Australia: corporate governance and financial reporting reforms under consideration

On April 28, Australia's Corporate Law Minister, Nick Sherry, delivered a speech at Riskmetric Group's Australia governance conference. The following comments of the Minister are of particular interest:

"I have previously announced that the Australian Government is examining three areas of corporate governance. The three areas are corporate offences… sanctions… and personal liability for directors. Our reforms in these areas will have one common goal — to ensure that we have a consistent and principled approach to addressing misconduct in corporate law. The particular measures to be taken include, firstly, clarifying the standards required of directors. This will enable them to make decisions with confidence. Decisions that are in the best interests of shareholders in fast-moving and complex business situations. Secondly, where directors fail to meet these standards, the law will ensure that the sanctions imposed are credible… flexible… and transparent. Thirdly, I believe that it is important to look at the emerging trend for imposing personal liability on directors for corporate fault. While this may be appropriate in exceptional cases, it now appears to be the norm. As a first step, Treasury will soon survey about 600 leading company directors to establish what is happening in the boardrooms of our leading companies. For corporate law this is where the rubber meets the road! In assessing the case for corporate law reform, we need to focus on what’s happening in the boardroom, as well as what’s happening in the court room".

With regard to financial reporting, the Minister stated:

"Earlier this year, I asked Treasury to examine a range of reforms to improve the relevance of financial reports to investors and the broader community. This work includes developing proposals to strengthen the executive remuneration framework. The proposals will be designed to promote greater transparency, accountability and shareholder engagement. While it’s important to get these reforms right, we certainly don’t intend to dictate the level of directors’ salaries. The Government believes that boards are best placed to set remuneration levels within companies, and take responsibility for those remuneration levels to shareholders."