Acting for You, December 2019

Appearance before the aged care royal commission

Governance Institute has long advocated for the importance of governance in aged care. In February 2017, Governance Institute launched our publication Adding value to governance in aged care, which has been very well received by our members and the aged care sector generally.

Governance Institute has since partnered with Leading Age Services Australia (LASA) to deliver governance training to assist those working in governance in the aged care sector. I have presented at some of LASA’s conferences and workshops on governance issues.

I was therefore pleased to be called to appear before the Royal Commission into Aged Care Quality and Safety in Hobart on 15 November 2019 where I gave evidence on governance generally as well as the development of our guidance and our governance training.

I was asked for my views by counsel assisting on various governance matters including:

  • the quality of governance in the aged-care sector
  • ways of improving governance standards in the aged-care sector
  • how, in practice, the board of an aged care provider develops and maintains a culture committed to ethical behaviour and compliance with the law
  • the concept of risk appetite
  • possible learnings from the banking royal commission
  • the importance of boards receiving the right information.

In my evidence I referred to:

  • the importance of having independent directors on a board
  • the move towards skills based boards in the aged care sector and the use of board skills matrices
  • board tenure and succession planning
  • clinical governance being an important part of a risk-management frame-work for aged care providers
  • the role of regulators in ensuring good governance.
One of the issues that counsel assisting wanted to explore was what a highly performing aged-care organisation might have in terms of governance.

One of the issues that counsel assisting wanted to explore was what a highly performing aged-care organisation might have in terms of governance. In my response, I emphasised the importance of

a skilled effective board with good culture, management, practices and people.

The link to the video recording of my evidence is here. The transcript of my evidence can be accessed here

The aged care royal commission will be sitting in Canberra from 9 to 13 December 2019. The Canberra hearing will be receiving evidence on interfaces between the aged care and the health care system and examine whether older people, particularly those living in residential aged care facilities, are able to access the health services they need as they age.

We will continue to update members on important issues arising from the royal commission.

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Digital shareholder communications: Bringing the Corporations Act into the 21st century 

Governance Institute and the Australasian Investor Relations Association (AIRA) have long advocated for measures which facilitate electronic or digital disclosure of information to shareholders and reduce the burden on companies in the form of cost and paper waste that occurs when sending hard copy shareholder communications by mail. 

Currently, shareholders must notify companies if they wish to receive their notices of meeting and meeting materials by way of email. If they fail to make that notification, companies are required to send the notices of meeting by post. Despite many campaigns, listed companies only hold email addresses for about 50 per cent of their shareholders. Each year these companies spend hundreds of thousands of dollars printing and posting meeting packs to their shareholders. This year Telstra Limited spent between $800,000 to $1 million sending out 650,000 hard copy notices of meeting. AMP spent approximately $700,000 sending out meeting materials to 470,000 shareholders. Three Australia Post trucks were required to collect them. The AMP notices of meeting required 16 tonnes of paper (not including envelopes). Many of these notices of meeting ended up in landfill. 

Back in 2016, Treasury worked on a simple amendment to the Corporations Act 2001 (Corporations Act) which would bring shareholder communications into the 21st century and allow companies to digitally engage with their shareholders. This work did not proceed.

Governance Institute and AIRA have joined forces to progress this reform. We consider that the Federal Government’s new Deregulation Taskforce presents an ideal opportunity for this straightforward regulatory change to be made. The Corporations Act can be amended to provide that shareholders who fail to opt in to receive their notices of meeting by either mail or email are deemed to have received them if the company makes them universally available on their website.

We still support the rights of shareholders to ‘opt in’ to receive hard copy meeting materials. This is important, particularly for older Australians. However, companies are ‘hitting a wall’ when it comes to collecting email addresses from shareholders and regulatory change is required in order to move to the next step.

Shareholders already access the annual report digitally. In 2007, the Corporations Act was changed to enable shareholders who do not elect to receive a hard copy of the annual report to access it on a website. More than 90 per cent of shareholders no longer receive a hard copy annual report in the mail. This has led to major cost savings and a reduction in paper waste.

Governance Institute and the AIRA have met with members of the Deregulation Taskforce and have lodged a joint submission supporting this reform. We encourage our members to read our joint submission. 

Members interested in providing feedback to us on this advocacy campaign can contact me on policy@governanceinstitute.com.au

I look forward to hearing what members have to say.

Annual director elections for listed companies 

There has been a push recently by investors and regulators globally towards annual director elections for listed companies.

The UK Corporate Governance Code requires all directors of listed entities to be subject to annual re-elections on a comply or explain basis. Eighty-eight per cent of S&P 500 companies in the United States now hold annual director elections. Organisations such as ACSI are encouraging listed entities to hold annual director elections on the basis that they drive better accountability. 

Governance Institute is interested in obtaining the views of its members and broader stakeholders on the issue of annual director elections. Would they improve governance in listed entities or would they undermine board effectiveness?

We have issued a two-minute survey seeking our members feedback. The link to the survey is here Please respond to our survey by Friday 6 December 2019.

Submissions

Bringing shareholder communications into the 21st century — 27/11/19

Australia’s 2020 cyber security strategy: A call for views — 1/11/19

Media releases

Annual Ethics Index released today sends a tough message to Canberra on climate change — 12/11/19

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