The Business Council of Australia said today it supported the majority of the CLERP 9 corporate governance proposals but continued to have serious concerns about key aspects of the package.
BCA President, Dr John Schubert, said the bulk of the package was aimed at improving the transparency and independence of company audit processes. Business supported these changes, which reflected concerns arising from the collapse of companies like Enron and HIH, Dr Schubert said.
However, new ASIC powers to fine companies for continuous disclosure breaches and a proposal for a shareholder vote on executive remuneration were ill-conceived.
The BCA was also concerned about proposals to extend the disclosure of remuneration of senior managers.
“The BCA remains firmly of the view that while disclosure may appear to empower shareholders, additional information about specific executives’ remuneration will force boards to pay higher salaries.”
The BCA would continue to oppose these proposals on the basis they were counterproductive to company performance.
Under the proposed package, ASIC would be able to impose fines on companies it believed were in breach of continuous disclosure provisions, rather than having to go to court to prove its case. Dr Schubert said ASIC had advocated the proposal for reasons of bureaucratic efficiency without clearly demonstrating the need for the power.
“There is no evidence of wide spread breaches of continuous disclosure requirements that warrant this proposal, which effectively makes ASIC the investigator, jury and judge,” he said.
“Decisions relating to continuous disclosure can be extremely complex and subjective and do not lend themselves to on-the-spot fines.
“The proposal risks establishing a perverse incentive system for companies that would rather pay the fine even if they believe they have complied, and avoid the time, effort and cost associated with challenging the alleged breach in court.”
Dr Schubert said the proposed shareholder vote on remuneration requirement challenged a core concept of public companies, that shareholders delegate day-to-day decision-making to the board and management of the company.
“Corporate governance in Australia, which was already world-class, has developed a long way this year with the release of the ASX Corporate Governance guidelines and now CLERP 9.
“However, elements of the package take regulation a step too far and there is a serious risk of them being counterproductive.”