Governance news bites – 2 May

Governance is often in the headlines, and the last few weeks have been no exception. Recent news related to governance includes: 

Charities tax off the table: What directors need to know about budget 2025

Directors can expect the New Zealand Government’s 2025 Budget, due 22 May 2025, to be a "growth budget" but not a high-spending one, according to Finance Minister Nicola Willis. The Minister signalled this week a strong focus on infrastructure, skills development and R&D, while confirming tighter fiscal settings – including a $1 billion reduction to an already tight operating allowance and a commitment to return to surplus.

Crucially for the not-for-profit sector and boards with charity interests, Willis has ruled out introducing charities tax changes in the 2025 Budget. In an interview on 28 April 2025, she confirmed the Government would not progress work on changes to the taxation of charities in Budget 2025, despite consultation on extensive changes to the taxation of charities. This provides important short-term certainty for boards overseeing charities, foundations and philanthropic entities. It appears more work is being done on taxation settings for membership organisations (like the IoD)

Absent from the Budget will be major new spending programmes outside the Government’s existing policy commitments. With high debt servicing costs and modest revenue growth, the fiscal room for manoeuvre is limited. Directors should expect a Budget focused on stability, productivity and private sector growth – and should prepare for a leaner public sector with a sharper focus on enabling business, not driving it.

Boardroom confidence in the US plummets amid political anxiety

Confidence among United States directors has sharply deteriorated, according to a new Chief Executive Group survey of 400 public company board members. The Director Confidence Index fell by 30 per cent in the first quarter of 2025 to 4.7 out of 10 (with 10 being excellent) – its lowest level since the pandemic – driven largely by heightened concerns about political dysfunction and a murky economic outlook.

This deepening malaise mirrors trends observed in recent reports from a major US accounting firm and The Conference Board, which have also found directors increasingly anxious about regulatory instability, geopolitical risks and slowing GDP growth. A growing number are revisiting strategic plans and scrutinising investment decisions with caution. The findings are a stark reminder for New Zealand directors that governance resilience, political risk monitoring and scenario planning are not just local concerns, but global boardroom imperatives.

Strategic risks demand boldness from modern boards

Recent analysis from Harvard Law School’s Forum on Corporate Governance warns that many boards are still falling short on risk oversight. While compliance and regulatory issues dominate agendas, boards are often failing to probe deeper into strategic and systemic risks, particularly those that emerge from fast-moving areas such as artificial intelligence, cyber threats, geopolitical shifts and climate disruption.

The report calls for directors to move beyond the comfort of quarterly reports and ‘tick-the-box’ risk reviews, urging instead a sharper focus on existential risks that could threaten business models. It highlights the need for more rigorous scenario planning, better integration of risk into strategic discussions and a culture that encourages difficult conversations. For New Zealand boards, the message is clear: robust governance requires directors to ask tougher questions, challenge management assumptions and embed dynamic risk oversight at the centre of boardroom practice.

AI risk not fully understood at board level

A recent report from the New Zealand Herald highlights that many public servants are adopting generative AI tools, such as ChatGPT, without formal approval, training or clear oversight. This rapid uptake, often outside organisational frameworks which is not confined to the New Zealand public sector, raises red flags about data security, privacy risks and accountability – issues that directors cannot afford to ignore.

Globally, the risks are well documented. New research published in the Corporate Law & Governance Review notes that while AI offers efficiency gains, it also introduces significant governance challenges. Boards must contend with opaque decision-making (‘black box’ algorithms), the potential for systemic bias, regulatory uncertainty and new forms of fiduciary risk.

New Zealand boards must ensure AI is integrated into existing risk management and assurance frameworks, not treated as an experimental or operational matter left solely to management. Boards should prioritise clear AI governance policies, director education on emerging technologies, and robust monitoring of AI deployment. In the absence of proactive board leadership, organisations risk exposure not only to operational and reputational damage, but to breaches of directors’ duties to act with care, diligence and in the best interests of the company.