- The ASX Corporate Governance Council says it’s wrong to label its latest draft of Principles and Recommendations as the work of left-wing activists or social engineers.
- The suggestion that the Principles and Recommendations have contributed to boards being inundated with thousands of pages of board papers is also wrong.
- The materials in the consultation draft on “social licence to operate” appear to be the major cause of concern.
The Corporate Governance Council of the ASX has hit back at critics who say its rules have added to the mountain of paperwork blocking directors from making more strategic decisions.
David Murray, the new chair of AMP, last week said the board of directors had in the past been swamped by paperwork, leaving little time to debate strategic issues.
He pointed to the ASX corporate governance principles, and the need for an array of board committees, as a cause of this. The ASX is currently working on fourth edition of its Principles and Recommendations.
Murray chaired the Financial System Inquiry, which reported to the Federal Government in December 2014. He also served as inaugural Chairman of the Australian Future Fund from 2006 to 2012.
However, Elizabeth Johnstone, the Chair ASX Corporate Governance Council, today issued a statement saying it is wrong to label the consultation draft as the work of “left-wing activists” or “social engineers”.
“It is the work of those who invest in, raise capital from, and provide professional support for, the market,” she says.
She says it’s also wrong to suggest that the Principles and Recommendations have contributed to boards being inundated with thousands of pages of board papers.
The key objections to the latest draft of governance appears to be around the section in the draft about having a social licence to operate, with companies encouraged to think about the wider community as a stakeholder as well as shareholders, customers and employees.
Among those objecting is the AICD (Australian Institute of Company Directors).
The directors the concepts of a “social licence to operate” and acting in a “socially responsible manner” are subjective and will be interpreted differently by different stakeholders.
However, Elizabeth Johnstone at the ASX Corporate Governance Council says this issue can be addressed in different terms such as reputation, brand and trust.
“The Council will listen carefully to the concerns that have been raised about the term ‘social licence to operate’ and consider how best to express and address this issue in the course of preparing the final version of the fourth edition,” she says.
“Each new edition of the Principles and Recommendations has been widely regarded as contributing significantly to an uplift in governance standards in Australia.
“The suggestion some have made that the Principles and Recommendations have contributed to the egregious behaviour revealed by the Hayne Royal Commission is simply wrong.”
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