Corporate governance tests: ASIC to look over your shoulder
10/09/2018
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Last month the Coalition Government announced an additional $70.1 million in funding for ASIC to combat misconduct in the financial industry. This funding injection will enable ASIC to conduct more intense monitoring of large financial services companies, including on-site visits.

For those directors who thought this might mean ASIC infiltrating its members into middle management to catch the few “bad eggs”, it appears ASIC’s sights are higher. Around 10% of that funding ($6.8 million) has been earmarked for the establishment of a “corporate governance” taskforce looking at board and executive behaviours.

And for those who are thanking their lucky stars they do not serve on a financial services board, the targets will not be limited to financial services companies, according to ASIC commissioner John Price, speaking to attendees of the Risk Management Association Annual Chief Risk Officer Conference 2018 last week. “We will consider a number of factors when selecting targets, so the project covers a good cross section of entities,” he stated.

According to Mr Price, the taskforce will focus on three main areas:

1. Reviewing Director and officer oversight of risk

ASIC will review whether boards are independent from management and whether they are receiving enough information to be able to hold management to account.

ASIC will ask:

  • 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

ASIC will ask whether executive remuneration structures, grants and vesting of variable remuneration are driving the right behaviours and accountabilities of executives in Australia’s listed companies. Its initial focus will be board remuneration committee decisions to award and grant variable remuneration.

3. Corporate disclosures

ASIC wants to understand whether companies stated corporate governance policies and procedures are actually reflected in practice.

Boards might bring forward assessments on whether their oversight and practices in these areas will stand up.

The full speech can be found HERE.

© Guerdon Associates 2020
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