Governance Institute submission to Treasury on electronic execution and meetings
As previously advised to members (Acting for You, October 2020) Governance Institute has consistently advocated for the Corporations Act 2001 (Corporations Act) to be brought into line with the modern business environment and to adopt a technology neutral approach. We have called for the temporary changes to the Corporations Act concerning virtual meetings and electronic execution of documents to be made permanent. Currently, these changes expire on 22 March 2021.
Treasury issued the Corporations Amendment (Virtual Meetings and Electronic Communications) Bill 2020 (bill) on 19 October 2020 and Governance Institute lodged its submission on the bill on 30 October 2020. Our submission noted that the proposals in the bill go some way to addressing some of our members’ long-standing concerns; the environmental impact of the use of paper involved in printing notices of meeting and other materials (and associated delivery mechanisms) where alternative means of effective communication are available which enable the provision of relevant information in real time. These concerns extend to the wastage of paper where documents are either not received by the member, or are discarded unread as well as the significant printing and distribution costs. This waste includes the requirement for continued mailing to ‘lost’ shareholders six years after mail is initially returned.
Our submission also referred to members’ support for positive shareholder engagement and finding the most effective ways for companies which wish to continue with or explore virtual meetings do so in a way that at least matches and does not diminish the opportunities for member engagement, traditional at physical meetings. We pointed out that as is the case with anything new or introduced at short notice, some 2020 AGM experiences may have been reported as having sub optimal or other unintended consequences. However, our members are committed to working collaboratively with all stakeholders to in the first instance, minimise these concerns and then to provide ideas and solutions which enhance the virtual meeting experience for all parties.
Our submission argued that the format of shareholder meetings should not be prescribed, it should be open to companies to adopt the format most suited to them and their shareholders. We therefore support the facilitative approach taken in the bill. We cautioned against ‘hard wiring’ provisions into the Corporations Act to address issues that were more the product of the unprecedented conditions under which AGMs have taken place in 2020. We noted that a number of companies have found the move to virtual meetings has provided increased opportunities for shareholder participation in meetings because shareholders in other parts of the country or overseas were not restricted to only attending meetings held in their home state or country.
- recommended that it is critical that the Corporations Act be ‘technology neutral’ given that there are likely to be technological solutions not yet in existence which may again change the way companies interact with their members as radically as technology has changed these interactions in 2020.
- recommended that companies have the flexibility to conduct shareholders’ meetings in the manner most appropriate to their and their shareholders’ circumstances, without prescribing the format of these meetings.
- recommended against amending the Corporations Act to require that all votes at virtual meetings be taken on a poll on the basis that listed companies are required to report on an ‘if not, why not’ basis against the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations as to whether all substantive resolutions at members’ meetings are decided on a poll. Our members consider that there are too many issues with requiring all voting at virtual meetings to be taken on a poll rather than a show of hands, even for smaller companies and that this proposal would in fact disadvantage smaller companies.
- strongly encouraged government to embrace the opportunity to amend the Corporations Act to enable companies to use technology to notify shareholders that notices of meeting and materials are available.
- recommended a regime whereby members can opt in to receive either an electronic or hard copy notice of meeting. In addition, the legislation should deem companies’ shareholders who fail to make an election to have received the materials, provided the company makes the meeting materials: available in the public domain and accessible, using a universal or near-universal channel of communication, and issuing an ASX announcement (if listed), noting that making the meeting materials available on the company’s website meets the current definition of a near-universal channel of communication.
- recommended strongly against the proposed amendment to section 251A (1) to record questions and comments in the minutes of members’ meetings. Our members do not support imposing more stringent requirements for minutes of virtual meetings than for minutes of physical meetings, which meet long-established principles set by the courts.
Governance Institute’s CEO Megan Motto has been appointed to the Modernising Business Communications Expert Panel. This group will provide guidance to the Government’s Deregulation Task Force on the most promising areas for reform and whether solutions have been accurately identified, are workable and would deliver meaningful benefits to business and the Australian community.
We will update members on the progress of this important and long-awaited reform.
Aged care royal commission: Final submissions and proposed recommendations
Counsel Assisting the royal commission released the proposed recommendations at the commission’s final hearing on 22 October 2020. The series of 124 recommendations address a broad range of issues relating to aged care as well as the governance of aged care providers. Governance Institute made a submission in September 2018 on the Terms of Reference for the Royal Commission into Aged Care Quality and Safety encouraging the Minister to include a review of the current state and adequacy of the governance and risk management frameworks within organisations in the aged care sector.
Governance Institute made a submission to the royal commission on 12 November 2020 on those recommendations related to the governance of approved aged care providers. One recommendation (Recommendation 52.1a) proposes amending the Aged Care Act 1997 to require the boards of aged care providers to have a majority of independent directors. Our submission acknowledged that it is good governance for boards to have a majority of independent non-executive directors, but cautioned against including this requirement in legislation. Our members consider it would sit better in a governance standard applicable to the aged care sector rather than in legislation from which individual providers have to seek exemption.
Our submission expressed our members’ support for recommendations (Recommendations 53.1 a and b) which would require the boards of every approved aged care provider to have members who possess between them the mix of skills, experience and knowledge of governance responsibilities, including care governance and to have a care governance committee, chaired by a non-executive member with appropriate experience in care provision. Our submission noted that as a practical matter, this may not be workable in smaller organisations, particularly those in regional and remote areas where it is difficult to secure the services of appropriately skilled and qualified directors. One way of addressing this challenge in the sector may be the use of advisory committees and external committee members. Similarly, the proposal to have a care governance committee may need to be adapted for smaller organisations where these matters are probably best considered by the board as a whole. Counsel Assisting recommended the implementation of a new governance standard in Recommendation 24.1(d). Governance Institute supports this recommendation and considers that the proposals in relation to board skills and care governance committees would be best considered in the context of the new standard. Our submission also expressed support for the recommendation (Recommendation 54.1) to establish a program to assist approved providers improve their governance arrangements.
Governance Institute has formed a strategic alliance with Leading Aged Services Australia (LASA) to deliver governance training which commenced in 2019. Governance Institute has jointly hosted governance workshops specifically developed for the aged care sector nationally with LASA. Overall we have trained approximately 1,000 people from both the Governance Institute and LASA membership groups.
The royal commission is required to deliver its Final Report by 26 February 2021. We will continue to update members on the progress of this important issue.
|Recent advocacy activity|