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CPA Australia Governance in Practice (Governance success factors (Board…
CPA Australia
Governance in Practice
Governance success factors
Diversity
(Fairness and Performance)
Board Diversity
Board appointment and Cessation
Board Appointment
Natural Person >18 years old
Currently not disqualified from managing a corporation
No former qualification required but often an expert in a particular field
!!! Issues
Traditionally strongly influenced by the board
Should be nominated by the nomination committe
Some position hold little value
Shareholders have little options
Legally appointed by the Shareholder
Director may appoint a board member and get ratification from shareholders in the next annual general meeting
De-staggering
and
Staggered
Financial Reporting Council (FRC) UK -
Corporate Governance Code
All directors of FTSE 350 subject to shareholder's vote every year
United States Approach
Annual vote for all directors is very common
Three year 'Staggered vote' Cycle
1/3 of all directors every year must resign and face new election
De-staggering vote
All directors resign and face new election
Still need an appropriate degree of continuity
Australian Approach
ASX 14.4 exempt managing directors from an election
Director no longer considered as independence after 10 years
!!! Issues
Exempted directors never face a shareholder election
Old and Weary directors cannot bring new ideas to the compancy
Boardroom often resistant to change
Excessive 'continuing appointment' - same people gets elected again and again
Directors still to loss independence
Kiel and colleagues
1 year = inexperience
2-3 years = utilise full skills of the director
5 years = entrench
Departure
#
Informed via ASX
Informed by APRA (financial institute)
Real reason of departure is often hidden (Bosch 1995)
Removal
Two-strike Rule - spill the board
Disqualification
Civil Wrong
Financial market misconduct
Responsible for multiple insolvency
Significant dishonest conduct and Corporate crime
Anti-competitive civil/criminal wrong
Procedures
Automatic (typically 5 years)
Court Order (as long as 20 years)
Prescribed by Regulatory Bodies (ASIC or APRA)
Operational Issues
Employee
OHS
Worker's compensation claim (Safe Work Australia 2015)
Pay and working conditions
Weak bargaining position
Superannuation
At mercy of employers (If without legal protection)
Annual Leave
AUS & UK - four weeks minimum
Singapore - 14 days after 8 years of service
US - two weeks optional
Whistle-blower
Employee's Obligation to employer
Regular Attendence
Confidentiality
Care of employer's property
Respect other workers
OECD Principles
Countries should make law to protect workers
Basic Health Care
Basic working condition
Basic rate of pay
Leadership model
- Long term benefits
Trade & Labour Union
Collective Bargaining
Industrial Action
#
Go-slow
Work-to-rule
Strikes
Audit and related regulation
Independent External Auditor
International Standards on Auditing
Required to express an opinion
Compliance
Objective and relevant
International Financial Reporting Standards
Professional Judgement
PwC and Centro - Auditor liability
Internal Auditor
Lack of independenc
Pressure under senior management
Proof, Penalty and Redress - Civil & Criminal
Impact of Legal System on the Corporation
Competition and Protecting markets
Corporation and financial markets
Consumer and Customers
Unconscionable Conduct
Governance issue in the non-corporate Sector