the members voice

  • Date:01 Oct 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:

Shareholder Friendly Reporting

The AICD/PricewaterhouseCoopers Shareholder Friendly Report was launched in September 2005.
In November 2004 the AICD Reporting Committee produced a paper The Usefulness of Financial Statements outlining director concerns that a combination of Australian accounting standards and regulatory rulings were making financial statements increasingly complex and less meaningful, especially for shareholders lacking detailed accounting and financial experience. In exploring this topic AICD also considered the wider issue of performance reporting to shareholders.
AICD asked PricewaterhouseCoopers to help in developing a “shareholder friendly report” that illustrates ways of overcoming these concerns. The report is a simplified document that meaningfully conveys information about a company’s performance and financial position to retail shareholders.
AICD and PwC are trying to encourage a reporting framework within which people with some knowledge of business and accounting can understand the performance and future of companies they wish to invest in. If they require more detailed analysis, the data should be easily available. AICD has been “road testing” the report with members and key stakeholder groups including the Australian Shareholders’ Association, ASIC, the AASB and the Group of 100.


Submission to FRC on IFRS
The FRC has asked for submissions from the various groups represented on the council on their experiences with the Australian implementation of the new International Financial Reporting Standards.
While AICD accepts that the FRC does not intend to re-visit the decision to harmonise Australian accounting standards with international accounting standards, the AICD has been concerned for some time at the impact the transition to international accounting standards is having on the market generally and particularly on unlisted reporting entities.
Australia is the only country where all reporting entities are required to make this transition. AICD made a number of comments on specific issues but had some broad general comments
• A number of the new international standards have rarely been used in practice and are therefore largely untested. Implementation issues and issues with the standards themselves will continue to emerge in the next 12 – 18 months and the heavy demands on Australian companies, standard setters, professional firms and regulators connected with IFRS implementation are likely to continue for some time
• Standards interpretation is emerging as a critical issue – both in the Australian and the international context
• It is critical that Australia remains involved in the new international standards setting and standards interpretation process and that there is an effective and efficient consultation process between Australian and international standard setters, preparers, users and regulators
• Difficulties resulting from unintended consequences of IFRS implementation are likely to continue to emerge as more companies report under IFRS.


NSW OH&S Review
AICD has made a submission to WorkCover on the issues raised by the NSW Government’s mandated review of the NSW OH&S legislation.
Issues raised by AICD include the appropriateness of the Industrial Relation Commission’s jurisdiction over criminal prosecutions, the availability of appeals, trial by jury and criminal protections for directors that are otherwise available in non-OH&S context.
AICD argues that there should be more scope for defendants to be exonerated in circumstances where they are not culpable. These defences should also take in consideration the realities of the employer’s circumstances and acceptable industry practice/standards should be given greater weight when determining whether a defence is made out.

‘Corporate Duties Below
Board Level’

In its submission on the CAMAC discussion paper AICD supports the extension of the duties of care and diligence and good faith in the Corporations Act 2001 to a person who takes part, or is concerned in, the management of a corporation.
AICD acknowledges, that it is almost impossible to devise a statutory definition of such personnel, or of the term “management”, that would improve on the former definition of “executive officer” in the former Companies Act and urges it be reinstated as the best practicable definition of non-director personnel.
This would address one of the major concerns raised by the HIH report, and as the definition was used between 1981 and March 2000 there is a body of case law available to give guidance as to the meaning of these phrases.

McKinsey Survey
McKinsey & Company, in association with Canadian company HRI – and supported by the AICD – surveyed ASX top 200 directors for their views on the challenges ahead.
The survey covered 121 directors with an average of nearly 16 years cumulative board experience. More than 80 percent of respondents were directors of companies with a market capitalisation of more than $1 billion.
Survey results indicate that the regulatory reform pendulum may have swung too far towards regulatory conformance and preventing downside risk.
The survey identified three insights: board performance has improved markedly in recent years; much of the improvement comes from the efforts of directors themselves; and the main challenges ahead to consolidate progress are to turn the board into a strategic asset for the company, starting with the board’s relationship with the CEO, and to improve the flow of information between board and management.


Role of the chairman forum
An AICD directors’ forum for around 65 directors and chairmen from the top 100 companies was held in Melbourne at the end of August.
The program was developed by the AICD Corporate Governance Committee and the forum was opened by AICD chairman Don Mercer.
The day provided an opportunity for an exchange of views and experiences on the role of the chairman of a publicly listed board and for an exploration of what is expected of board chairmen today. The forum concluded with a lunchtime address from Professor Andrew Kakabadse from the Cranfield School of Management in the UK on the characteristics of world-class chairmen.
The AICD is developing papers about the role of chairmen to distill current thinking on how a modern chairman should operate and on the legal implications for the chairman’s role following the Greaves (One.Tel) case.

Policies
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