Advocacy

The AICD’s advocacy team represents the interests of members in public debate and to governments.

ASIC funding model

We recently provided our views to Federal Treasury about a proposed industry funding model for the Australian Securities and Investments Commission (ASIC).

The AICD agrees in principle that an industry funding model may be an appropriate mechanism to ensure that ASIC has the necessary financial resources to perform its regulatory and oversight role in the capital markets.

However, it should be acknowledged that any industry funding may ultimately be passed on to consumers as these fees and levies are likely to be incorporated into the cost base of corporate entities.

Once the nature and extent of the funding model has been agreed on, we believe an additional process is required to put in place the appropriate performance management metrics to ensure ASIC manages its costs in a transparent way.

Some have questioned whether the market participants that ASIC have oversight responsibilities for, should be responsible for funding the regulatory activities of ASIC. They are concerned that this change in relationship may impede ASIC’s independence and that certain market participants may be able to assert undue influence on the regulator. It is important that when developing this model, these concerns are addressed and that appropriate measures be put in place to minimise this risk.

Due to the significant changes proposed in the consultation paper we have recommended that the transition period should be extended beyond the three years proposed.

Director penalties and super funds

The AICD has called on the Federal Government to reconsider a proposed penalty regime for the directors of superannuation trustee companies recommended by the Financial System Inquiry and agreed to by the Government in its response. It is the view of the AICD that the measures currently being implemented by the Government to improve the governance of superannuation funds are more effective and the case to introduce additional director penalties has not been made.

Our submission to Treasury in response to the recommendations made by the Financial System Inquiry in its final report indicated that the directors of superannuation trustee companies are already required to comply with the duties under the Corporations Act 2001 which apply to all directors, including directors of banks and other companies. There is no evidence that the avenues of redress already available to fund members if directors breach their duties are in any way deficient.

Superannuation governance

Proposed laws to boost the independence on the boards of superannuation funds are currently being considered by the Senate Economics Committee.

The AICD maintains its support for the Government’s legislation to require independent directors on superannuation fund boards because it will apply internationally accepted standards of governance to funds that have yet to embrace greater independence on their boards.

While mandating that one-third of the board be independent, the draft legislation also includes an “if not, why not” disclosure requirement that the board have a majority of independent directors. It also provides for a three-year transition period for funds to meet the new requirements. This allows flexibility for funds that are unable to the meet independence criteria immediately.

The proposed laws are important as they should give investors the confidence that their assets are not only safely managed today but will generate a steady, reliable income stream when they retire. It is the AICD’s view that the investment returns of a superannuation fund are not a litmus test for effective governance. Good governance instead provides for the long-term stability, sustainability and profitability of an entity.

30 per cent by 2018

Last month we released our first quarterly report that tracks progress around our gender diversity target for Australian boards. In April this year we called for all boards to ensure that at least 30 per cent of their directors are female and urged S&P/ASX 200 companies to meet this new target by the end of 2018.

As part of our commitment to ensuring that boards are focused on this issue, we are tracking the progress of ASX 200 companies over the next three years via our monthly statistics. We are also publishing the names of the companies that reach the 30 per cent target on our website, applauding their progress and encouraging other companies to emulate their efforts by recognising the wealth of existing female talent.

By the end of June 2015 there were 34 companies in the ASX 200 that had at least 30 per cent female directors. Interestingly, 96 companies only need one more female board member to reach the 30 per cent target, demonstrating that it is a realistic aim for 2018.