Proposals on corporate governance released by the federal Opposition were counter to both shareholder interests and company performance, the Business Council of Australia said today.
BCA President, Dr John Schubert, said it was ironic the debate over toughening company governance was occuring side by side with one on how to spend the budget surplus, which had been generated predominantly by an increase in corporate tax receipts.
“Clearly, you cannot argue that corporate performance is falling short of expectations and requires even tougher regulation, while at the same time the current debate on the budget surplus and how to spend it acknowledges the strength of that performance,” Dr Schubert said.
He said a number of proposals outlined in Labor’s CLERP 9 statement, together with proposals being considered as part of the government’s CLERP 9 package, would provide little or no value, or even detract from the ability of companies to create wealth for shareholders.
“The overall push for greater and greater prescription is a major concern, particularly given a number of these proposals are a response to short-term concerns,” Dr Schubert said.
“Combined with shortcomings in Australia’s tax system, the continuing push for black-letter law to regulate company governance may well become a competitive disadvantage for Australia to attract investment and maintain growth.”
Dr Schubert said in reality proposals to ‘empower’ shareholders would simply lead to shareholders being overwhelmed by the volume of information.
Companies also were likely to suffer through an excessive focus on reporting requirements to the detriment of strategic focus and wealth creation.
Dr Schubert said the BCA remained firmly opposed to a proposal for a non-binding shareholder vote on executive pay as it would create potential legal issues for directors, as well as undermine the concept and role of a publicly listed company and its board.
“Similarly, a proposal to increase the disclosure of remuneration from 5 to 10 of a company’s most senior managers will only mean more information in executive remuneration being made available to the market,” he said.
“It would be reasonable to expect that expanding the current disclosure system – while appearing to empower shareholders – would contribute to an increase, not decrease, of overall pay levels.”
Dr Schubert said Australia’s corporate sector had taken significant steps to improving the substance and image of corporate governance, particularly through ASX Corporate Governance Guidelines released earlier this year.
He said there had been widespread compliance to the ASX guidelines, particularly in the area of remuneration and nomination committees.
“The ASX guidelines have only recently been introduced and a far better approach than overregulation would be to allow time for these guidelines to be implemented and their effectiveness reviewed,” he said.