Governance Bites #142: governance and employee well-being, with Tracey Cross

Is employee financial stress impacting your company’s bottom line? In this essential Governance Bites episode, host Mark Banicevich speaks with legal advisor and independent director Tracey Cross about why boards must prioritize employee financial well-being. Tracey explains that unresolved financial issues drive underperformance and stress, noting 79% of non-relation stress is financial. Discover the economic and social case for action, and learn how stepping up to lead makes the workplace an ""island of civility"" that improves attraction and retention. Boards must ask curious questions to measure productivity gains and ensure this vital topic is addressed at the governance level.
Tracey Cross is a highly respected legal and corporate governance expert, bringing over 25 years of experience in financial services regulatory compliance and strategy. As a Chartered Member of the Institute of Directors, Tracey holds key Independent Director roles, currently serving on the Boards of AIA New Zealand and Mint Asset Management. Her board responsibilities include strategy, risk management, and chairing committees like Audit & Risk and ESG. Tracey is passionate about governance with purpose, driving the belief that good conduct and culture are fundamental to competitive and sustainable business. Currently practicing on her own account and working as a governance adviser at Grounded Governance Ltd, she specializes in providing pragmatic, commercially driven solutions, strategy development, and tailored legal and governance training for Boards and businesses. Her focus is on strong leadership and advocating change that results in the best customer outcomes.
#Governance, #EmployeeFinancialWellbeing, #CorporateGovernance, #WorkplaceWellness, #Productivity, #FinancialLiteracy, #BoardOfDirectors, #HR, #Retention, #IslandOfCivility, #GovernanceBites

Transcript

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Hi, I'm Tracy Cross. I am a legal advisor and independent director, and I have pleasure of advising boards and doing training facilitation. So today I've joined, Mark, and the topic is governance and employee financial well-being. Hi. Welcome to Governance Bites. My name is Mark Banicevich, and, as you just heard, today I get to spend more time with Tracy Cross. Tracey, thank you very much for your time, I love coming to see you, and it's been a little while since we've had a chance to catch-up, so this is a great excuse. True. The topic that you suggested here is around governance and employee financial well-being. To start with, how should boards think about financial well-being as part of, whether they've got a duty of care to employees, or part of that responsibility around their employees? Well, I think employee financial well-being is something that hasn't really been talked about. I think even for myself it's been, I guess, a consideration more recently as we talk about retirement savings, the lack thereof, the gap with regard to female, sort of, balances, et cetera. And we have all these sort of great conversations, but we, more often than not, are talking to the converted, and we're not actually talking about these really tricky conversations at a high level, at a governance people. Right. So I think that, you know, employee financial well-being is important for boards and for organisations, because it is your people. It is your people that serve a single product, distributing your product, helping you build the revenue and the profit that you want. And if we're not looking after our people in the right way, I think that's sort of a real lost opportunity. Probably fair to say that employees that have not got good financial well-being may be stressed at work. Yeah. And it may roll over and cause underperformance, so there's probably an economic reason to do it, if you get the numbers right. As well as being a good social reason to do it right, to help people. One of the things I remember from some Financial Services Council (FSC) research, you know, we've heard for a long time around the low level of financial literacy in our country, and reading all this research, and seeing this number many, many times, you kind of thing, "Yes, we've got a financial literacy problem." And the piece of research that the FSC did a couple of years ago that really drew that out for me was where they had four questions around financial literacy, and I think 52% [actually 38%] of people got two or fewer of those right.[Link to the research in the description] But it was the calibre of the questions that really threw me. And one of them was something along the lines of: if you have 2% inflation rate and you have $100 in one year's time, can you buy more, less, or the same as you can buy today? Two of them were true or false. One was around: is it safer to, as I think it was something along the lines of, it is more risky to invest in one company than it is to invest in a large number of companies, around diversification. And the other one was something similar around balanced versus aggressive funds. And I can't remember what the fourth question was, but those questions were so fundamentally straightforward. There was no mathmatical calculation in them. You think that they're fundamental and straightforward. Yeah, exactly, exactly. And without having the mathematical calculations, it's concepts that people generally are battling with. So this area is certainly somewhere that companies can add real value to their employees. Do you see this financial well-being as a governance issue or an HR [Human Resources] issue, or is it both? Well, look, I think it's both. I mean, you know, dealing with people, of course HR is always going to come into the equation. But I think, picking up my earlier point, you've got to have these conversations at a higher level. You know, if we're talking about our people stressing about their finances, and you know, the FSC's done research around this, their resilience index tracker [Financial Resilience Index], etc. And, you know, I think 70% percent of Kiwis who were sort of stressed about money. Might be changing slowly now, but there was a sort of a real baseline of real concern there. And I think the [Southern Cross Health Insurance] 2025 Wellness Workplace Report said, I've just got my finger here, 79% of non-[work] related stress was related to financial concerns. So if our people are worried about their finances and they're bringing that worry to work, they're just not going to be productive because they are worried about it. And I think that, you know, Hi Money has issued a great report rich in context around just how we deal with our money, how we think about our money, how our upbringing impacts our consideration and willingness to learn or talk about money. Sort of, picking up your point around the questions also. We really need to provide our employees with support in this respect, and then they will be more productive and give a bit more to the company. I think the other aspect too, though, is that if we're not including that as part of our overall well-being focus within organisations, someone else will be. And as we know with younger generations, it's not all about the money, is it. It is about, you know, being seen, the employer being seen to care. To care. Yeah, exactly. So they'll likely jump ship. Right. So you just raised there one risk that boards will face if they fail to have financial well-being somewhere in their governance frameworks around the business. What other risks are there for the firm? Well, I think you've got the attraction and the retention of people, that sort of impacts that. But just picking up, more importantly for a lot of people, it's around the productivity. Productivity, you menitoned before. I mean, if this is impacting our bottom line, surely it's important to pick it up. But having said that, we know that D&I [Diversity and Inclusion] supports the bottom line, but we have entities that aren't really picking up on that, or are sort of pausing it. Yeah, within an entity, it would be quite hard to measure as well, wouldn't it? Because you're looking at a snapshot now, and unless you take some approach, some intervention, and then measure before and after, you've got no data. Yes, yes. So you're relying either on external research, which you say is very clear, but how many small business owners are there that are out there looking at this research, and saying, "I really should be doing this stuff"? So a business that may have a level of productivity, wherever it may be, may not understand or know what the opportunities are to improve that productivity. And someone may come in and say,"Look, if you help your staff understand money better, you'll perform better," and you might get a bit of a sideways glance at it. That's right. And if we have more of these conversations around it so that everyone can pick up on them. And you podcasts are very available, Mark, so that they sort of hear, and it just triggers something, and they think, "Oh, okay." Make it normal. Or, you know, "I might not be able to delve into my company, but who could support me with that?" Yeah. I mean, there's some great people and tools out there these days. Absolutely there are. What signals should directors look for that indicate that employee financial stress is undermining the productivity, or their culture, or the retention in the business? Well, I think absenteeism is always a good indicator of something going on, together with cultural surveys, things like that. Survey, you know, just actually management talking to the people, seeing what's going on, seeing what is important to them. It was interesting at the IoD [Institute of Directors] conference this year, and they had the Edelman Trust Barometer, that they do, I'm not quite sure if it's been a couple of years [25+]. And they were talking about how, in this crazy world of polarisation and misinformation, there's a real lack of trust, that workplaces are seen as a bit of a safe space for people, and employees really expect or want their workplaces to step up to lead, to, I think they talked about workplaces being the island of civility. So if you've got people really in this crazy world thinking, "Where do I go?" Who do you believe? If they're looking to the workplace, it's an opportunity for employers to step up and support and really lead the space. And the benefits will come, won't they, with regard to the attraction and retention. Absolutely You know, you've got the good people, you've educated them, you've empowered them to be better equipped to deal with their finances, to be more financially resilient. You're going to get more productivity out of them and a better bottom line. And it's interesting, with KiwiSaver, we've got the perfect opportunity to do so, right. And it was set up with this idea that employers would step in and help drive that conversation, but that hasn't really happened so far. Yes, yeah. It's been more the KiwiSaver providers themselves directly marketing to individuals. Rather than companies choosing preferred providers. Yes, yes. And that's a lost opportunity, too, isn't it, because you do have some amazing employers that are really contributing to KiwiSaver and have been proactively for many years. Yes. Again, it's an opportunity for employers that really want to make a difference and to differentiate themselves. As is looking at your parental leave policy or your gender pay gap, or these sorts of things. You know, how are you actually supporting your team of employees? And how can you, what are the opportunities to sort of market and tell your story to others? Yes. Because everyone, you know, it's the power of storytelling. That's what people want to engage with, and I think that's really important when people are looking for roles. Yes. It's interesting what you were saying before about the Edelman survey and about people wanting this kind of help, because quite often people see finance as something that, if you step in and ask a question about this, the answer could be quite defensive about, "What business is that of yours?" So it can be a very difficult subject to approach. So it is something that businesses would have to tackle very carefully. But the value of doing so is really high. And I think, too, you know, there is sort of a bit of a reluctance to talk about finances in the workplace. You know, "Am I giving advice?" Or things like that. So employers have just sort of steered right away. But it's getting the right support and the right tools. I mean, one of the things that's, sorry, a bit of a promo, but for the FSC Empower Women, we're looking at a potential creation of a toolkit for employers, - Right. - where we can bring in all these great resources that are out there now, whether it be around the parental leave policy or Ministry for Women's gender pay gap reporting toolkit, where we can bring all of these things together, so that employers can use them; employees can access them a lot easier. And the hope, and it's in partnership with the Retirement Commission, in the hope that we can actually elevate the financial resilience and empowerment of New Zealanders. Yeah, great. I was going to say, because the Retirement Commission has Sorted at Work, as a programme, as well, don't they. So, as you say, there are some really great programmes out there. Yeah. But there's so much out there, but people don't know where they are. Yeah. And also it's an opportunity, that sort of toolkit. And there may not be appetite. It may not go anywhere, but we're sort of testing it at the moment. Yeah, great. But yeah, it could really make a difference. It can. I mentioned before around how, for an individual business, it could be quite hard to know what is the current state and what is the impact, in terms of productivity gain, around making these changes around financial well-being for the employees. How might boards measure the return on investment? Well, I think you've got to have very clear measurements right from the start. Now that's not necessarily answering your question as to what are those measures. But I think that the measures need to be relevant, they need to actually be objectively tested. And I think it is, it's just setting that benchmark. Where are we now? So what's our? We might not have any data about how are our people feeling about their financial well-being and what have you. But if we start including it in our staff survey, for example, testing the waters, asking our people what they need, et cetera. What are their stress points, appropriately of course, that's going to be your starting point. Your starting point won't necessarily be perfect, but you're starting. Yeah. Otherwise we just talk about this all, and we don't do anything. And it would also be interesting to measure standard productivity measures depending on whether you're producing, goods or services, all the standard, production per hour, whatever that may be, and how much is that improving? And you wouldn't expect it to double, but you might get 5% increments, or those sorts of things. And your staff retention, you would think would be. Yes, that's a great one. I mean the survey results, your staff retention. Are we keeping people? Are we attracting people, attracting quality people? Are they leaving for a big competitor that's been really leading in the space? Those sorts of things? Yeah. And you'd expect that if you're retaining staff, you're not training up new staff, that would lead to higher productivity. Yeah, yeah. Yeah, okay, right. What metrics or reporting should boards request from management around employee financial well-being? Well, I think that sort of comes back to that earlier point, really, in actually identifying what we want to know and what we're doing. So I think we've got to come back to, "What do our employees need or want?" Because there's no point doing something if it's not wanted. And we know that the assistance programmes, a lot of the work that goes on there is around financial well-being and stresses, etc. Yes. Now we don't know the detail of all of that because, of course, it's confidential. But you could have some discussion groups. A lot of that's too little, too late, too, right, because those employee programmes are when something's broken, and the employee reaches out for help, and I think quite often you get three sessions, and that's not going to turn the world around. But I think even just simple things that, you know, if you're offering some sort of financial course, or education piece, or webinars, or offering a deal on insurance or what have you. People coming in at lunchtime. It's the uptake. Yeah, exactly. So how many, have we got attendance? Is our attendance increasing? What about people talking about it? Is there a real buzz around the room because, oh, my goodness, they're finally getting the support where they can talk about things openly, and with the right sort of experts being brought in to support them? I think it's, what does it feel like, as well. As well as things like - There will be better experts that me, that can work out the measures, et cetera. But I think you've just got to start, have the conversation As a director, you can start by saying, as you say, "What initiatives are in place?"How many people have been through those initiatives?" Yes. And then your staff surveys and things to find out the impacts. And the starting point, too is, "Well, what does our employee well-being programme look like?"Does it even include financial well-being?" Chances are it won't. Yeah, right. And I mean, I'm aware of some that have really brought it in, and it's just really well received, particularly in times when people are clearly stressed. Yes, yeah, absolutely. And as much as we're not talking as much now about the cost of living crisis, costs haven't gone down. No, no. Salaries haven't gone up enough to compensate for the jump that we had in the last two years. Yeah. So yeah, it's still there. The struggle itself is still there. Yeah. And there's a tail on these things, isn't it, it doesn't mean that the economy starts to go up and everyone's problems are resolved. No. And I think, coming back to that earlier point about employers actually looking at what they're doing, and how that might impact their employees' financial well-being, is quite important. Yeah, very much. How can boards balance the cost of these programmes with the shareholders' expectations for returns in the business? It's just like anything, isn't it, Mark. I mean there's costs and benefits, and it's what's important. It's what's going to drive that return to the shareholders, which this is just a small component. So I just see it as any other sort of topic. Yeah, right. I guess, to a large extent, as well, the cost would be pretty insignificant too, wouldn't they, for most businesses? It would just come out of an HR budget for a large business, - Yeah. - and for small businesses there's probably a lot of services, you know, your Good Shepherds, and things, where you might be able to get some assistance at low or no cost. I think though that because it is low cost, and let's say HR's there to support, etc., we just need to be careful that we just don't keep the topic down here. Yeah. I think that it should be a topic that the board is leading as part of the overall well-being strategy for the organisation. Obviously management is doing all the doing and coming up with the ideas and the most appropriate ways to do things, but I think the board should be asking the questions. Yeah, yeah, absolutely. What examples have you seen where strong board leadership made a measurable difference to well-being - financial well-being? Well, I think it just comes back to really asking curious questions, and being interested in what the business is doing, and diving down into that level."So we've got a well-being programme. That's great. But, oh hey, it does it include financial well-being?" Yeah. As compare to, "Oh yes, we've got a well-being programme, tick." "We have yoga every Thursday, yeah.""And now let's move on to something more important." You know, I think it's really leading that sort of conversation which often isn't had at the board. Yeah, yeah. One final question for you, off the topic a little bit. What advice would you give to a new director? I think there's a lot of support that's available out there. You don't have to do it on your own. There's a lot of great networks. And I think it's important just to reach out for support, including around the board table. It can be quite intimidating when you go onto a board and there's very experienced board members there and you're just sort of a newbie. But just reach out because everyone's really willing to help and support. Cool. Ask for help. Look around, it's there. Yeah, absolutely. Tracy, thank you so much. That's been a cool conversation. I'll look forward to catching up again soon. Cheers, thanks, Mark. And seeing you next episode. Thank you for watching this episode of Governance Bites. We have more episodes on YouTube and your favourite podcast channel where I interview directors and experts on various topics relating to boards of directors and governance. We'd love to see you back, and please like, subscribe and share the videos and podcasts.