Welcome to Directors Australia’s blog

Directors Australia works with the boards, directors and executive managers of organisations to achieve the highest standards of corporate governance. Our aim is to improve board and organisational performance, and on this blog we’ll be posting regular articles on issues of relevance to directors, boards and senior management. We welcome thoughtful comments on the topics raised as well as suggestions on any topics you would like covered via This email address is being protected from spambots. You need JavaScript enabled to view it.

Disclaimer: This blog site has been prepared by Directors Australia for the purposes of providing general information only. Nothing on this blog site should  be used or relied on for legal or other advice by any party. Each party's individual circumstances may change the effect and relevance of any matters discussed.

The Commonwealth Parliament has passed the Public Governance, Performance and Accountability Bill. The new Act replaces the Financial Management and Accountability Act 1997 and the Commonwealth Authorities and Companies Act 1997, and sets out in one statute the governance, performance and accountability requirements for the Commonwealth Government and its entities.

Among other matters, the Act sets out core principles and behaviours which public sector officers are expected to follow. Duties and obligations are placed on accountable authorities and officials in relation to public resources.

An ‘accountable authority’ of a Commonwealth entity is required to govern the entity in a way that promotes the proper use and management of the public resources for which it is responsible, promotes the achievement of the purposes of the entity, and promotes the financial sustainability of the entity.

In a new move, accountable authorities will also be required to establish and maintain appropriate systems relating to risk oversight and management, and internal control.

In exercising their powers and performing their functions, officials also have duties:

  • of care and diligence
  • to act in good faith and for a proper purpose
  • not to improperly use their position to gain a benefit or cause a detriment
  • not to improperly use information they have obtained because they are an official
  • to disclose any material personal interest that relates to the affairs of the Commonwealth entity.

The accountable authority of a Commonwealth entity will also be required to prepare for the entity:

  • a corporate plan
  • budget estimates
  • annual performance statements about the entity's performance
  • annual financial statements.

Work is currently underway to develop rules to support the new framework.
A copy of the Act can be accessed here.

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ASIC proposes to be a party to discussions between company managers and investment research analysts in relation to stock, it announced in July 2013.

ASIC views the move as part of its role to ensure that all investors have access to equal information from listed entities when making their investment decisions and states that it will:

  • work to raise awareness of the risks of selective disclosure when listed companies brief analysts
  • remind key gatekeepers, company officers, individual analysts and their firms of their obligations
  • look to conduct spot checks with selected companies to hear how companies brief analysts and understand their procedures.

The announcement follows various analysts downgrading their estimates of gold production by Newcrest Mining days before Newcrest announced its downgrade to the market. Some law firms are reportedly investigating a class action based on Newcrest’s continuous disclosure obligations.

ASIC’s move has been criticised by lawyers, analysts and investor relations firms citing that the increased surveillance would unnecessarily impede the informality of such meetings.

This reporting season is the first since ASX issued its revised Guidance Note 8 in March 2013, which assists listed entities understand their continuous disclosure obligations and particularly the requirement to disclose market sensitive information to the ASX.

Particular areas revised in Guidance Note 8 included:

  • what ASX means by the word 「delay” when it defines 「immediately” as 「promptly and without delay”
  • when an entity should ask for a trading halt to manage its continuous disclosure obligations
  • when ASX treats media and analyst reports, and market rumours as evidencing a loss of confidentiality under Listing Rule 3.1A.2. 

The revised Guidance Note 8 can be accessed here.

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As companies prepare their end of financial year accounts, ASIC has reminded directors of the need to ensure that financial reports provide useful and meaningful information to users.

In releasing its areas of focus for 30 June 2013 financial reports, ASIC particularly warns directors to focus on:

  • ensuring that the operating and financial review (OFR) for listed entities provides more useful and meaningful analysis, and information for members
  • the impact of new accounting standards on consolidated financial statements and joint arrangements
  • impairment of goodwill and other non-current assets
  • the value of financial instruments that are not traded in an active market
  • going concern assessments, and
  • revenue recognition and expense deferral policies.

In March 2013 ASIC released a regulatory guide to lift the standard of disclosure in operating and financial reviews which form part of a listed entity's annual report. The guide includes information that ASIC believes investors would reasonably require to make an informed assessment of the entity's operations, financial position, business strategies and future prospects.

The Regulatory Guide can be accessed here.

ASIC has also released the results of its review of 150 financial reports of listed entities and of unlisted entities with larger numbers of users as at 31 December 2012. Deficiencies identified by ASIC included the impairment of goodwill and other non-current assets, non-consolidation of controlled entities, and key disclosures about going concerns and the assumptions underlying asset valuations.

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From 1 July 2013 charities (other than basic religious charities) must meet the new Governance Standards to be registered with the Australian Charities and Not-for-profits Commission (ACNC).


The ACNC governance standards are intended to set a minimum standard and cover:

  • the purposes and not-for-profit nature of charities
  • accountability to members
  • compliance with Australian laws
  • the suitability of those who govern charities, and
  • the duties of those who govern charities (including responsible management of financial affairs).
  • The ACNC has released a range of material to assist organisations understand and comply with the standards. These materials can be accessed here.


All charities need to understand and assess their existing compliance with the governance standards. In this regard, organisations should be reviewing their constitution, governance policies, board composition and performance, and determining if they require any requisite training and assistance here.

The ACNC recognises that the Governance Standards are minimum standards and do not cover all aspects of governance.

NFP organisations looking for additional guidance should refer to the Australian Institute of Company Directors Good Governance Principles and Guidance for Not-for-Profit Organisations. The AICD sets out 10 principles developed following extensive consultation with the sector. 

A copy of the AICD Principles can be accessed here.

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Directors & officers targeted personally for the organisation’s ‘cultural failings’

by Tim Murray
Managing Director of Culture Strategy Partners

Key points:

  • In FY2011 the Hastie Group had $1.8b revenue, $2.9b construction work-in-progress, $1b assets and 7,000 employees. The Group was placed in administration in May 2012.
  • The Administrator’s report summarises Hastie’s collapse as being “..due to poor strategic, operational and financial management and increased competition.”
  • While many of the issues identified by the Administrators are accounting and legal in nature, they also identify numerous ‘cultural failings’ that caused, or contributed to, Hastie’s downfall.
  • The Administrator believes these cultural failings represent potential civil and/or criminal breaches of duty and are targeting directors and officers personally for damages.

Cultural failings as observed by the Hastie Group Administrators
Many of the issues identified by the Administrators are accounting and legal in nature. However, the Administrators also identified a range of ‘cultural failings’ within the organisation that they believe represent potential civil and/or criminal breaches of duties by directors & officers due to “Failure to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise in the same circumstances”:

  • the poorly implemented acquisition strategy, including lack of due diligence; poor post-acquisition integration and performance of the businesses; duplication of overhead costs; loss of key personnel
  • inadequate management and Board reporting systems, including lack of uniformity across subsidiaries that were open to manipulation
  • the Board appeared not to have ‘an enquiring mind’ resulting in poor or non-existent interrogation of management and financial reports and forecasts
  • inadequate control exercised by the Board over management, including profitable companies subsidising the loss-making Middle East businesses
  • sub-standard project management systems and processes; no or inadequate communication with customers
  • a general lack of transparency leading to a culture of ignoring bad news

Three things directors & officers can do to minimise risks from ‘cultural failings’

  1. Demonstrate that culture is actually important to you. You can do this by asking the right questions; looking for evidence that management is actively focusing on organisational culture; and enthusiastically participating in the culture program that management is leading.
  2. Monitor whether the organisation has the appropriate ‘cultural traits’ for its business. For example, organisational transparency (sharing the right information with the right people); accessibility (anyone being able to talk to anyone);  accountability (the right reports from the right people at the right time).
  3. Include cultural aspects with the other decision criteria that drive M&A decisions – financial, strategic, operational – during due diligence, the overall decision formulation process, and the post-deal business integration process.

An effective culture is not just about risk management
Research into business high-performance over the past 100 years has established a direct correlation between financial results and the communication habits that drive its workplace – ie its culture.

In today’s increasingly competitive, complex and rapidly changing business world, there’s a widening performance gap between organisations with strong cultures, and those that are frustrating and depressing places to work.

So focusing on culture is not just about risk management and crisis avoidance. It makes good business sense.

Tim Murray is Managing Director of Culture Strategy Partners (CSP): Communications for a High-Performing Workplace. For more information call Tim on (02) 9043 5288 or visit the website www.culturestrategy.com.au

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