ASIC's New Supervisory Initiative: Corporate Governance Taskforce

ASIC’s Corporate Plan for 2018/2019 introduces some new supervisory initiatives as part of its regulatory priorities – one of these is the establishment of a Corporate Governance Taskforce (CG Taskforce). This CG Taskforce is not limited in remit to financial services, but will span large listed entities across a range of industries.

ASIC Commissioner John Price said in a speech at FINSIA on 15 November 18 that “This will allow us to shine a light on 'good’ and 'bad' practices observed across these entities.”

There is no fulsome detail yet on the what, how and when, and which entities will be selected.  In terms of the how, Treasury has noted that it will include deploying staff to conduct on-site surveillance and investigations.  In terms of the what, Mr Price did flag in his FINSIA speech that the following three issues are amongst the matters that will be looked at by the CG Taskforce’s review:

“1. Director and Officer Oversight

The first is the role of the Board and officers in the oversight (and in the case of officers, the management) of risk. The independence of the Board from management and proper information flows to the Board is necessary for the Board to effectively hold Management to account. Our review will look at how Directors are actively exercising their stewardship functions, particularly in relation to non-financial risk.” 

In explaining how ASIC will approach this issue, Mr Price has said in a previous speech: “'Our review will look at how Directors are actively exercising their stewardship functions, particularly in relation to non-financial risk', including:

• 'How are Directors and Officers ensuring that they know enough about the entity to ask the right questions? How do they know what they are not being told?”
• “How are they holding their executive teams to account?”
• “In large, complex entities, how do they ensure that they have meaningful oversight over all material non-financial risks of the entity?”
• “How are they satisfied that the compliance and risk functions of the entity are being adequately funded?”

“2. Executive Remuneration

The second issue we will be investigating is executive remuneration practices. We will do this with the benefit of recent work that APRA has also done in this space. Remuneration is a clear driver of conduct. We will be looking at whether executive remuneration structures, grants and vesting of variable remuneration are driving the right behaviours and accountabilities of executives in Australia's listed companies.” 

“3. Disclosures

Finally, we will be considering the adequacy of periodic corporate governance disclosures. We will be looking to see whether investors are being provided with meaningful disclosures about the effectiveness of a company's corporate governance practices. At the moment most disclosure focuses on what policies and procedures companies have in place regarding corporate governance. We want to understand whether those stated policies and procedures are actually reflected in practice.”

Undoubtedly the individual entities and Boards involved in the Taskforce’s reviews will benefit from reflecting on, and if needed improving, their own corporate governance practices. However, a broader benefit to corporate Australia will be if the CG Taskforce does publish a report at the end of this initiative that shares the corporate governance learnings and best practice benchmarks. Watch this space...