In Boom and Bust, We Must Retain Trust
This year, Australia’s insolvency industry has undergone two tranches of law reform. Passed in September, the amended legislation, Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017, is widely considered to be long-overdue and brings Australia in step with other developed economies.
According to seasoned company director and AICD acting chairman, Gene Tilbrook, the reforms will also help “remove the stigma around business failure” and prevent many companies from being prematurely placed into external administration, and potentially liquidation.
To date, the bulk of the commentary has understandably focused on the changes to the safe harbor provisions which afford company directors a window within which to restructure troubled businesses that have reasonable prospects of recovery.
A less discussed aspect of the new regime is how it elevates the needs and rights of creditors (opening the door to creditor activism) and introduces new requirements for stakeholder communication.
It is important that these aspects of the reforms are also understood by management and boards.
In communication we trust
CEO attendees at this year’s World Economic Forum named the gaining and retention of trust as one of their most pressing concerns. In doing so, they also acknowledged the definition of trust has expanded - and in today’s terms, trust must be aligned with organisational values, culture and behavior. The post meeting papers reference:
“The days where the CEO of a company was rarely accessible to the end customer or was able to get sanitised feedback are gone... Today, executive teams need to fully grasp the ethical and moral implications of their decisions, and communicate their actions with integrity. Trust has become an equalising force, moving power from top-down to peer-to-peer.”
These remarks are equally relevant to the insolvency sector, and to the relationship insolvency practitioners have with creditors.