- Be Prepared
Welcome to this
edition of Corporate Governance Update - mid-October
This issue includes:
Your Upcoming AGM - Top tips to being prepared.
the News: The EY survey and when will Clerp9 finish?
Upcoming AGM - Top tips to being prepared
Meetings are a vital part of the corporate governance
process and an essential forum for shareholders.
Too many AGMs
fall far short of shareholders' expectations. This
year, with the spotlight on corporate governance more
than ever, it is critical that yours doesn't.
CGA's team of
specialists have devised some simple guidelines to
enable you to both manage and address governance-related
issues at your AGM, and retain shareholder confidence
If you would like
further assistance in preparing for your AGM, or have
other questions, please contact us. You can request
our suggested answers to corporate governance type
questions at AGM's by emailing : AGManswers@corporate-governance.com.au
Vincent Sweeney and Danny Herceg
1. Be prepared.
will be ready to ask you questions such as:
- How do we know
your corporate governance is in order?
- How do you
protect against surprises?
- How will the
board improve communication with shareholders?
- What corporate
governance changes or policies are planned for the
2. Be direct.
opinion, providing vague or non-committal answers
to shareholder questions will only undermine shareholder
3. Be honest.
No company goes
through a year without some failures. Shareholders
are entitled to know what they were and what the board
has learned. Discerning honesty will earn you respect
4. Keep it
your audience with information in the hopes of avoiding
awkward questions. Keep any presentations short and
remain specific and focused.
5. Manage your
It is the responsibility
of the Chairman and CEO to manage and control the
PR 'spin-doctors before, during and after AGM's.
6. Be specific
Don't try and
answer all shareholder questions yourself. Allow your
senior executives to take questions that lie in their
areas of specialty. Answering each question before
taking another will give questioners a chance to clarify
an answer or ask an additional question.
your auditors to be upfront and direct.
need to know that your auditors' top priority is protecting
8. Bring on
third party governance specialists.
Tapping into the
expertise of independent advisers will do more than
give your company credibility at your AGM. Demonstrating
that you are serious about best business practice
and corporate governance issues will also preserve
and increase shareholder confidence.
Simply put, well-run
AGMs are an essential part of good corporate governance.
Governance in the News
EY report -
Australian Companies fail New York Stock Exchange
The new EY survey
of Australia's Top 200 companies, asks the question
of whether Australian companies and their Boards of
Directors can meet the compliance standards of the
new NYSE Listing Rules if suddenly required. Of the
Top 200 surveyed, 18 were registered with the US Securities
and Exchanges Commission (SEC), with a number of SEC
registrants having a dual listing on the Australian
Stock Exchange (ASX) and the NYSE.
registered companies generally fared well, Australian
non-SEC registered companies still have a long way
to go if they were ever forced to comply," said
EY. "The survey indicates Australian companies
would fall significantly short if called upon to meet
the NYSE requirements for all board committees to
be comprised of independent directors . " said
Also, according to the survey, Australian non-executive
directors would likely fail to meet the strict new
'independence' standards established by the revised
NYSE regime, with many of the Top 200 companies facing
the possibility of having their boards of directors
The reason for
this is twofold. Firstly, there are no Australian
requirements for boards or board committees to comprise
a majority of independent directors or be solely so
comprised. Secondly, although a practice has emerged
of majority non-executive directors on boards, there
are no rules regarding the definition of "non-executive".
This means that "non-executive" and "independent"
are not necessarily the same. A company's failure
to meet the required majority "independent"
criteria for the board will also affect the "solely
independent" criteria for the audit, nomination
and compensation committees.
Ms Picker said,
"The NYSE changes could force a company to reconstitute
its board to fit US compliance needs, or at the very
least, result in the Australian company having to
report to its US stakeholders that it does not have
a majority independent board. The reaction of shareholders
to such disclosure would almost certainly be highly
Overhaul Of Corporate Law - but when will it end?
Treasurer Peter Costello unveiled 41 recommendations
aimed to enhance the country's corporate governance.
Costello said the 200-page review, titled Corporate
Disclosure: Strengthening the Financial Reporting
Framework (also known as CLERP 9), is a "fundamental
reshaping of Australia's financial reporting."
timeline for this is longer than many think. It is
highly unlikely that the final shape of Clerp9 will
be known until February 2003 and possibly later. In
the intervening period additional changes are being
recommended in other jurisdictions and if common sense
prevails about harmonisation around the world, CGA
believes we should review and adopt some of these
changes in Australia for the benefit of harmonisation.
A cross section
of the recommendations includes: mandatory audit committees
for the top 500 listed firms; the protection of whistle
blowers; the cost of executive and director share
options must be disclosed in annual reports; audit
partners must change the companies they audit every
five years; AUD1 million fines for market manipulation,
insider trading, and failure to meet disclosure requirements;
expanded role of the Financial Reporting Council to
oversee audit independence and standards; auditors
required to attend annual general meetings; shareholders
voting proxies electronically; stockbrokers and analysts
should disclose any personal financial interests they
have in stock they recommend; expanded powers for
the Australian Securities and Investments Commission
(ASIC); and the creation of a Shareholder and Investors
Governance Australia [CGA] is one of Australia's leading
specialist advisory group working with boards on corporate
governance and stakeholder issues. CGA is supported
by an Advisory Board, whose members have distinguished
experience with corporations, government and academia.
For more information
contact Vincent Sweeney or Danny Herceg on ph: 02
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