All articles in Volume 13 Issue 13

Australia’s future workforce

8 July imageCEDA has just released a major research report Australia’s future workforce? which focuses on the jobs and skills required to ensure the nation’s economy continues to grow and diversify.

Technological change is described as being a threat that may “radically reshape the workforce of tomorrow” and that “it remains to be seen whether it will generate a net increase in employment and wealth within Australia or if the labour market benefits will be dispersed.”

CEDA suggests that modelling shows almost five million jobs face a high probability of being replaced while a further 18 per cent of the workforce will see their roles eliminated.

The ever-increasing reports of technology impact and big data loom large in the report, as does the impact of the shifting “economic gravity”, climate change and the ageing population.

The report includes contributions from 25 leading researchers and thinkers who describe the forces of these changes. Professor of political economy at Stanford University School of Business and expat Australian Steven Callander, posits that Australia faces a strategic dilemma – how can we become more innovative?

Callander describes how Australia has historically imitated technological and process innovations yet had few breakthroughs. Put simply, we are an “exploiter” rather than an “explorer”, but this strategy is losing its value. The commodity expected to be most scarce will be ideas, but he adds that whoever owns those ideas will reap supersize rewards.

Professor Callander makes several policy recommendations:

1. Create liveable cities – workers who produce ideas capable of being sold on the global market live where the living is good. Australia has a natural advantage here.

2. Create great universities – the link between strong educational institutions and economic development is tight.

3. Mandate a small fraction of superannuation funds to be directed to “support entrepreneurial ventures”.

4. Adjust competition policy to recognise and encourage the small players that often drive technological innovation.

Reform the institutions of Australian legislative government – including the abolition of the Federal Senate or removal of elements of proportional representation, which he cites as creating legislative gridlock and political dysfunction.

Callander concludes: “Our previous strategy of exploitation may lead us into a rose-coloured view of our current level of sophistication. It is imperative that this does not lull us into a false sense of permanency – or entitlement – as a member of the global economic elite.”

The full report can be found here.

Senate passes ESS laws

The Minister for Small Business, Bruce Billson, is “pleased to see the Senate pass new laws to improve employee share schemes and provide the start-up sector with a massive boost”.

The Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015 took effect from 1 July 2015. Put simply, options were previously taxed when vested to the employee. This meant employees were hit with a substantial tax liability upfront, even though there was often no material way to pay, for example, by selling the underlying share.

Most significantly, the change means the tax on the options can be deferred for up to 15 years or until the option is converted to a share, when the value can be easily calculated.

Many commentators in the start-up sector have lauded the changes, which have been mooted for up to six years. Many suggest that high potential start-ups have moved offshore in the past to achieve employee participation and that this change will lead to keeping many more start-ups in Australia. Of course it means that the potential wealth generated by such start-ups will be shared with many of the key employees of the businesses and that it has been seen that often this wealth is used to generate further successful start-ups.

Negative commentary has mainly focused on the fact that the tax breaks are only for small start-ups. Excluded specifically are listed companies, those with turnover in excess of $50 million or those that have been incorporated for more than 10 years.

It is viewed that these exclusions will disadvantage many of Australia’s high-growth start-up companies.

The legislation details exclusions and conditions, which mean that expert advice may be required to ensure scheme compliance.

To learn more about the Australian Institute of Company Director’s position on this issue, read our policy submission.

Gender diversity pushed higher

The Tasmanian Government has moved to increase the number of women on government boards and committees by setting a target of 50 per cent by July 2020.

Details of the target were outlined in its revised document Women on Boards Strategy 2015 – 2020, which is aimed at addressing the gender imbalance of membership of government boards and committees.

Actions contained within the strategy aimed at increasing the number of women on government boards include:

  • From July 2015, all new boards and committees will have a target of 50 per cent representation of women.
  • From July 2015, appointments to all existing boards will need to factor in the target of 50 per cent representation of women as vacancies fall due and new members are recruited to fill them.
  • The Government will establish a member-only group on the social networking site LinkedIn. Women and men will be invited to join the group to receive advice about board vacancies, information about training and development, and invitations to attend networking events.
  • The Government will contribute up to $50,000 per year for three years towards the cost of scholarships for women to undertake training through the Australian Institute of Company Directors, including the Company Directors Course and Foundations of Directorship course. The department of premier and cabinet will develop guidelines for the administration of the scholarship funding.

Currently women hold 34 per cent of government board positions in Tasmania, while 120 of the total 960 Tasmanian government boards already have 50 per cent or greater representation of women.

The announcement follows a proposal put forward by a group of crossbenchers into parliament in recent weeks, that would require at least 40 per cent of all seats on government boards to be filled by women.

The private bill requires Commonwealth officials making appointments to government boards of more than four directors, to ensure that each board is made up of at least 40 per cent men and at least 40 per cent women.

This bill also requires each portfolio department to prepare a report each financial year setting out information relating to the gender composition of government boards within that portfolio.

The Minister for Women must then publish a consolidated report setting out the statistics regarding gender composition across all government boards.

While this has been an “aspirational” government policy for several years, the bill, if enacted, will give the policy legislative effect.

To read the full strategy document, click here.

ASIC updates guidance

The Australian Securities and Investments Commission (ASIC) has released updated regulatory guidance for investors to help them in taking collective action to improve the corporate governance of listed entities.

The guidance – which follows ASIC consultation launched in February 2015 – has been published as Regulatory Guide 128 Collective action by investors (RG 128).

RG 128 includes:

  • Illustrative examples of conduct which is unlikely or more likely to trigger the takeover and substantial holding provisions.
  • An outline of ASIC’s approach to enforcement of these provisions in the context of collective action by investors, which includes considering whether the conduct is control-seeking, rather than simply promoting good corporate governance.
  • An overview of some other legal and regulatory issues that can arise in relation to investor engagement.

As part of this policy update, ASIC has also discontinued class order relief that facilitated voting agreements between institutional investors as it does not reflect the way institutional investors tend to engage with entities and has not been used for many years.

Commenting on the updated guidance, ASIC commissioner John Price said: “Effective investor engagement forms the foundation of good corporate governance and can enhance the long term value of companies.

“Our guidance details how investors can effectively influence the corporate governance of the companies in which they have invested collectively without contravening the principles underlying takeovers and substantial holding provisions of the law.”

To learn more about the AICD’s position on this issue, read our policy submission.

Greater independence needed

The Australian Financial Review has reported that 140 new independent directors and up to 40 chairs will change under the draft legislation released by the Federal Government affecting not-for-profit (NFP) superannuation funds.

The retail funds already require that their boards have a majority of independent directors and an independent chair.

The NFP funds have countered that the returns to their members have been superior to for-profit funds and their mandate of “member interests first” would indicate quite strongly that the current governance system is working well. They point to the fact that according to the latest SuperRatings Fund Crediting Rate Survey all but one of the 20 top-performing funds over the last decade are NFP funds.

Potential independent directors and chairs will of course need to ensure that they can be confident of maintaining this level of performance.

The Australian Institute of Company Directors (AICD) has noted that short-term fund returns are not the only measure of good governance.

“Good governance provides for the long-term stability, sustainability and profitability of an entity. It should give investors the confidence that their assets are not just safely managed today but will be able to generate a steady, reliable income stream as they retire in the decades ahead,” commented John Brogden, CEO of the AICD.

NFP directors not ready for future

A recent study carried out by Grant Thornton and Pro Bono Australia reveals a majority of not-for-profit (NFP) directors do not have the financial literacy skills to meet the challenges of the future.

A total of 1,065 respondents were surveyed from many NFP sectors and while almost 60 per cent believed boards had the financial literacy to satisfy current needs, only 40 per cent believed their boards had the necessary skill for future needs. Director education was cited as a way to “bridge the gap” and where it had been undertaken, the skill levels were higher than average.

Both boards and management agreed that financial literacy skills were extremely important for boards. On a scale of one to five, with five being more important, the average importance rated at 4.7 out of 5.

When both directors and management rated the performance of their board against the criteria, the ratings fell to between 3.5 and 3.9 depending on the size of the NFP.

The study also measured board performance along different criteria. For example, paid boards were considered stronger than unpaid boards.

The study highlighted some concerning findings in that 22 per cent of director respondents said they were “completely reliant” on a subgroup and 22 per cent were “completely reliant on management for finance matters”.

In facing future challenges, the area of most concern regarding board financial skills was directors’ lack of understanding of the risks associated with plans for new revenue streams. These skills were considered moderate at best.

The report concludes that “there is a need to improve the financial literacy of NFP boards” and that most respondents believed this responsibility rests with each individual director. However, only 36 per cent of organisations included financial training in their induction process and only 18 per cent had access to training programs (either internal or external).

It was suggested that NFP board evaluations should also include an assessment of financial literacy skills to help identify needs.

The report is available here.

We asked and you replied

In our last issue, we asked members to respond to a survey relating to the Productivity Commission’s proposal that company directors be allocated a director identity number (DIN).

We’d like to thank the 225 members who responded to the survey. Approximately 67 per cent of those members supported the Productivity Commission’s proposal.

In contrast, the main reasons given by the respondents who objected to the Productivity Commission’s proposal were that:

  • It would increase the administrative burden on directors.
  • There was insufficient information about the potential costs and benefits.
  • Rogue directors would inevitably find ways to work around the system.

Some members who objected to the proposal stated that they would support it if directors’ personal information (such as residential addresses and dates of birth) were no longer made publicly available on the ASIC register.

The Australian Institute of Company Directors has since provided its submission to the Productivity Commission in response its draft report on business set up, transfer and closure. The submission addresses the proposed allocation of DINs (including the results of the survey) and also the amendments proposed by the Productivity Commission to Australia’s corporate insolvency regime. A copy of the submission is available here.

The Productivity Commission’s final report is expected to be handed to the Australian Government in August 2015.

Netscher joins St Barbara

Gold explorer and producer, St Barbara, has announced the appointment of Tim Netscher MAICD as non-executive chairman.

This announcement follows the retirement of two long-serving directors, Colin Wise FAICD, non-executive chairman since 2004, and Doug Bailey, non-executive director and chairman of the audit and risk committee since 2006.

Both retired from the board on 30 June 2015 and Netscher assumed his position on 1 July.

It is intended for the time being to maintain a board of four directors, including managing director and CEO, Bob Vassie GAICD. Kerry Gleeson FAICD will replace Tim Netscher as chair of the remuneration committee, while David Moroney replaced Doug Bailey as chair of the audit and risk committee on 25 June 2015.

Surf Life Saving Australia has appointed Melissa King as its first female CEO.

King was previously general manager of communications and business development at Surf Life Saving Australia and was responsible for the external relations, marketing, fundraising (commercial and philanthropic) and partnerships for the national body.

King will replace Greg Nance who retired at the end of June 2015.

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