s global research reinforces this shift, with nearly 80% of business and technology leaders predicting significant industry transformation driven by generative AI within three years. AI isn’t waiting. The businesses that thrive won’t be the ones who sit back They’ll be the ones who prepare
Tracy Sheen is an AI business strategist, keynote speaker, and author of AI & U: Reimagine Business, helping leaders navigate the intersection of technology and human potential. She works with organisations across sectors to make AI accessible, ethical, and impactful for teams of every size. Visit https://www.thedigitalguide.com.au/
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