Members Voice AICD Review

  • Date:01 Dec 2003
  • Type:CompanyDirectorMagazine
An outline of some of the issues addressed by AICD’s policy department, committees and task forces over the past month follow:

Members' Voice

An outline of some of the issues addressed by AICD's policy department, committees and task forces over the past month follow:

CLERP (Audit Reform and Corporate Disclosure) Bill – CLERP 9

AICD lodged its submission on this important piece of draft legislation in November 2003. The time frame for response to the Bill was extremely short given the Government's stated intention to introduce the Bill before Parliament rises for the year.

AICD's submission was developed by a task force consisting of the chairmen of the AICD Law and Accounting Committees, the AICD board and members of the AICD policy department. Members of the Law and Accounting Committees and the Remuneration Task Force also made significant contributions to writing the submission.

The Bill is far more prescriptive than anticipated given the government's assurances that "light touch" regulation was more appropriate. AICD is also concerned that provisions in the Bill overlap with the ASX Corporate Governance Council Guidelines and incorporates HIH Royal Commission Inquiry recommendations which have not been debated publicly.

AICD's submission concentrated on key issues of importance to directors including:

• Infringement Notices for Breaches of Continuous Disclosure Obligations — the Australian Law Reform Commission April 2003 Report on Civil and Administrative Remedies (ALRC Report) criticised this proposal. AICD is disappointed that the Federal Government has not responded or referred to the ALRC Report. AICD strongly opposes the proposal that ASIC be given power to impose financial penalties and issue infringement notices in relation to alleged contraventions of the continuous disclosure regime. There are alternative ways in which ASIC can and should exercise its powers in pursuing such breaches. If the Federal Government proceeds with the proposal, guidelines should be developed to govern ASIC's exercise of the new powers and those provisions should be subject to a sunset clause which provides for their review in three years time

• Extension of civil liability for continuous disclosure breaches — AICD is concerned that the proposal for the extension of civil liability for continuous disclosure breaches to individuals goes further than intended by the Commentary on the Bill and may have unintended consequences

• Auditors to Report Suspected Breaches of the Law to ASIC — the proposed changes to Section 311 of the Act will make audits unnecessarily adversarial, and are likely to reduce rather than enhance the effectiveness of the audit process. The seven-day reporting time limit is too short

• Shareholder approval of termination payments — the proposal to apply the formula in the Corporations Act to "cap" the extent to which a company can make a genuine payment by way of damages for breach of contract or agree to a contractual termination entitlement entered into as a "sign-on incentive" without obtaining prior shareholder approval is illogical and may operate to impose unreasonable and unintended restrictions. The timing of obtaining shareholder approval is also an issue which has not been resolved

• Whistleblowing — the framework for disclosure and the protection for disclosing employees need more defined processes, procedures and parameters. Internal company processes should be fully utilised in relation to grievances before matters are referable to ASIC. The provisions should apply to officers and employees of listed companies and to disclosure of serious offences based on a "reasonable grounds to believe" test with immunity subject to some qualifications and limitations. ASIC's role also requires further guidance and definition.

FRC Chairman visits Accounting Committee

Victorian council member Charles Macek, chairman of the Financial Reporting Council visited the November meeting of the AICD Accounting Committee.

Discussion took place about a wide range of subjects including the ongoing funding of the FRC, the role of the FRC in the introduction of international accounting standards, including ways in which Australia can maintain its historical role as a significant contributor to the process and the FRC's plans for the future.

Federal Budget Submission

AICD lodged its submission on the Federal Budget 2004 with Treasury.

AICD's submission focused on the following key issues: superannuation, international tax competitiveness and integrated tax design.

By way of reform AICD also advocated tighter fiscal policy, the sale of Telstra, state and personal tax reform and the elimination of business import tax and the general tariff.

Taxation Work Program

AICD supports the position of Inspector-General of Taxation (IGOT) and particularly acknowledges the recognition of the importance of the tax payers' stake in the administration of taxation.

AICD lodged its submission on the IGOT work program in September. Full details of the submission can be found on AICD's website. The areas viewed as a priority are:

• effective governance structures

• genuine consultation

• simplified legislation

• sound tax administration.

Taxation and Economics Committee members will meet with the IGOT to discuss its views in the near future.

FAQ of the month

How do directors evaluate board performance?

The first step is to establish key performance indicators for the board. This will involve board members understanding and agreeing to what needs to be achieved and evaluated and then measured. Board members also need to understand that there are different types of assessment models available and that they will need to tailor the process to suit their board's needs.

AICD's course Board, Director and CEO Assessment and the AICD library can help boards decide on how to introduce a performance measurement system.

Business leaders challenged

More than 530 members attended a WA Division luncheon on 29 October at which Wesfarmers chairman Trevor Eastwood and managing director Michael Chaney were interviewed by ABC business reporter Tom Baddeley. The interview revealed how Wesfarmers has come to employ 30,000 people, opened around 2000 outlets and attained a market value exceeding $10 billion.

Eastwood and Chaney challenged every business leader in the room to lift their own performance through simple, powerful and commonsense values.

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.