Contact: Craig Mitchell
Deloitte
Partner - Governance & Risk
+61 (0) 2 9322 7729
Contact: Melinda Loew
Deloitte
Media Relations
+61 (0) 2 9322 7146
The continued principles-based, non-prescriptive approach to Corporate Governance announced today by the ASX delivers real value and balances the views of Australian corporates and stakeholders, Deloitte Governance & Risk partner, Craig Mitchell said.
Mr Mitchell, who represents the Group of 100 on the ASX Corporate Governance Council, welcomed the new Corporate Governance Principles and Recommendations and commended the ASX on a thorough and extensive review process.
“With over 100 submissions to the public consultation process there were wide-ranging points of view expressed.
"The resulting new ASX Principles reflect a balanced and commercial platform for corporate governance in Australia.”
Mr Mitchell said unlike some overseas jurisdictions, which have had to unwind their governance frameworks because of unworkability, these changes are a refresh not a major rewrite which clarify core principles and removes duplication with the Corporations Act and Accounting Standards.
“Such a stable base can only improve the confidence in the Australian capital markets and enhance our international competitiveness.
“The ‘if not, why not’ disclosure-based approach allows companies to share and explain to stakeholders what they are doing from a corporate governance perspective.
“There is no absolute right or wrong way as each company faces unique circumstances."
With this additional transparency, stakeholders can make their own decisions as to the governance practices of the listed entity.
“One area where this is welcome is in relation to risk management where the concept of ‘material business risks’ has been introduced.
"Listed entities can adopt a flexible risk management approach to suit their circumstances.
"The trick will be what is appropriate.
“Applying boiler-plate or incumbent risk management frameworks and solutions may not meet the new spirit of the ASX Principles.”
Mr Mitchell said in submissions to the ASX and at recent forums Deloitte has held across Australia with leading Board Audit Committee members and CXOs, the consensus is that this is a continuous risk management journey for corporate Australia.
“Most listed entities are doing the right thing but believe there is room for improvement to truly embed holistic risk management into their organisations.
“Generally, CXOs and board members agree with ASX principles approach because definitions are not important."
The guidelines are intended as directional and allow organisations flexibility in assessing governance, risk and compliance and make disclosures according to the needs of their particular organisation and investors.
“CXOs and Boards need to consider the risk maturity of their organisation, whether their risk program and reporting is appropriate or whether further risk intelligence is required.
“The ASX Principles are not about eliminating risk and will not prevent future corporate collapses.
"They are part of a communication process that increases confidence in the capital markets without being too much of a regulatory burden,” he said.
“However, companies should also consider other early warning systems and programs to reduce risk of collapse or significant surprises, such as whistleblower services which are specifically required under US law.
“There is no single model of good corporate governance.
"Organisations should not start with the ASX Principles but do what is right for them first and then finish with comparison to the ASX Principles and disclose any differences and why, as appropriate,” Mr Mitchell concluded.
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