Modernising the Corporations Act
Governance Institute appeared before a public hearing of the Senate Economics References Committee and also made a second written submission on the Bill that proposes further temporary relief on virtual AGMs, digital shareholder communications, and electronic document execution. The CEO and Legislation Review Committee members urged the Senate to pass the Bill to provide industry with certainty ahead of the peak AGM season. We argued for several provisions to be amended to avoid unintended consequences. We also advocated strongly for virtual AGMs to be allowed – as the current drafting of the Bill only permits physical/virtual hybrids. Schedule 2 of the Bill proposes to introduce a fault element for continuous disclosure to address unnecessary class actions and rising D&O insurance premiums and bring the disclosure regime closer into line with comparable jurisdictions. Following consultation with members, Governance Institute indicated support for the continuous disclosure changes, noting they do not lower the disclosure threshold and that the quality of disclosures did not decrease when these same measures were temporarily introduced during COVID-19. We will keep members informed of progress on this important issue.
Proxy advice reforms
Governance Institute has made a submission on Treasury’s proposal to tighter regulation for the proxy advice sector. Based on extensive consultation with members, our position supports a limited number of the proposals. Our submission makes the point that we have always taken a strong interest in the regulatory settings for proxy advice and that our aim is to promote better engagement between companies and their owners. We acknowledge that proxy advisory firms play an important role in Australia’s corporate governance landscape, while also addressing where there is scope for improved industry practice.
We indicated member support for:
- Improved disclosure of trustee voting by superannuation funds, to better enable fund members to understand how funds exercise voting power on their behalf.
- Companies being given a right to receive, upon request or a standing request, two business days prior notice if a proxy firm intends to issue a report recommending voting against a company’s recommendations on a proposal on the agenda for a shareholder meeting. This notification would not necessarily need to contain the proxy firm’s full report. We argued that companies would benefit, in the highly compressed, time-sensitive environment of an AGM, from an early notification that would enable them to increase their direct engagement with owners, to promote the overall informed nature of the market. A long notice period would not be required and would not be practical.
- A consistent and uniform process or mechanism whereby companies can request corrections of factual inaccuracies and for amended reports to be reissued to clients via the same communication method as the original publication. This process or mechanism would not necessarily need to be legislated, so long as it was consistent across the sector. Nor would this process or mechanism need to occur before the report is sent to clients. We indicated members would be satisfied if this occurred after the publication of the original report, provided errors were corrected and communicated promptly.
- Widespread industry adoption of the current practice by some proxy advisers of sending, where requested by a company, a company’s written response to a proxy report containing a negative recommendation to the proxy firm’s clients.
Protecting Critical Infrastructure and Systems of National Significance
This important Bill is currently being reviewed by a Senate committee and may soon be put to a vote. At public hearings on 11 June lawyers, privacy experts and state-based cybersecurity regulators express concerns with some aspects of the current drafting. If passed, the Bill will have wide-reaching implications for governance, cyber-security and resilience planning in several sectors. It will impose positive security obligations (PSOs) on applicable entities in the communications, financial services and markets, data storage and processing, defence industry, higher education and research, energy, food and grocery, healthcare and medical, space technology, transport, and water and sewerage sectors. The PSO involves three aspects: adopting and maintaining an all-hazards critical infrastructure risk management program; mandatorily reporting serious cybersecurity incidents to the Australian Signals Directorate; and where required, providing ownership and operational information to the Register of Critical Infrastructure Assets. Section 30AG of the Bill would require the board of a regulated entity to issue an annual risk management report to the Commonwealth Government each financial year. We will continue to monitor this issue closely.
In June, Governance Institute supported a news and social media campaign by the #fixFundraising collation, of which we are a founding member. The campaign drew on a major survey of over 600 charities to renew the call for much-needed reform of Australia’s charitable fundraising laws. The report’s findings called attention to the impact of red tape and outdated state and territory laws on charities that operate across Australian jurisdictions. Governance Institute supported the campaign with news coverage and social media activity. We are using the survey findings in our continued advocacy to federal, state and territory governments to encourage them to meet their joint commitment, announced in late 2020, to harmonise fundraising laws by the end of 2021.
Withholding or removing information from ACNC register
The Australian Charities and Not-for-profits Commission (ACNC) is proposing changes to its Policy Statement on when information can be withheld or removed from the ACNC Register. Governance Institute participated in informal consultation on technical amendments that relate to circumstances where information on the register may identify an individual donor. Based on member consultation, we broadly supported the proposed changes with minor feedback, including the need for greater clarity on whether the ACNC Commissioner would, in practice, ever exercise their powers to restrict information on the register of their own volition or whether the power is only exercised in response to a request.
Greater transparency of proxy advice — 04/06/2021
Digital Australia Strategy 2030 — 07/06/2021