the members voice

  • Date:01 Nov 2005
  • Type:CompanyDirectorMagazine

The members’ voice

 

An outline of some of the issues addressed by AICD’s policy department, committees and taskforces over the past month follows:

 

Corporate Social Responsibility
The AICD’s submission to the Parliamentary Joint Committee on Corporations and Financial Services endorsed the concept of corporate responsibility but expressed the strong view that mandating is the wrong approach.
More than most phrases, “corporate social responsibility” (CSR) means different things to different people. This threshold difficulty of a clear definition makes it inappropriate for mandated behaviour.
In the AICD’s view legislation and regulation should only prescribe minimum standards of behaviour and AICD considers that those minimum standards have already been addressed.
The plethora of state and federal legislation is sufficient to permit, and often require, directors to take into account the interests of the broad range of stakeholders in managing a corporation. The Corporations Act does not currently prevent Australian companies or directors from taking into account the interests of all stakeholders in a way that is necessary to ensure that a company is successful and sustainable.
The Act does not require an amendment to impose an additional generalised social responsibility obligation but, if such an amendment is made, it should only be permissive.
Similarly, AICD does not believe there should be any mandatory CSR-based reporting obligations or single reporting framework.
There is already significant momentum in the development of sustainability reporting, both in Australia and internationally. The current diversity in this area reflects the “journey” that companies must take in developing sustainability standards and reporting methodologies suitable for their individual circumstances.
It is clear that there is not a single model that would suit both large and small companies. The AICD is also not convinced that there is any benefit to the Australian community in pre-empting the ongoing international debate in this area. It will give evidence to the committee at public hearings in November.

ASX Corporate Governance Council Working
Group on CSR

In an address to the council in September, Senator Ian Campbell, Minister for the Environment and Heritage, proposed that government and the council develop a set of agreed non-financial reporting guidelines. The council has convened a working group to consider his request and prepare a range of options for the council to consider when responding to him. The AICD is a member of this working group which includes the Business Council of Australia, the Australian Council of Superannuation Investors, the Group of 100, Law Council of Australia and the department.


Review of WA state taxes
The AICD is providing input to this review, both in an individual submission and through its membership of the Business Coalition for Tax Reform (BCTR). The AICD’s submission commends the WA Government’s initiative in undertaking a review which has a direct and obvious impact not only on businesses operating in WA but also on building a better tax system from a whole of economy perspective.
The AICD and other members of the BCTR believe the best taxation system for sustained long term economic growth in Australia requires that all levels of taxation work efficiently to facilitate Australia’s international competitiveness, as shown by a recent BCTR survey. WA Division president Fiona Harris is a member of the WA reference group on the review of taxes. The results of the BCTR survey are on the AICD website.


Cutting red tape
The Prime Minister and the Treasurer recently announced the establishment of a taskforce on reducing the regulatory burden on business.
Gary Banks, chairman of the Productivity Commission, will chair the taskforce which is to report early next year. The taskforce has asked for views on regulatory reform which would produce immediate gains to business.
The AICD will make a submission to the taskforce and is working with a small group of industry bodies to share information and co-ordinate the response from business. Input will be sought from AICD policy committees, state councils and the AICD board.


Corporate Insolvency Reform
Chris Pearce, Parliamentary Secretary to the Treasurer, has announced that the Government will proceed with an integrated package of reforms to improve the operation of Australian insolvency law.
The areas to be addressed include strengthening creditor protection through enhancements to the General Employee Entitlements and Redundancy Scheme, improving the regulation of insolvency practitioners, increasing the cost effectiveness and efficiency of voluntary administration and targeting ‘phoenix company’ behaviour. The AICD has been calling for a comprehensive review of insolvency law for some time and will respond to the proposed reforms when they are released for comment.


APRA Meeting
Representatives from the AICD will meet with APRA chairman Dr John Laker and APRA staff to discuss the institute’s concerns about APRA wanting access to board evaluations with fit and proper assessments.
On governance AICD is lobbying for changes before the January, 2006 implementation date.
The AICD’s major concern is the overlap between APRA’s proposed regulations with ASIC and ASX requirements for listed companies.
The proposed APRA guidelines also seek to impose a higher standard than the ASX recommendations with none of the flexibility of the ASX “if not, why not” approach that companies can use to suit their individual circumstances.
The AICD wants APRA to consider exemptions from its proposed prudential standards on a case by case basis and to disclose these exemptions.
APRA’s proposals have attracted strong criticism and the AICD intends to press APRA to change its inflexible, mandatory standards approach.
The AICD’s submission is on the AICD web site.

Australian Council of Superannuation Investors Guidelines
ACSI is seeking comment on these guidelines which are designed to assist trustees in monitoring listed Australian companies. The AICD is interested in receiving feedback from members on the guide which it will use to provide comment to ACSI on recommendations and suggestions for change. The AICD is interested in dialogue with trustee bodies such as ACSI which are increasingly influential in the Australian corporate governance debate.

Feedback
All AICD policies and submissions can be found at www.companydirectors.com.au under Policy and Advocacy. If you wish to provide feedback, obtain further information or permission to reproduce
this material please contact Rob Elliott, general counsel, Manager Policy and Advocacy at
relliott@companydirectors.com.au

FAQ of the month

What should a board consider when considering the introduction of a board performance evaluation process?

There are a number of issues to consider before introducing a performance evaluation process. They include:
• What are the purposes and objectives of the evaluation? They could include: identifying performance gaps, developing team work, improving the effectiveness of meetings or benchmarking against other boards.
• Who will be assessed?  The whole board? Individual directors? Both?
• What will be assessed? Processes? Individual contributions? Relationships with management?
• How will the evaluation be carried out? Internally? Using an external provider?
• Who will be asked for input? Board members only? Senior management? Others?
• What assessment techniques will be used? Qualitative or quantitative? Surveys and/or interviews?
• How frequently will ongoing evaluations be carried out? Will there be informal evaluations throughout the year in addition to formal appraisals?
The AICD’s education programs and publications can provide further assistance in this complex yet crucial area. See our website for more information.