Direct News: Nov 2002

Corporate governance out of control?; Improving US regulation; Deficiencies not so super; Asian principles endorsed; Bosses bullied into reform; All companies great and small Corporate governance out of control?

The campaign to improve corporate governance standards is out of control and threatens the very health of North American capital markets, Nasdaq head Hardwick Simmons told US newspapers recently. "If we kill the goose and no jobs are created because capital formation is stultified, then indeed we've won the battle and lost the war," he said. "I feel we've gone too far already," he said, adding that smaller companies – Nasdaq's bread and butter – will be hit hard by overly stringent regulations.

Improving US regulation

The SEC took another step closer to implementing provisions of the Sarbanes-Oxley Act, passed back in July with a proposal that would require public companies to disclose information about internal control reports, company codes of ethics, and audit-committee financial experts. In addition, it proposed rule changes that would prohibit actions designed to improperly influence auditors. According to US press reports, the proposals would require companies to disclose the number and names of the "financial experts" serving on their audit committees, disclose whether they have adopted a code of ethics for their principal executive officer and senior financial officers, and file, in their annual reports, an internal control report of management.

Deficiencies not so super

Depressed and volatile investment markets have led to the inevitable: deficiencies in defined benefits funds. That's a clearly established issue found in a Governance of Australia's Superannuation Funds survey, conducted by the Institute of Chartered Accountants in Australia in conjunction with Deloitte Touche Tohmatsu. The survey covered six key areas including trustee processes, fund administration, audit, legal compliance, investment processes and member investment choice. Richard Rassi, Deloitte's national superannuation partner, and the ICAA's current superannuation committee chairman, said that, the most significant area of governance requiring improvement was risk management. This involves the board being aware of all key strategic and operational risks facing their funds. Risk assessment and management will produce new challenges for many trustees as the government introduces law to require all funds to implement a risk management plan.

Asian principles endorsed

The Confederation of Asian Chambers of Commerce and Industry has endorsed principles of good corporate governance as a fundamental pillar of the competitive liberal market economy. CACCI brings together 21 national chambers of commerce from around the Asian region, including from Australia, India, Indonesia, Japan, South Korea, Sri Lanka, Russia, Taiwan, New Zealand and Malaysia. The 19 principles of good corporate governance are contained in a statement endorsed by CACCI at its recent annual meeting in Seoul, South Korea. The statement will be widely disseminated to member countries and will be forwarded to APEC for input into its processes. The statement was formulated by a working group chaired by the Australian Chamber of Commerce and Industry. Further information is available from ACCI.

Bosses bullied into reform

Smart CEOs and senior managers are fast becoming aware of the implications of a poor work culture – it could mean a jail term. More than 800 of Australia's top CEOs and senior managers attended a recent leadership conference organised by Human Synergistics. An extensive study, titled Leading High Performance Cultures: Measuring Leadership Style Through the Life Styles Inventory of 35,000 managers in Australasia showed most managers rely on the behaviours of blame and aggression to "motivate" their staff. WorkCover has turned the spotlight on managers who are perceived to be bullying staff members, with hefty fines and jail terms on the cards for those found guilty. In NSW for example, there is a maximum fine of $550,000 for a first offence, rising by 50 per cent for subsequent offences. It is those prevalent aggressive management behaviours highlighted in the culture and leadership study that, in many cases, contribute to a person's feeling of being bullied. The result of which can be legal action against those who have failed to put systems in place to prevent it.

You don't have to be the one accused to face retribution. Those managers who simply do nothing and allow the work culture to support the inappropriate behaviour can also find themselves in hot water. Bully warning signs include:

1. Do you have a well publicised anti-bullying or anti-harassment policy?

2. Is there a lot of stress in the workplace?

3. Are you experiencing high staff turnover?

4. Do you or your managers rely on competition in the workplace for motivation?

5. Do you demand perfection?

6. Does your team have autonomy or are decisions restricted to a few?

7. Do you truly know what your employees think of your management style?

All companies great and small

AGL chairman John Phillips gave a zoological flavour to his corporate governance address, "Toads and beetles – some thoughts on corporate governance and regulation", delivered at a NSW Division lunch last month. An audience of more than 200 people heard how regulators should go about their role like dung beetles and that over-regulation would have the same effect as the introduction of the cane toad – unforeseen consequences.

Disclaimer

The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.