Virtual AGMs and electronic communication with shareholders
On 17 February 2021, the Government announced its intention to temporarily extend virtual AGMs to September 2021, permanently allow digital shareholder communications, and trial hybrid AGMs for 12 months. The draft enabling legislation was tabled in Parliament and sent to the Legislation Sub-Committee of the Senate Standing Committees on Economics for report on 12 March 2021. If these proposals become law they will assist in improving the technology neutrality of the Corporations Act 2001 (Corporations Act), but a large number of areas where change is needed would remain.
Governance Institute issued a media release in late February. We welcomed the Government’s continuing commitment to modernising the Corporations Act to enable digital technology and providing much-needed certainty for December 31 reporting companies. However, we noted members’ concerns that virtual AGMs were being placed in a holding pattern. We drew attention to several provisions in the draft legislation that could impose unnecessary regulatory burden on members and have unintended consequences for upcoming AGM seasons. We also sought clarity on the details of the hybrid AGM pilot program.
Ahead of the draft legislation being tabled in Parliament, Governance Institute advocated strongly for virtual-only and hybrid meetings to be permanently allowed where companies deemed them appropriate for the needs of their shareholders or members. The focus of this advocacy effort was an industry roundtable hosted by Governance Institute CEO Megan Motto in February 2021 that brought together all key stakeholders, including members in the listed, unlisted and not-for-profit sectors, and stakeholders who had raised issues with virtual meetings. Governance Institute intends to continue to work with industry to achieve a consensus that aligns with members’ views.
Continued advocacy to Government on virtual meetings is a top priority for Governance Institute for the remainder of 2021.
Modernising Business Communications – Improving the Technology Neutrality of Treasury Portfolio Laws
Governance Institute further advocated for digital modernisation in its submission to Treasury on 28 February 2021. Modernising business communications is a priority of the Government’s Deregulation Taskforce, established in 2019. Treasury and the Deregulation Taskforce had issued a consultation paper on how best to improve the technology neutrality of Treasury portfolio laws, including but not limited to the Corporations Act. In our submission we strongly urged against maintaining the status quo. We reiterated our support for modernisation of the Corporations Act and argued for wider reforms to ASIC forms, the practices and behaviours of regulators and other agencies, and to the interactions between Commonwealth and state legislation. The submission was supported by strong case studies from Governance Institute members that illustrated issues of regulatory burden and outdated legislation.
Highlights of the submission:
- All ASIC forms should be able to be lodged online and signed electronically. Hard copy ASIC lodgements are time-consuming, inefficient and impose a regulatory burden on officeholders, agents, auditors, and liquidators.
- Industry concerns over litigation evidence and procedure pose barriers to widespread adoption of electronic execution over wet ink signatures.
We will continue to consult with the Deregulation Taskforce and keep members updated on progress. Governance Institute CEO Megan Motto continues to advocate for members through her membership of the Modernising Business Communications Expert Panel that advises the Taskforce.
Strengthening APRA's prudential requirements for remuneration
Governance Institute made a submission on 12 February 2021 to the Australian Prudential Regulation Authority (APRA) on its revised draft Prudential Standard CPS 511 Remuneration. This was the second round of consultation on the cross-industry standard, which has potential impacts for Governance Institute members at all levels of organisations in banking, superannuation, insurance and other APRA-regulated entities. In response to feedback from Governance Institute and industry, APRA’s revised standard moves away from the prescriptive requirements of the initial consultation draft towards a more flexible principles-based approach, with fewer obligations on smaller entities. Governance Institute was broadly supportive of this less prescriptive approach, although we identified several remaining flaws and unintended consequences in the re-draft.
A number of Governance Institute’s recommendations related to implementation and scope:
- Governance Institute welcomed APRA’s decision to delay implementation. The standard was originally to come into effect 1 July 2021. APRA now proposes to release the finalised draft in June 2021 and supporting guidance by the end of 2021. Phased implementation will not commence until 1 January 2023.
- We recommended that the approach to the alignment of the Banking Executive Accountability Regime (BEAR) and the Financial Accountability Regime (FAR) should be settled and agreed, with appropriate industry consultation, before the standard commences to give industry time to carefully implement these overlapping schemes.
- We recommended that implementation dates for the standard should align with APRA-regulated entities’ financial years, to ensure Governance Institute members do not encounter practical difficulties in implementation.
- We noted that, while there is some improvement in the second draft, the remuneration framework that regulated entities would be required to maintain still applies to an extremely broad range of individuals including service providers. We recommended further clarification on how the framework applies to service providers as well as grouped entities.
Governance Institute will keep members updated on further consultation opportunities.
Commonwealth Integrity Commission
Governance Institute made a submission on 12 February 2021 to the Attorney-General’s Department on the proposed Commonwealth Integrity Commission draft legislation. Governance Institute welcomed the first direct steps to establish a national anti-corruption body to promote transparency, accountability and integrity in the public sector. We drew attention to flaws in the legislation that risk reducing the effectiveness of the Commission in combating corruption. The submission urged the Government to ensure the Commission has sufficient scope, jurisdiction, powers and resources to fulfil its purpose of promoting integrity, and therefore good governance, in the Commonwealth public sector. We argued its resourcing should be independent, transparent and free of conflicts of interest. Politicians and political staffers should not be shielded from public hearings, as the draft legislation proposes. The Commission should be able to hold public hearings into political corruption allegations provided there are safeguards for individual rights. Members of the public should also be allowed to refer matters directly to the Commission. We will advise members of any changes to the legislation as it progresses through Parliament.
Modern Slavery Statements
Governance Institute attended an engagement session on 22 February with Jason Wood, Assistant Minister for Customs, Community Safety and Multicultural Affairs, to obtain an update on Modern Slavery statements ahead of the 31 March 2021 final due date. Mr Wood advised that he was satisfied with the quality and level of compliance so far on Modern Slavery statements. He indicated the Government would resist calls for enforcement action against organisations that fail to comply with their reporting requirements unless such action was absolutely required. The Government’s view is that voluntary compliance is the best approach. The veracity of Modern Slavery statements is being treated on an at face value, good faith basis. The Assistant Minister is contemplating a recognition scheme for organisations that fall beneath the reporting threshold that voluntarily choose to submit Modern Slavery statements. This recognition may take the form of certifications or some other form of acknowledgement.