Reinforce the supremacy of the Principles and Recommendations Council urged

14 November 2013

Reinforce the supremacy of the Principles and Recommendations Council urged

The third edition of the Corporate Governance Principles and Recommendations must have a greater emphasis on promoting the key principle underpinning the guidelines — the ‘if not, why not’ approach which has established the guidelines as the pre-eminent good governance template for listed companies in Australia, the ASX Corporate Governance Council has been told.

In its submission to the Council, Governance Institute of Australia (formerly Chartered Secretaries Australia) points out that while there are many governance guidelines issued by multiple parties, none of these has been adopted as the key governance document by listed companies. The success of the Council’s guidelines lies in their acceptance that there is no ‘one-size-fits-all’ governance framework, but also their relevance and the fact that they meet the needs of investors in seeking greater transparency and companies trying to tell their story.

“In just 10 years the Principles and Recommendations have changed corporate behaviour fundamentally,” Governance Institute chief executive Mr Tim Sheehy says.

“Companies and their boards are being held much more accountable for their stewardship of other people’s money. The greater transparency about how companies are governed and managed is a result of the accountability expectations that are central to the guidelines. They remain the pre-eminent governance model in the country and Council must continue to reinforce their supremacy,” Mr Sheehy added.

Governance Institute has also told Council that any suggestion that tenure of directorship affects independence is inappropriate, pointing out that a quick review of the ASX50 shows that there is no firm threshold for when the length of a directorship affects independence. This is because a mindset that is open to new ideas is a central tenet of independence of judgment, rather than tenure. A director could be on a board for many years and retain independence, and another could join a board and not be independent from day one.

Governance Institute has welcomed the new recommendation that the independence of the company secretary be further enhanced by the role reporting directly to the chair, but advises this needs to be supported by recognition that the board is responsible for monitoring the performance of the company secretary in their role as governance adviser to the board.

“It is important that the challenges of a dual-reporting line for the company secretary be recognised in the Principles and Recommendations,” Mr Sheehy said.

“The board effectively only appoints two people — the CEO and the company secretary — and its responsibility in the review of the company secretary as governance adviser is important in maintaining the role’s independence,” Mr Sheehy added.

For further information contact Viv Hardy at CallidusPR on (02)9283 4113/ 0411 208 951 or Tim Sheehy on 02 9223 5744 or 0419 490 594

About Governance Institute of Australia

The Governance Institute of Australia is the only independent professional association with a sole focus on the practice of governance. We provide the best education and support for practising chartered secretaries, governance advisers and risk managers to drive responsible performance in their organisations.

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