CEOs Report The challenges to come AICD Review

  • Date:01 Dec 2003
  • Type:CompanyDirectorMagazine
The year 2003 will be viewed by many directors as the time when government and regulators responded to the corporate collapses of the prior two years.

The challenges to come ...

The year 2003 will be viewed by many directors as the time when government and regulators responded to the corporate collapses of the prior two years.

The Australian Government promised a "light touch" legislative response which would complement the work of the ASX Corporate Governance Council Principles and Best Practice Recommendations. Compliance with those guidelines must be reflected in the annual reports of all listed companies published from 2004.

The recently released draft CLERP9 proposals on Audit Reform and Corporate Disclosure are anything but "light touch". The provisions of the Bill to implement CLERP9 are highly prescriptive and often lack clarity.

AICD has expressed its concern that the new provisions if implemented in their present form will produce a confusing and costly labyrinth of law.

AICD has demonstrated its commitment to sound board practices and principles through its leadership role in providing education, training programs and information to support increased professionalism of Australia's boards. Heavy-handed and prescriptive legislation will encourage boards to move from a principles based approach to a compliance, audit and checklist approach to governance. Considerable amounts of both time and money will be spent on compliance as a result of over-regulation of practices that can be seen and observed.

The board's main priority of ensuring effective strategies and prudent risk management to provide for the sustainable prosperity of the company is in danger of being relegated below compliance processes in response to this over-regulation.

Good boards have already responded to investor and community concerns raised as a result of the few bad apples in the barrel by undertaking more effective transparency and disclosure of their activities. Director selection and appointment processes are now more structured and formalised, board and individual performance assessments are widely conducted and there is a growing acceptance of the need for all directors to undertake professional development programs and training to keep up-to-date with the changing demands of directorship.

It seems clear that the regulatory and shareholder pressures for greater transparency of board processes and activities will continue into the future. However no-one has yet been able to fully define the characteristics which make for an effective board. Effective board performance results from an amalgam of the diverse skills, experience and character of the board participants as they interact with each other.

Being a director, particularly of a listed company, has always been a demanding pursuit. The regulatory responses which have come forward this year have made the role much more challenging for the future.

Our policy committees and staff have prepared a detailed submission voicing our concerns with many of the issues raised in the CLERP9 proposals. We are committed to working with government to achieve a workable outcome for their policy objectives while limiting the scope for unintended consequences arising from poorly drafted legislation. AICD will continue its role in supporting and equipping our members to cope with these changes.

As I have decided to step down as CEO of AICD at the end of my current contract in January next year, this will be my final column in Company Director. I wish to thank the members for their support of the organisation and the staff for their wonderful commitment to making the AICD a success.

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