Anything to declare?

88 Pages·2012·0.48 MB·English

Anything to declare?
A report examining disclosures about board reviews,
identifying good practice and encouraging progress
Published by Chartered Secretaries Australia and Boardroom Partners Pty Ltd
© 2012 Chartered Secretaries Australia Ltd and Boardroom Partners Pty Ltd
The information and material supplied and presented as part of this report is the subject of copyright, the
property of which vests with Chartered Secretaries Australia Ltd and Boardroom Partners Pty Ltd, other than
the extracts from disclosure statements, as detailed. Unauthorised reproduction in both oral and written form
is not permitted. All rights reserved.
Contents
Acknowledgments ii
Foreword iii
Executive summary iv
Introduction 1
Background 3
Recent research
This research
Key findings 7
Detailed findings 11
Conclusions 25
Disclosure statements 27
Appendices 65
Appendix 1 — Top 200 companies by name as at January 2012
Appendix 2 — Companies by rating
Appendix 3 — Research methodology
Appendix 4 — Interview questions
Appendix 5 — Experiences of interviewees
Appendix 6 — Examples of best practice UK FTSE 100 Disclosures
References 78
Anything to declare? Page i
Acknowledgements
We would like to thank the following for their valuable input.
Directors and chairs
Jillian Broadbent, Elizabeth Bryan, Carol Holley, Belinda Hutchinson, Irene Lee,
Catherine Livingstone, Anne McDonald, Emma Stein and one director who
chose not to be identified.
Company secretaries
Tim Hartin, Amanda Harkness FCSA, Caroline Waldron FCSA and two company
secretaries who chose not to be identified.
Boardroom Partners research team
David Band, Senior Consultant
Jane Bridge, Managing Partner
Emma Lambert, Research Associate
Spyridon Revithis, Manager, Data
Gail Walsh, Executive Assistant
CSA research team
Judith Fox, Director, Policy
Amyn Nathwani, Policy Adviser
Foreword
Boardroom Partners and Chartered Secretaries Australia It must be acknowledged that many companies conducted
(CSA) are pleased to have conducted this first-ever audit of board performance reviews well before the ASXCGC’s
the disclosure of board performance reviews of ASX guidelines were published and they continue to do
200 companies. so. But is must also be acknowledged that, for too
many companies, there is still a long way to go. Good
Both organisations are committed to improving the governance can have a dramatic impact on the culture of
governance practice of Australian companies and see this an organisation and disclosure of governance practices
report as assisting companies in their understanding of the can add to investors’ confidence that the culture of the
practices other listed companies are using. We have built company they invest in accords with their expectations.
upon similar research undertaken in 2009 by the Institute
of Chartered Secretaries and Adminstrators (ICSA) in the Our research has highlighted the need to clarify what
United Kingdom. Because of this, readers can gain an various stakeholders require in terms of effective disclosure
insight into the practices of Australian companies as well as about board reviews.
those in the United Kingdom using a similar methodology.
We hope that this report will be a useful addition to
As stated, in addition to reviewing annual reports, we were Australia’s corporate governance landscape. The ASXCGC’s
able to meet with a number of organisations that gave guidelines have had a positive impact on governance
their time and accordingly enabled a much more detailed reporting and we see comparative analyses such as this
review. We are grateful for the cooperation we received as critical in improving the guidelines, boardroom practice
from them. These in-depth interviews enabled the research and investor confidence in the market.
to go beyond published information to add a greater depth
to the findings.
Disclosure is the cornerstone of an efficient market and is
the essence upon which the ASX Corporate Governance
Council’s (ASXCGC) Corporate Governance Principles and
Recommendations (the guidelines) are based. The Council’s Tim Sheehy FCSA
guidelines have had a significant impact on the quality Chief Executive
and extent of governance disclosure since their inception Chartered Secretaries Australia
in 2003. The guidelines have encouraged companies
to introduce governance practices, such as board
performance reviews, that have no doubt improved board
effectiveness and given investors greater confidence about
the companies in which they invest.
Jane Bridge
As the research has highlighted, the ASXCGC’s guidelines
Managing Partner
have had a positive influence in encouraging an
Boardroom Partners
increasing number of boards to undertake detailed board
performance reviews. More than half of all companies
met or exceeded the ASXCGC’s requirements. Not
surprisingly companies in the ASX top 50 generally
exceeded requirements. Nevertheless there were examples
of misunderstanding or of reporting that was boilerplate
in nature. We noted that the smaller the company, the
greater the tendency to under-disclose.
Anything to declare? Page iii
Page iv Chartered Secretaries Australia and Boardroom Partners
Executive summary
In the world of corporate accountability in Australia, Public companies in the UK are further advanced in this
there have been significant developments in recent times. area of disclosure of board review practice. They provide
Nowhere is this truer than in the area of board reviews, some excellent examples of good practice, which are
which are now more common than ever before. Indeed, as included in Appendix 6 of this report. However, as our
this report shows, reviews of board performance are now report shows, several Australian companies are excellent
almost a universal phenomenon among leading exemplars as well.
public companies.
We hope that this report will reach a wide corporate
It is one thing to conduct a review. It is another thing audience and that our research findings provide helpful
to disclose information publicly about that review. The comparative information for board members and company
recommendation of the ASXCGC is that ‘Companies secretaries. Just as importantly, we hope that an additional
should disclose the process for evaluating the performance outcome of the report will be an explanatory or additional
of the board, its committees and individual directors.’ note from the ASXCGC, clarifying that disclosures are to
include the fact of review rather than merely an intention
This report finds that, among Australia’s leading public or standard policy.
companies, there is considerable variety in both the
practice and the disclosure of board reviews.
From their own public information, it is apparent that
many companies are making a genuine effort to follow
both the letter and the spirit of the recommendation.
They are using disclosure to demonstrate to their various
stakeholders the seriousness with which they take their
boards’ performance. Indeed, it is apparent that the
effect of the recommendation has been to encourage an
increasing number of boards to undertake detailed board
reviews. More than half of all companies met or exceeded
the ASXCGC’s requirements.
Nevertheless, a number of companies still disclose only
minimal information about their board reviews. There
is clearly a widespread and genuine concern about
confidential issues being made public. Given that a
significant number of large listed companies have been
able to overcome that concern, it would appear that others
either do not understand the recommendation or are
unable to meet it.
Anything to declare? Page v
Page vi Chartered Secretaries Australia and Boardroom Partners
Introduction
Reviewing the performance and contribution of corporate In Australia, where the recommendation is: ‘Companies
boards has been recommended as ‘good practice’ for some should disclose the process for evaluating the performance
years now.1 In Australia, evaluation methodologies are of the board, its committees and individual directors’5, the
well developed and there are many options available today same variety exists.
for boards wishing to consider how they ‘add value’ or
compare with other boards. With this in mind, Boardroom Partners and CSA have
partnered to investigate the evolving approaches to
Board evaluation is a key element of corporate governance, disclosure of board review in this country. While others have
although it is apparent that there is a wide range of looked at aspects of this issue, we offer this report as the
approaches to this potentially highly sensitive area. At best, first comprehensive analysis of the disclosures of Australia’s
a review will provide a board with meaningful information leading 200 corporations.
for development and the future; at worst, it will be a waste
of time and resources. This report includes complete (board review) disclosure
statements from 200 annual reports; our assessments of
Research in Australia2 and the UK3 has already explored each statement as either meeting, exceeding or failing
the form, content and practice of board evaluations, and to meet the disclosure requirements; and discussion with
identified what makes for a worthwhile review. Industry board directors and company secretaries of some of these
bodies, institutional investors and regulators all reinforce companies regarding the relationship between disclosures
the need for rigorous reviews and guidelines are becoming and the practices of review.
increasingly specific. The latest UK Guidance on Board
Effectiveness4 includes highly detailed recommendations
for board use. In 2009, ICSA published a review of the
disclosure statements of the top 200 FTSE companies,
illustrating wide variety not only in the practices of review,
but also in the approach to disclosure.
1 OECD Guidelines, 2009; ASX Corporate Governance Council Corporate Governance Principles and Recommendations, 2nd ed, 2007; Walker Review of Corporate
Governance in the UK banking industry, 2009
2 Australian Council of Superannuation Investors and UTS Centre for Corporate Governance, 2010, Board Performance and Effectiveness
3 Association of British Insurers, 2012, Report on Board Effectiveness; IDDAS UK 2012, Board Dynamics — Evaluating Board Effectiveness
4 Financial Reporting Council UK Guidance on Board Effectiveness, March 2011
5 ASX Corporate Governance Council Corporate Governance Principles and Recommendations, 2nd ed, Recommendation 2.5
Anything to declare? Page 1
PPaaggee 22 CChhaarrtteerreedd SSeeccrreettaarriieess AAuussttrraalliiaa and Boardroom Partners