All articles in Volume 13 Issue 15

National reform: Have your say

5 Aug lead image

Australia is in the midst of an important debate about reforms that are urgently required to help the nation meet the challenges it is likely to face in coming decades. Directors are in a unique position to contribute to this debate and the Australian Institute of Company Directors intends to participate in it on the behalf of our diverse membership.

As a first step in this process, we will be participating in a National Reform Summit being held in Sydney on 26 August. Our bi-annual Director Sentiment Index gives us an indication of the views of our members in relation to issues on the summit agenda, including tax reform, the impact of low productivity and the infrastructure deficit. To help us gain an even better understanding of your thoughts, we’re inviting all members to take part in a short survey.

The information we gain from the anonymous poll will help us frame our contribution to the summit so that it adequately represents our membership as a whole. The poll consists of five short questions in which we ask you to rank your priorities for reform in a number of different areas.

Importantly, one of those areas is the governance of the nation. Many of the issues faced by Australia are long-term issues that require the same focus that directors exercise as part of their board responsibilities. We thus hope to imbue the national reform debate with a recognition of the value of robust governance principles.

The 80 participants in the summit will include representatives from the Business Council of Australia, the Australian Council of Social Service, National Seniors Australia, the Australian Chamber of Commerce and Industry, and the Australian Council of Trade Unions.


ATO issues guidelines for boards

The Australian Taxation Office’s (ATO’s) 'Tax risk management and governance review guide' has been published with a specific section on board-level responsibilities.

The guide is mainly aimed at large and complex companies, but also has some additional information for small and medium companies. The guide has specifically targeted two levels – board and managerial.

The board-level responsibilities may be familiar to most directors of large companies but they do offer an insight into the ATO’s view of how directors’ responsibilities regarding tax matters should be considered.

It suggests that at the highest level the board endorses a “formal tax framework that is understood across the organisation”. It suggests that better practice is to also have such a framework published in the annual report. The ATO also suggests that the board formalises director responsibilities for tax risk management including forming a tax risk committee or allocating that responsibility to the risk committee.

Referring to the skills matrix as discussed in the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations, the ATO suggests that gaps in director knowledge (presumably tax in particular) are mapped and then addressed with ongoing education.

There are several other suggestions on better practice, such as producing “board (or sub-committee) minutes or documentation that demonstrate members have been briefed on the effective tax rate of the business, including whether the amount of tax paid aligns with business results and, where relevant, reasons for significant misalignment.”

Given that most large public companies already provide a financial reconciliation between the normal corporate tax payable (prima facie tax at 30 per cent) and total income expense, it would suggest that this guideline is directed at the “foreign multi-national corporations conducting business in Australia”.

Such a reconciliation should be available to all directors of any size organisation as part of normal internal financial reporting. However, use of the term “business results” would also infer that there would be results other than profit, which should be considered when considering the effective tax rate.

For more, click here.


5,000 charities to get “red mark”

Over 5,000 registered charities will be tarnished with a “red mark” for failing to lodge their 2014 Annual Information Statements (AIS), the Australian Charities and Not-For Profits Commission (ACNC) has announced.

The announcement comes after numerous calls from the not-for-profit (NFP) regulator calling on charities to meet their required reporting obligations or face the consequences. The current statements are now six months past the nominated lodgement date of 31 January 2015.

It is an ongoing annual requirement that charities lodge their statements within six months of the end of the 1 July to 30 June financial year to preserve their charity status with the ACNC and to maintain an accurate listing on the ACNC Charity Register.

Registered charities that fail to lodge their AIS within the correct timeframe will now have their listing noted by a “red mark” of non-compliance.

The register is an important tool that receives hundreds of thousands of views each year from the public, donors and grant makers who can evaluate a charities work and financial status with a view to volunteering or making a financial donation or grant.

ACNC Commissioner, Susan Pascoe AM FAICD, said: “The ACNC had a duty to the public to make it clear when charities were not doing the right thing. The ‘red mark’ for those charities that are six months overdue in their reporting helps the public identify charities that are not meeting their obligations.”

Charities that fail to submit their statements for two consecutive years can face losing their charity status. Recently the ACNC revoked the status of over 5,500 charities that had not completed both the 2013 and 2014 AIS, which means they can no longer access Commonwealth charity tax concessions.

Phil Butler, sector leader, NFP at the Australian Institute of Company Directors said the uncertainty surrounding the future of the ACNC earlier this year may have caused some charities to put their reporting duties on the backburner.

“The current government has determined that the abolition of the ACNC is not a priority, therefore the regulator is to remain for the foreseeable future. “Therefore charities should ensure that they meet their compliance duties and submit their statements as soon as possible. I encourage any charities encountering difficulties with the Annual Information Statements to contact the ACNC as it is there to help with the process.”

Charities can check their reporting due date by viewing their charity’s entry on the ACNC Charity Register at www.acnc.gov.au/findacharity


More disclosure required on mental health

A report commissioned by the Australian Council of Superannuation Investors (ACSI), Workplace mental health and safety: Corporate risks and opportunities for financials, mining and utilities companies in the S&P/ASX 200 aims to start a conversation among investors and companies to raise awareness of risks and opportunities related to workplace mental health.

While a sizeable proportion of ASX 200 financials, mining and utilities companies have measures and commitments to implementing workplace initiatives such as wellbeing programs, flexible workplaces, training and development; barely a third of them publicly disclose research information on the effectiveness, or otherwise, of mental health and safety-related programs. This is in stark contrast to the very high disclosure rates for physical health and safety outcomes.

The report found miners working under the fly-in fly-out (FIFO) model are most at risk. Seventy nine per cent of metals and mining companies in the ASX 200 have FIFO workforces. The study found significant challenges associated with FIFO workforce mental health, however, only a third of these companies disclose details of initiatives to improve mental health through family-friendly rosters or other programs. Only a small proportion of companies disclose information on issues such as the use of employee assistance programs, employee, satisfaction levels, staff turnover rates, training data, absenteeism and overtime worked.

Compared to the UK and Europe, the ASX 200 financials, mining and utilities fall behind their international peers in regard to physical and mental health, and safety disclosure. Only 58 per cent of financials companies practice moderate or good disclosure compared to 87 per cent of industry peers in the UK and 73 per cent respectively in Europe.

ACSI’s chief executive officer, Louise Davidson, said that companies need to both identify and explain the risks relevant to them and their industry. In addition, they should explain how they are managing them, so investors can effectively price and evaluate issues as part of their analysis of existing and potential investments.

“A lack of reliable and comparable disclosure of corporate performance, beyond that contained in traditional financial reporting, can undermine effective communication of these longer-term measures of business success by company boards to their owners,” she said.

Professor Allan Fels, chair of the National Mental Health Commission also welcomed the report. “The ACSI research highlights the importance of companies measuring the success of their workplace mental health and wellbeing initiatives, to ensure good outcomes and to enable better investment planning,” he said.

The report outlines several suggested key actions for investors including:

  • Engaging the boards and senior executives of companies invested in to raise awareness of and improve disclosures on workplace mental health and safety.
  • Raising the issue of leadership support for de-stigmatisation of mental illness in conversations with the boards and senior executives of the companies in which they invest.
  • Requesting absenteeism rates, details on workforce satisfaction metrics and performance over time.

Full details on ACSI and its research publication are available at www.acsi.org.au.


ASX 200 companies feeling social

The investor relations (IR) task of listed companies in recent years has evolved to become a technically complex function demanding increased sophistication.

Traditional communication tools like analyst briefings and investor roadshows are mandatory communication events, however annual reports and annual general meetings are showing less investor engagement every year. Therefore, companies are employing new digital methods to speak with their current and prospective investors.

In terms of digital however, the spectrum of applications is increasing well beyond the previous “state of the art” website and webcasts.

A recent update to an ongoing benchmark study of S&P/ASX 200 companies by the Australasian Investor Relations Association (AIRA) has shown marked increases in the use of social media and apps.

The study shows that almost three quarters of respondents are either currently using social media to communicate with investors or may do so in the near future. From the social platforms available, LinkedIn was clearly the first choice for organisations and showed a fivefold increase from the 2010 benchmark. LinkedIn was followed in popularity by Facebook and Twitter, respectively.

Apps were also becoming an increasingly important element in the IR communications toolkit with 30 per cent of ASX 200 companies citing they had deployed or were thinking about deploying an app.

AIRA’s study also showed that although the percentage of ASX 200 firms using webcasts remained largely unchanged at 36 per cent, more than 50 per cent of these companies were now making them available in mobile applications, reflecting the increasing use of these devices to access content.

“The biggest drivers of the use of technology for investor relations is the phenomenal growth in the use of mobile devices for investors accessing company information,” said Ian Matheson FAICD, chief executive officer at AIRA.

“For that reason, as an absolute minimum, companies need to ensure their websites are responsive to all mobile devices. This is critical now that Google gives priority to those websites that are responsive to mobile devices.”

A responsive website is one that has the ability to adapt the content to properly fit the mobile device being used.

Matheson added that the growth of social media is also integral to the uptick in companies embracing social media, as although many may not fully engage in a two-way conversation with investors, at the very least, companies need to be aware of what is being said via these channels.

Further details on the study can be found here.


Older workers facing discrimination

The level of discrimination faced by older Australians has been highlighted in the nation’s first survey on age discrimination at work; with the highest incidence of age discrimination in the population aged between 55 and 64 years old.

Age and Disability Discrimination Commissioner, Susan Ryan said, The National Prevalence Survey of Age Discrimination in the Workplace survey found Australia has a long way to go to break down workplace cultures of age discrimination.

The results also suggest that discrimination is part of the culture of some workplaces and work practices. It is common for Australians aged 50 years and older to witness someone else experiencing age discrimination in the workplace. Further, a substantial number of employers and managers reported that they regularly take an employee’s age into consideration when making decisions about staff.

“The high prevalence of age discrimination in the workplace has obvious and lasting impacts on the health and personal financial security of those trying to get or keep jobs,” said Ryan. “The results show that over a quarter of Australians aged 50 years and over report that they had experienced some form of age discrimination in the last two years, and 80 per cent of those spoke of negative impacts.”

Michael O’Neill, chief executive of National Seniors Australia, said the results should be a wake-up call for policymakers and employers. He is urging businesses to address the issue.

The ageing population represents enormous opportunity, not just as employers, but also consumers. The over sixty-fives now represent some of the wealthiest consumers in the history of the nation. There is huge opportunity for business to market better services or new industries to this group.

O’Neill says not a lot has been done to combat ageism, however he believes the market and opportunities will inevitably drive business to make the most of this demographic which will dominate in decades to come.

“Culture will drive the change as they see this age begin to dominate. Companies either get on board or they’ll miss out. It’s important to have regulations in place that limits or prevents discrimination in any form. At the end of the day the biggest driver is the business model. There is an opportunity here and we need to make the most of it.

“Boards must recognise the value of diversity in the workplace,” he adds. “It’s not about employing just young or old or any other group. Older workers bring important experience, loyalty and ownership of task. If directors want to see this first hand, then go to the local Bunnings stores, where more than 25 per cent of employers are over 50. This is a diverse workplace which is effective and profitable.”

Read the full report here.


ASIC to undergo audit

The Australian Institute of Company Directors (AICD) has welcomed the Federal Government’s Capability Review of the Australian Securities and Investments Commission (ASIC) as a timely opportunity to review the focus, governance and funding of ASIC.

The review which is the first in 17 years , was announced by Assistant Treasurer Josh Frydenberg, and follows recommendations from David Murray's Financial System Inquiry report, which called for a review of the capability of all major regulators every three to five years. It will be headed by Karen Chester GAICD, full-time commissioner with the Productivity Commission; Mark Gray FAICD, former chief executive officer at the Queensland Treasury; and barrister David Galbally AM QC MAICD.

The panel will be supported by private and public sector personnel to evaluate how effective ASIC is in using its powers and examine how the regulator identifies and prioritises immediate and future risks. Consideration will also be given to how ASIC allocates resources between surveillance, education, policy, enforcement and litigation. Governance culture and the skills of its staff will also be examined.

“A well-funded and effective corporate regulator is essential for efficient financial markets and good corporate governance,” said John Brogden, AICD Managing Director & Chief Executive Officer.

“It is important to improve the clarity of ASIC’s responsibilities and determine the funding model that will give it sufficient resources to meet its extensive objectives.”

Brogden added that improving the commercial knowledge within ASIC would achieve more effective consultation between ASIC and the companies it regulates and help to avoid regulatory over-reach.

He also welcomed the commitment to consultation as part of the Capability Review.

“Improving consultation and understanding of business will assist ASIC in the performance of its regulatory functions. We welcome the ASIC Capability Review and look forward to playing an active role in its deliberations.”

The panel will provide a final report to the Government by the end of 2015.


AICD members join Takeovers Panel

The Australian Institute of Company Directors (AICD) members Karen Phin GAICD, Nicola Wakefield Evans MAICD and Bill Koeck MAICD have been appointed to the Takeovers Panel on a part-time basis. They have been joined by Stephanie Charles and Sarah Rennie. All members have been appointed until 29 April 2018.

The purpose of the panel is to provide a mechanism for peer review of takeovers activity, with the aim of being more efficient, less formal and more expeditious than the courts. The functions and powers of the panel are conferred by the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001.

The panel now has 43 members (including the president), all of whom are appointed on a part-time basis.

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Future Generation Global Investment Company (FGG) has announced the appointment of Belinda Hutchinson AM FAICD, Sarah Morgan GAICD, Sue Cato and Karen Penrose GAICD to its pro bono board.

FGG is based on the model of of Future Generation Investment (FGX ) launched last year and is being led by co-CEOs Louise Walsh and Chris Donohoe GAICD.

It is Australia’s first internationally focused listed investment company (LIC) and has the dual objectives of providing shareholders with diversified exposure to global equities and aiming to donate one per cent of the company’s net tangible assets each year as funding for Australian not-for-profits focused on youth mental health.

It will list on the ASX in September 2015.


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