Since the findings of the Hayne Royal Commission, many Boards and their members would have reflected on their effectiveness and thoroughness in addressing a myriad of issues associated with their relationships with customers, suppliers, shareholders and staff.
The spotlight of the Royal Commission also shone on the role of regulators, and their intent in the period ahead became widely discussed and publicised.
The Australian Council of Superannuation Investors (ACSI) in their review of corporate governance have put forward a number of suggestions including the prospect that Directors face annual elections.
In their most recent report ‘Towards Better Corporate Accountability’ of April 2019, the Australian Council of Superannuation Investors (“ACSI”) put forward four key policy proposals:
- Introduce a binding vote on remuneration policy every three years
- Disclose CEO pay ratios to shareholders along with an explanation of how the ratio supports the company’s values, strategy and culture
- Introduce annual elections for Directors of listed companies
- Give shareholders the right to bring resolutions to company meetings
APRA recently released an information paper addressing self-assessment of governance accountability and culture.
Among many observations, APRA’s report states, “Whilst most institutions meet APRA’s expectations for depth and challenge, only a few self-assessments identified new insights. Assessments often identified a range of weaknesses or opportunities to improve risk management practices, however these were in the main reported to be already known to Boards and leadership teams …… The extent of issues raised in self-assessments, accompanied with lengthy lists of planned actions, also suggests that many institutions have yet to develop a clear understanding of what factors have caused weaknesses to manifest and persist.”
Overlaying the observations of ACSI and APRA, we also note recent observations by the Australian Institute of Company Directors, particularly in relation to Board capability, as well as observations arising from the Hayne Royal Commission and ASIC in relation to culture and the criticality of the Board in ensuring that the organisation’s culture was appropriate in a wider stakeholder environment than might have traditionally been embraced.
We have also noted the emerging focus on ESG and the increasing emphasis on, and breadth of, risk oversight. Directors today must ensure that investors’ expectations are not lost in this flurry of perfecting the Board and refocusing its attention.