ASX corporate governance guidelines misinterpreted

A report concerning the implementation by companies of the ASX's Principles of Good Corporate Governance and Best Practice Recommendations has recently been released. The key findings of the report by the Implementation Review Group of the ASX Corporate Governance Council are that:

• while the principles and recommendations are advisory, a number of smaller companies mistakenly believe them to be mandatory;
• a number of medium and smaller companies have not considered the appropriateness of implementing the recommendations because of concerns that investors will be critical if practices that differ from the Council's recommendations are adopted; and
• the "if not, why not" reporting of some smaller companies did not sufficiently explain the choice of governance practice to investors.

The key message is that, rather than simply adopting the principles and recommendations (or, for that matter, any generic corporate governance program) as is, they should be tailored to meet the organisation's requirements.

APRA proposals on compliance for life insurance branches

The Australian Prudential Regulation Authority (APRA) has released for public consultation a draft prudential standard and discussion paper on the establishment and operation of a compliance committee by local subsidiaries of, or branches of, foreign life insurance companies.

The requirement to have a compliance committee is a new requirement designed to provide greater assurance that branches and subsidiaries will comply with the prudential requirements placed upon entities registered under the Life Insurance Act 1995 (the Life Act) to conduct life insurance business in Australia.

Key points contained in the proposed standard include:

• the board of directors of a foreign life company must delegate sufficient powers of management to the compliance committee to enable it to ensure the branch complies with the Life Act; and
• ultimate responsibility for ensuring compliance with Australia’s prudential regime remains with the board. To this end, the board must:
  • have the power to appoint and remove the members of the Committee at its discretion, subject to certain composition and residency requirements as outlined in the standard;
  • ensure the delegation of managerial powers is not irrevocable and does not exclude, if necessary, the board from exercising these powers; and
  • establish adequate procedures for monitoring and supervising the operations of the Committee, as well as assessing its performance.

APRA has also announced that it will consider extending the standard to the branches of foreign general insurers in due course.

Comments on the draft standard close on 28 February 2005.

Although the standard will only apply to certain insurers, the discussion paper and draft standard may be useful for other companies when considering the relationship between the board and the compliance committee.

The draft standard and discussion paper can be downloaded by clicking here.

Current compliance issues

There are a raft of issues with compliance implications being dealt with by the Federal Government and its agencies. While implementation dates for some of the foreshadowed changes are not yet known, here's the current "timetable" for some of the major changes taking place in the first half of 2005:

• March - Exposure draft of Bill to strengthen anti-money laundering legislation expected to be released.
• 31 March - Deadline for the report of the Privacy Commissioner's review of the private sector provisions of the Privacy Act 1988 to be provided to the Government.
• 31 March - Closing date for comments on ACCC/ASIC Debt Collection Guideline Discussion Paper.
• 1 April - Closing date for comments on the exposure draft of the Corporations Amendment Bill (No. 2) 2005. (The Bill is intended to "facilitate increased shareholder participation in corporate governance, while reducing the associated costs of such participation. Specifically, the Bill facilitates avenues for communication other than the requisition of meetings.".)
• 1 July - ASIC Dollar Disclosure Policy (Policy Statement 182) commences.
• 1 July - The Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 comes into operation.