All articles in Volume 13 Issue 18

PM Turnbull needs to deliver reform

John Brogden

Four Prime Ministers in four years is hardly something to be proud of. Let’s hope the elevation of Malcolm Turnbull provides stability to Australia and the opportunity for overdue reform.

Many commentators have argued that the change in leadership can provide a much needed boost to business and consumer confidence, however real reform needs to be delivered to make this a reality.

Malcolm Turnbull and his Government need a strong and stable vision for the economy and critically, adopt a bold agenda for tax reform.

Tax reform is unfinished business in Australia. Governments need to listen to the broad cross section of the Australian community calling for a broader, fairer tax regime.

The AICD supports a higher rate and broader base for the GST offset by tax reform across the States and Commonwealth.

What has disappointed many in the business community over a number of years is that issues are ‘taken off the table’ before all stakeholders have had the opportunity to debate them.

Although difficult and controversial, Australia needs to have a constructive debate on issues such as the GST and industrial relations policy if we are to continue our history of strong economic growth.

As a participant in August’s National Reform Summit, the AICD called on our political leaders to focus on four key areas:

  1. Improve the quality of national governance.
  2. Embark on a program of tax reform.
  3. Deliver a national infrastructure plan.
  4. Increase productivity and participation.

It is fair to say the business community views the change of leadership in a positive light, but unless real reform can be delivered, key economic indicators won’t improve.

John Brogden
Managing Director and Chief Executive Officer
Australian Institute of Company Directors


Private sector key to infrastructure growth

Treasury Secretary John Fraser has cautioned the private sector to be wary of slowing growth in the Asia-Pacific region, while encouraging it to play a “pivotal role” in infrastructure investment, trade liberalisation and policy reform.

“Growth has started to slow in some of the major economies in this region”, said Fraser. “We can’t put all of our eggs in the ‘Asia-Pacific basket’”.

Fraser noted the volatility seen in China since it liberalised its capital accounts, as well as slowing growth in Indonesia, South Korea, Singapore, Malaysia, Thailand and Japan.

He highlighted Australia’s recently signed free trade agreements with China, Japan and South Korea, as well as APEC’s Asia Region Funds Passport trade initiative, designed to provide investors with a wider choice of investment products in the Asian region.

Since his address, APEC finance ministers have signed the Asia Region Funds Passport Statement of Understanding and participating securities regulators are expected to enter into a Memorandum of Cooperation by the end of 2015.

Infrastructure investment and the private sector

Fraser highlighted the need for private sector investment in national infrastructure and commented that the private sector will need to play a pivotal role in meeting Australia’s infrastructure needs over the long term.

He suggested that organisations such as Infrastructure Australia and the Northern Australia Infrastructure Facility will help pave the way for private sector investment in new and existing infrastructure assets, including through concessional loans.

Fraser also mentioned Australia’s role in the Global Infrastructure Hub, which was set up by the G20 to increase global investment in infrastructure and build links between private sector investment and public infrastructure projects.

Since his address, G20 finance ministers and central bank governors have endorsed the Global Infrastructure Hub’s business plan. This is likely to increase global infrastructure capacity and begin matching potential investors with suitable infrastructure projects.

AICD’s role in the recent National Reform Summit

The AICD has recently been involved in the National Reform Summit, which has supported the prioritisation of and investment in national infrastructure projects to stimulate growth and productivity.

“The recent AICD Director Sentiment Index has shown that 90 per cent of directors believe investment in national infrastructure is too low”, said Rob Elliott, executive director of the AICD Governance Leadership Centre.

“Addressing this infrastructure deficit is a key priority for company directors as well as the governance of the nation.”

A recent poll in The Boardroom Report  also found that creating a set pipeline of infrastructure projects is a top priority among directors in promoting a national infrastructure plan.

For more information visit the AICD Governance Leadership Centre.


Shared value delivers benefits

Australian companies pursuing shared value strategies, or strategies with similar principles, are seeing both social and economic benefits as well as positive brand associations, according to findings from a report by Shared Value Project and Social Ventures Australia.

Gillian Turnbull, from Social Ventures, said the main purpose of The State of Shared Value in Australia 2015 was to understand the current state of shared value activities across leading companies in Australia. The survey targeted senior management (chief executive officers, and executives of corporate affairs, strategy and corporate responsibility) of S&P/ASX 100 companies.

The key benefits of a shared value approach include improved brand value, particularly among consumers and employees; as well as creating a competitive advantage for a company by encouraging more innovative solutions to traditional business challenges, or opening up access to new markets.

To be able to optimise advantages from creating shared value, said Turnbull, companies must ensure the shared value approach is fully embedded in their overall business strategy. There also needs to be clear measures in place to measure the outcomes and impact of the strategy, as well as a clear communication plan to share the approach and impact both internally and externally.

“If the board of a company wants to leverage the advantages of shared value, there is a clear role for them to play in setting the mission and vision for the company and driving the strategic direction to incorporate shared value creation at all levels of their business.”

Turnbull added that this then needs be communicated effectively within the organisation to ensure everyone is moving in the same direction. “The board also need to be clear about the targets they are expecting to achieve and to hold people accountable for reporting against these targets. Also, the board needs to establish a clear communication plan for sharing the results of any shared value strategy that achieves results.”

Commenting on the increased focus of shared value as a business strategy tool, Mark Kramer, author of Creating Shared Value, said the concept is one that has evolved from the traditional concept of corporate social responsibility. He said that a business using the shared value idea could make money by solving social problems and become a tremendous player in social progress.

“Companies have always engaged with society in terms of philanthropy. In the last few decades, they’ve been conscious of their sustainability and their corporate social responsibility,’ says Kramer. “Corporate social responsibility has to do with minimising the harms that a company causes in its operations. Shared value is different. Shared value is the role a company can proactively play in going out and solving social problems that either constrains the company’s growth, or gives it new product and market opportunities”

For more information, see The State of Shared Value in Australia 2015 Report.


NT directors’ liability reform

The Statute Law Amendments (Directors' Liability) Bill 2015 was passed on 26 August 2015 by the Legislative Assembly of the Northern Territory (NT) and will commence on a date yet to be fixed.

The legislation is the NT’s response to the Council of Australian Governments (COAG) directors’ liability reform stream under the COAG National Partnership Agreement to Deliver a Seamless National Economy.

The Australian Institute of Company Directors’ view

The COAG reform process was not designed to remove liability from directors who themselves personally commit or are involved in criminal conduct. The purpose of the reforms was to reduce the number of legislative provisions making directors “automatically” liable for the criminal conduct of the company, given that the acts of the corporation can be carried out by a large range of individuals without the director’s knowledge or involvement.

The AICD has been a strong advocate for change and has actively engaged with states and territories to drive progress by supporting audits and recommending a model directors’ liability provision.

The territory reforms follow similar reforms in New South Wales, Victoria, Queensland, South Australia and the Australian Capital Territory. Western Australia is also in the process of reform, with the Directors’ Liability Reform Bill 2015 currently before the parliament in Western Australia. While these reforms improve the landscape for directors, regrettably we continue to see variations across jurisdictions and the Northern Territory reforms leave plenty of room for improvement.

How does the bill affect directors?

The directors’ liability reforms under the Statute Law Amendment (Directors’ Liability) Act 2015 have relevance to a broad cross-section of directors in the Northern Territory. For example, the reforms impact small private companies and not-for-profit corporations as well as public companies.

The bill restores the presumption of innocence for directors in many pieces of legislation throughout the Northern Territory. However, the reforms retain two “Type 3” liability provisions, one in the Criminal Code and one in the Waste Management and Pollution Control Act. Type 3 provisions reverse the onus of proof and fail to uphold the fundamental legal principle that a person is innocent until proven guilty.

The AICD is of the view that the remaining Type 3 directors’ liability provisions should be removed. The AICD will continue to argue the case for these excessive provisions to be removed.  

While the AICD is of the view that further improvements should be made to the director liability provisions in the Northern Territory, the reforms are a step in the right direction and move the Territory closer to achieving a directors’ liability framework that is fair and appropriate.


ACNC quick tips for NFP AGMs

It’s coming into annual general meeting (AGM) season for not-for-profit (NFP) organisations and the Australian Charities and Not-for-Profits Commission (ACNC) has released a useful checklist to assist NFPs with compliance related issues and provide tips for a successful and productive meeting.

What to do

  • Check your charity’s rules or any legislation that applies to your charity to find out whether you must hold an AGM and, if so, whether there are any requirements you need to follow, such as holding it by a certain date or having it in a particular location.
  • Plan an interesting AGM. There are formal requirements that must be met, but AGMs can also be a great way to celebrate your charity’s successes, acknowledge the contribution of volunteers and inform and engage your members. Some charities invite a guest speaker or provide refreshments at the end.
  • Ensure you have enough eligible and suitable people who are ready to nominate for any vacancies on the board.
  • Arrange for someone to be in charge of the election (sometimes called a returning officer) to make sure a fair election is held and any rules are followed.
  • Have an agenda that covers all the requirements set out in your charity’s rules and any applicable legislation. This may include confirming the minutes of the previous AGM, presenting the annual report and financial statement (for some charities, financial accounts will need to be reviewed or audited before the AGM), electing members of your board and time for questions.

What not to do

  • Don’t miss the deadline for holding your AGM. If your charity is incorporated and cannot hold the AGM within the time required, contact your incorporating regulator to ask for an extension.
  • Don’t forget to write up the minutes as soon as possible after the meeting. If the secretary leaves or misplaces the notes, you may not have an accurate record of the meeting.
  • Don’t delay sending any forms required by your incorporating regulator and the ACNC. For example, you need to fill in forms that notify the ACNC about any changes to your board members or constitution. You may also need to submit annual financial and information statements; there is a fee for late submission.

Further information can be found on ACNC’s website


APRA consults on superannuation trustees

The Australian Prudential Regulation Authority (APRA) has released a consultation package on governance arrangements for APRA-regulated superannuation trustees.  

This package proposes amendments to APRA’s governance prudential framework in light of the Government’s proposed legislative amendments to require boards of registrable superannuation entities (RSE) licensees to have at least one-third of independent directors, including an independent chair. 

The package follows APRA’s letter of 26 June 2015, Governance requirements for RSE licensees: proposed amendments, which sought comment on APRA’s preliminary proposals to supplement the government’s proposed legislative amendments.  

Submissions in response to APRA’s June letter raised concerns about the lack of certainty in relation to the definition of independence, given substantial elements of the definition were, at the time, proposed to be defined in APRA’s prudential standards. 

The package released reflects this updated government position and the responses to APRA’s June letter. It proposes:

  • Amendments to Prudential Standard SPS 510: Governance and to Prudential Practice Guide: SPG 510 Governance.
  • A new draft Prudential Standard SPS 512: Governance Transition and Prudential Practice Guide: SPG 512 Governance Transition.

Commenting, APRA member Helen Rowell said: ‘The proposed changes support sound governance practices by RSE licensees. APRA’s proposed updates to its prudential framework will support RSE licensee boards as they move to this new governance environment.’ 

Once APRA receives submissions on the proposed changes to the governance arrangements, APRA will review those submissions, and subject to the passage of the proposed legislative amendments, expects to release the final prudential standards and practice guides in December 2015 with the standards taking effect on the date they are registered on the Federal Register of Legislative Instruments.

APRA invites submissions on the draft prudential standards and prudential practice guides by 23 October 2015.

For more information, visit the APRA website.


How to ask great governance questions

An ability to ask strong questions in board meetings is a critical director skill – and sometimes a terrifying reality for directors who are still learning about the organisation and its industry.

Putting a carefully considered question to management, in the right tone and balance, without dominating meetings, is an art that can take years to master.

Novice directors who try to grill management with questions quickly realise it does not help board meetings.

Another challenge is asking seemingly “dumb” questions in front of other directors or management. An emerging director might assume another director knows the answer, an approach that causes problems if directors have knowledge gaps around key issues.

In a recently released book for emerging directors, titled Eyes Wide Open, Robyn Weatherley AAICD provides advice for asking questions in board meetings. Weatherley was a founding member of the National Australia Bank’s Board Ready program.

Here are five tips:

1. Take from the best.

Study how other directors on the board ask questions. Consider how they are phrased, delivered and the level of detail.

2. Lead in with an apology or caveat.

Not every time, of course, but adding a briefly stated apology upfront can help frame awkward questions or those where the director is less confident.

3. Consider how you would like the question to be pitched.

Weatherley says new directors should analyse the board’s etiquette for asking questions, usually through the chair in well-run meetings. They might make eye contact with the chair or raise their hand slightly if they want to ask a question, to alert the chair.

4. Focus on quality, not quantity.

Some executives are irked when directors ask too many questions, or if the director is seen to be grandstanding.

Weatherley says new directors should look for cues from more established directors and consider which questions can be asked outside the board meeting.

Also, consider the potential response. If it is a detail-heavy question that requires a complex response, can it be sent separately to management via the chair and shared with other directors? “You are not compelled to ask questions at every meeting, on every paper,” Weatherley writes. “Some of the best directors ask very few questions.”

5. Consider the question tone.

Never ask questions in a bombastic, domineering or difficult tone, or use the questions to undermine the credibility of the respondent or other directors, says Weatherley. Keep a calm, professional tone and respect the sanctity of the boardroom and importance of directors working together to help stakeholders.


Minerals council offers Company Directors Course scholarships

The Minerals Council of Australia (MCA), in partnership with BHP Billiton and Downer EDI Mining, is once again providing scholarships for talented women in the mining industry to complete the Company Directors Course at the Australian Institute of Company Directors. 

The scholarships are an initiative by the mining industry to encourage more female participation on mining company boards by increasing the pool of board-ready women. This year, four scholarships are available.

The Company Directors Course provides participants with a comprehensive understanding of the major challenges facing company directors in today’s business environment, as well as equipping them with the skills and knowledge necessary to effectively undertake the duties of a company director.

Applicants wishing to apply for the scholarship must be nominated by an MCA member or MCA associate member company.

Applications close on Friday 25th September 2015.


Billabong director steps down

Billabong International has announced the resignation of director Matthew Wilson due to a potential conflict of interest in Oaktree’s investment portfolio.

Alternate director for Wilson, Thomas Casarella has also resigned.

Wilson joined the board in November 2013 and his departure follows Billabong’s first full-year profit in five years.

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The GPT Group has announced the resignation of chief investment officer, Carmel Hourigan, who is leaving to become the global head of property at AMP Capital.

She replaces Adam Tindall GAICD who will step up as managing director of AMP Capital position when Stephen Dunne GAICD retires in October.

Hourigan has held senior positions at Lend Lease Challenger and Colonial First State. She is also the vice-president of the Property Council of Australia.

Hourigan’s departure follows the announcement in April that chief executive officer (CEO), Michael Cameron FAICD was stepping down after six years leading the firm to become the group CEO and managing director for Suncorp Group.

He was replaced by Bob Johnston, former managing director at property development firm, Frasers Australand.


Boardroom Report disclaimer: The opinions in Boardroom Report do not necessarily represent the views of the publisher nor the publication. Every effort has been made to ensure accuracy, but no responsibility is accepted for errors. All rights reserved.