Vol 7 Issue 13 July 15 2009

  • Date:15 Jul 2009
  • Type:Boardroom Report

Towards a new regulatory framework

How can regulators fix the problems that have caused the global financial crisis? Ethiopis Tafara, director of the Office of International Affairs at the US Securities and Exchange Commission, provided some suggestions at the International Corporate Governance Network conference in Sydney yesterday.

He noted history would show that the current turmoil resulted from the system having failed to adapt to fundamental changes in the modern financial market. These changes were its global nature and the resulting mobility of capital; significantly increased competition amongst financial service providers; the elimination of differences between historically separate financial products, sectors and actors; and the development of a large and relatively liquid, unregulated institutional financial market paralleling the regulated markets.

Same standards needed for institutional investors

While Australia’s institutional investor community was successful and sophisticated, it did not hold itself to the same standards of transparency, accountability or responsibility that it expected from its public companies.

These were the views expressed by Elizabeth Bryan, chairman of Caltex Australia and UniSuper and a non-executive director of Westpac and AICD, at the International Corporate Governance Network (ICGN) conference in Sydney yesterday.

Call for improved communications

Both boards and investors carry an equal responsibility for improving communications and dialogue between them, Charnchai Charuvastr, president of the Thai Institute of Directors Association, noted yesterday.

Addressing the International Corporate Governance Network conference in Sydney, he said: “When you have a crisis in confidence, I believe that communication is the quick step to restoring that confidence, especially with our shareholders and investors. Long-term investors will demand more open and frequent communications and boards need to change their philosophy to see this as a constructive influence... The fact that we didn’t hear much from the boards of companies like GM, AIG and Lehman Brothers leading up to their historic failures is an indication that there is room for improvement.”

Overcoming barriers to M&A success

Directors need to prepare themselves for a likely pick up in merger and acquisition (M&A) activity over the next year as companies go looking for underpriced takeover targets and industries face consolidation.

Hay Group’s latest global M&A study shows that almost 90 per cent of Australian and New Zealand organisations are predicting a rise in cross border deals in the future, compared with just 43 per cent internationally.

 

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