Policy Update

  • Date:01 Oct 2013
  • Type:Company Director Magazine
A monthly review of the Australian Institute of Company Directors’ policy and advocacy team’s key projects and issues.

Deregulation priorities
We congratulate Prime Minister Tony Abbott and the Liberal National Coalition on their election victory. We hope he and his team grasp the chance to implement reforms that will deliver on promises to improve the business operating environment.

The new government’s immediate priorities should include reducing the burden on business of excessive regulation, reducing the liability burden imposed on company directors by legislation and improving the relationship between government and business through better consultation.  

We look forward to working with the new government to implement its deregulation agenda and achieve real outcomes that make Australia a better place in which to do business. Achieving this will encourage productivity, promote business and drive investment and job creation that, in turn, will produce the revenue required to provide government services. 

Building state networks
In August, we visited Darwin and Hobart as part of our government relations initiative, the Director Insights series. It seeks to foster a dialogue between the director community and political leaders, giving them an opportunity to discuss the role Australia’s 2.2 million directors play in our economy and their contribution to wider society.

In Darwin, general manager of communications Steve Burrell and Northern Territory division manager David Spear met the Northern Territory’s Chief Minister and Attorney-General. In Hobart, Tasmanian division president Derris Gillam, Tasmanian manager Cathie Goss and members of Company Directors’ senior executive team discussed issues of concern to directors with the Opposition leader and members of the Coalition shadow ministry.

Among the issues discussed in Darwin and Hobart were director liability reform, COAG reform, deregulation, productivity and not-for-profit reform. Board diversity and the importance of improved consultation between government and business were also discussed. These activities form a vital part of our advocacy as we continue to represent our members.

ASA discussion Paper
Last month, we made a submission to the Australian Shareholder Association (ASA) in response to its 2013 policy discussion paper. 

We understand the paper will form the basis of ASA’s monitoring activities of ASX-listed companies in terms of governance practices in the next reporting season. However, its intended purpose and audience seem to be confused.

On one hand, it appears to be a communication to ASA’s members as to what ASA will be looking at when it makes voting decisions. But, for the most part, its positions set rigid standards that define what constitutes good governance and the roles of companies, boards and directors.

In our submission, we noted that while we have no issue with ASA providing guidance or advice to its members, we strongly support a principles-based approach to corporate governance and do not support the mandating of corporate governance practices. Most of ASA’s policy positions in the paper are, in our opinion, overly prescriptive and inflexible, which is inconsistent with the widely accepted view that there is no “one size fits all” when it comes to corporate governance. This approach also fails to recognise the range in size and diversity of ASX-listed companies. In many instances, ASA’s policy positions in the discussion paper are also out of step with what is widely considered to be good corporate practice in Australia.

Company Directors has long endorsed the ASX Corporate Governance Council’s “if not, why not” reporting regime. It recognises the evolving nature of corporate governance and that there “is no single model of good corporate governance”. By taking an inflexible line on governance, ASA risks making unreasonable voting decisions that don’t take into account a particular company’s circumstances. The application of some of ASA’s policies may also lead to the destruction of shareholder value, rather than its enhancement.

While we objected to the overly restrictive approach taken on most policies in the discussion paper, we also made specific comments on the following individual policy areas:

  • Composition of boards, director tenure and independence.
  • Election of executive directors.
  • Board committees.
  • Board audit committees.
  • Director equity holdings.