Here's How New Directors Regulations Could Ruin Corporate Australia

Getty/ Jan Kruger

Regulators such as ASIC and APRA are increasingly calling for boards to heighten the level of scrutiny on how directors question management decisions. It’s all in the name of oversight and better governance.

But to many directors, including CBA chairman David Turner, it’s a threat to the proper functioning of the management/oversight relationship of Australian companies which has served the economy so well for many years.

Turner told The Australian that “boards could face serious ‘unintended consequences’ if more regulation forces ­directors to become too involved in management ­issues”.

Indeed, it feels like that is exactly the path that regulators in Australia are wanting boards to take. The most obvious example is APRA’s new Prudential Regulation for Risk Management, CPS 220, now expressly pushing directors of banks and other regulated entities to play a bigger role in day-to-day oversight of the risk management function.

Turner told The Australian:

Regulation in this country has served the country very well. Just fine. In terms of the functioning of boards of directors, we need to watch out not to create a situation where directors become so concerned about their responsibilities that they start crossing wires with management.

David Gonski has previously highlighted this issue, according to The Australian, which says that he’s previously noted that “the performance of boards was being damaged by expectations that they could shield against ­operational mishaps and poor ­results.”

You can read more here, including David Turner’s views on banking in Australia.

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