FOR IMMEDIATE RELEASE
Sydney, Thursday 2 November, 2006
High level principles equal better governance, say Australia’s directors
The Australian Institute of Company Directors (AICD) welcomes the opportunity raised by the ASX to move towards a more principles-based governance regime, as contained in the exposure draft of the revised Principles of Good Corporate Governance and Best Practice Recommendations released today by the ASX Corporate Governance Council.
“While the AICD is broadly supportive of the existing principles, it holds serious concerns that the large amount of associated commentary and guidance is onerous, costly and amounts to pseudo-regulation, which in its current form does little to improve governance standards,” said AICD chief executive officer Mr Ralph Evans.
“It is the principles that matter, and companies’ disclosure on how they are meeting them”
“The effectiveness of the governance framework is too important for the Australian economy to let it become choked by red tape and multiple agendas.”
“AICD calls on all directors and leaders in the business community to express their views directly to the ASX and its Corporate Governance Council,” Evans said.
AICD has identified specific proposals likely to create more problems for Australian business.
Risk (Related to Principle 7) - The approach to managing many risks is commercially sensitive by nature. Any requirement to disclose risks and what is being done to manage them places companies at a severe competitive disadvantage, and may clash with the duty of directors to act in the best interests of the company. Further, it provides investors with the unrealistic expectation that disclosure creates a virtual ‘risk free’ investment environment. This is not desirable.
Corporate Social Responsibility (CSR) (Part B of the Consultation Paper) - AICD believes expanding the scope of guidance on corporate responsibility/sustainability issues beyond risk is impractical. Moving CSR reporting beyond a risk framework makes it unworkable. Rather than encourage companies to take CSR seriously, it risks evolving into a ‘tick-the-box’ compliance activity – something AICD has sought to prevent.
(1 of 2)
Executive Remuneration (Recommendation 9.3) - The suggested change is being proposed largely because of perceived inadequacies in Listing Rule 10.14. If there is a problem, the matter must be addressed at the source – the listing rules. The review of governance principles and practices should not be subverted to address anomalies in other areas.
AICD will be consulting members for their feedback through a range of activities including online discussion forums and member events across Australia. It will make strong representations to the ASX endorsing a wholesale review of the framework. It urges companies and directors to make their own submissions as well.
For media inquiries please contact:
Rachael McCavanagh, AICD, on 02 8248 6645/ 0422 864686
END.