The age of compliance: is your company ready to adopt the new ASX Corporate Governance Principles and Recommendations?
By Michelle Eastwell and Melissa Grundy
- The ASX Corporate Governance Council released the Fourth Edition of the Corporate Governance Principles and Recommendations on 27 February, 2019.
- The Principles are non-prescriptive, recommended principles made by the Council that govern all listed entities’ internal systems and processes to achieve good governance outcomes and promote investor confidence in the market.
- If a listed entity has a financial year ending 31 December the new Principles will come into effect for the financial year ending 31 December 2020. Listed entities with a financial year ending 30 June will have the new Principles come into effect for the financial year ending 30 June 2021.
The ASX Corporate Governance Council in releasing the 4th Edition of the Corporate Governance Principles and Recommendations hot on the heels of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry: Final Report delivered to us by the Hon Kenneth Hayne AC QC provides a powerful mandate for all Australian boards to drive leading practice corporate governance.
‘Would you tell me, please, which way I ought to go from here?’ Alice said to the Cheshire Cat. ‘That depends a good deal on where you want to get to, said the Cat. We are all familiar with this sage advice from a fictitious cat and now we are left in no doubt which road Justice Hayne wants Australian corporations to travel – he makes it all very clear in his final Banking Royal Commission Report and there are very strong messages around board oversight.
At its annual general meeting yesterday, 33.4 per cent of ANZ’s investors rejected its executive remuneration report – well over the 25 per cent threshold required for a first strike. The ANZ Board is a relatively low scorer compared to Westpac where 64.2 per cent of investors rejected their bank’s remuneration report at the annual general meeting last week. The prize, however, for the biggest backlash against a remuneration report goes to NAB which scored a record 88.4 per cent rejection by its investors yesterday.
Boards have rights. A right to information, a right to question management, a right to dictate the quality of the information, how it is presented and the analysis expected. A right to seek external professional advice and a right to ensure the organisation they govern has the right people with the right skills. Importantly, boards have these rights in order to make decisions – not just any decisions, defensible decisions. However, there is one right boards consistently forget – that is the right to say no.
How long does it take for a new director to form a view on the operation of the board they have just joined? It’s a question that was posed by the senior counsel assisting the banking royal commission to the Commonwealth Bank (CBA) Chair Catherine Livingstone yesterday. According to the Chair, you need to see a full cycle of the meetings and activities of the board.
Dr John Laker AO in the (AFR 15 November 2018 – Regulators can’t fix bank culture: Laker) reinforces what many like me have been saying and no doubt others have wanted to say about the board’s responsibility for organisational culture. Laker says “…organisational culture is squarely the responsibility of boards, in the first instance…”.
Do we expect our boards to be role models? Will the current behaviour we have seen and continue to see identified in Royal Commissions and Inquiries have an impact on young people in society? Can boards in the financial services sector turn around the damaging lack of trust we continue to see displayed daily, despite the Banking Royal Commission.
Congratulations to David Locke, a good friend of Effective Governance, the Chief Executive Officer and Chief Ombudsman at the Australian Financial Complaints Authority (AFCA) which commenced operations today, Thursday 1 November 2018. David knows the value of good governance, robust ethical culture and providing high quality service to consumers of financial products.
Diversity is a topic that is bound to generate discussion. There are countries such as the UK that require data to be published on the number of women in management roles as well as the gender pay gap. This makes for great discussion, but for a middle aged man why should I really care, the current system is good for me … right?