THE GROWING regulatory maze that CEOs, CFOs and boards must now attempt to navigate in Australia is driving changes in employee screening, according to industry practitioners
THE GROWING regulatory maze that CEOs, CFOs and boards must now attempt to navigate in Australia is driving changes in employee screening, according to industry practitioners.
The first signs of demand for the screening of boards and executive director-style roles are making themselves known, said Sarah Kearney, managing director of psychometrics firm SHL. This trend, albeit one that is in its early stages, is being driven by the continuing mass of corporate scandals, and the regulators’ responses to this.
“We’ve often seen a big chunk of the market screaming for graduate and middle management testing,” Kearney said.
“But because of the fact that the rise and fall of some of the major players has been caused by significant impact at the top, there has been a higher interest in getting the recruitment right at the board level.”
Kearney said the trend was just starting to emerge and predicted it would become more prevalent.
“People are talking about it a lot more and we are starting to see a lot more interest in it. People are asking, ‘What would you do with someone at this level?’”
One of the main drivers of this trend is the Australian Prudential Regulatory Authority’s (APRA’s) focus on ‘fit and proper’ tests for senior staff in regulated institutions. Under the APRA proposals, which will be firmed up in mid-year, APRA-regulated institutions will need to develop their own tests that include the fitness and propriety of individuals to act in positions of responsibility.
APRA chairman, Dr John Laker, is hoping that the development of the fit and proper tests will reflect community expectations of people who fill positions of responsibility and create benchmark standards for people in, or wishing to enter, APRA regulated industries (banking, financial services and insurance) at director level.
Employee screening of graduates, for example may be a relatively straightforward fact checking and verification exercise, but the screening of potential board members also has emerging methodology and testing.
“We call them objective tests,” said Kearney. “One of the things about it is that just because you get to board level doesn’t necessarily mean you are numerate, or numerate under pressure conditions.”
Anybody could be numerate if they had time to think about it, she said, but board members had to be able to assimilate complex information, make quick evaluations, ask questions and not take things at face value.
“So I would say that is a key requirement of a board member – someone who can understand the numbers well enough and quickly enough to ask the right questions and not have the wool pulled over their eyes combined with the high ethics and integrity,” she said.
