The Business Council of Australia said today it welcomed the announcement of new governance rules by ASX Corporate Governance Council today but said their effectiveness would need to be closely monitored.
BCA President, Dr John Schubert said the BCA, which had endorsed the new governance guidelines, viewed their development and implementation as part of an ongoing process.
Dr Schubert said parts of the new governance structure were clearly positive, many of which were already in place for most major companies.
These include the establishment of remuneration committees and increased transparency of remuneration policies, as well as clearer definitions of the roles of company boards and key executives.
At the same time, the BCA was concerned that a number of the new rules were too prescriptive, creating a perception that good governance was more about conformance than positive company and boardroom culture.
It was also concerned about the practicality of other requirements which may lead to shareholders being overwhelmed by the volume of information now required for annual reports and other company information.
Dr Schubert said the BCA was pleased the new structure incorporated a review mechanism which would allow these rules to be tested against good governance outcomes.
“Learning from experience in terms of the success or otherwise of their implementation will be fundamental to ensuring these rules result in best practice governance.
“In practice the reporting requirements of the recommendations are likely to be substantial for most companies and indeed onerous for some – the review must take all these issues into account.”