Key parts of the proposed CLERP 9 legislation will continue to be strongly opposed by big business on the basis that they are counter to sound company performance, good corporate governance and long-term shareholder interests.
Releasing the BCA’s submission to CLERP 9 today, BCA President, Mr Hugh Morgan, said these proposals would effectively subject business to powers and intrusions that would not be countenanced in other areas of Australian society.
“This is a proposal – despite assurances that direct shareholder plebiscites will go no further than executive pay – which effectively has no limit and will undoubtedly be applied over time to intrude upon or circumvent other areas of board responsibility and decision making,” he said.
“The board is the agent elected by shareholders to represent their interests, just as parliamentarians are the elected agents for voters.“
Mr Morgan said the principle of a non-binding vote for shareholders was akin to mandating citizens’ referendums on specific decisions taken by parliament and government.
This would clearly be unacceptable on the basis that it would make parliamentary decision-making unnecessary complex and unwieldy. It would infringe on the fundamental principles that Parliaments are elected – as are boards – as agents to act on behalf of their constituents.
“In respect to executive remuneration, the reality is that the board directors have first-hand knowledge of the executive team and their performance and access to information about comparable salaries in other relevant organisations which is not readily available to shareholders for privacy reasons,” he said.
“The legal risks to directors of not complying with a so-called non-binding shareholder vote are real and multiple, given most companies and boards now have legal obligations in many jurisdictions that are subject to varying definitions of director responsibility and liability.
“The potential consequences range from fewer experienced directors prepared to serve on public company boards to increases in insurance costs to cover directors’ liability.”
Proposals to increase ASIC powers and sanctions over companies that allegedly do not comply with continuous disclosure provisions were similarly intrusive and threatened business with the application of what were fundamentally unjust principles.
Mr Morgan said the proposed new powers would effectively empower ASIC as judge, jury and executioner.
“The proposal would allow ASIC to determine unilaterally when the disclosure rules have been breached and to penalise companies – all without an effective mechanism of appeal,” he said.
“Such a proposal is contrary to basic legal principles and would no doubt provoke an outcry if proposed for any other area of activity.
“There is little evidence that the current continous disclosure regime is not operating effectively and as such the proposal should not be introduced.”
Mr Morgan said that as part of its CLERP 9 submission, the BCA was recommending alternate proposals that would serve both the interests of shareholders in terms of greater transparency, without the need to place unjust obligations on companies.
They include proposals to:
- Establish a special panel to advise ASIC as to whether continuous disclosure provisions have been infringed, or require ASIC to seek external advice on whether a company has infringed disclosure requirements. This advice would then be provided to the company which would have an opportunity to respond.
- Require publicly listed companies to disclose the average remuneration paid to a set number of its top executives, rather than publish the remuneration of individual executives. This would provide a valid and transparent means of comparing executive remuneration without the risk of racheting up salaries through the disclosure of individuals’ pay.