The AICD’s advocacy team represents the interests of members in public debate and to governments.
AICD’s position: Senate voting reform
The Australian Institute of Company Directors (AICD) has strongly supported reforms to the Senate voting system as an important step forward in the governance of Australia.
As an organisation focused on excellence in governance, the AICD is in a unique position to comment on the nation’s system of governance through our federal parliamentary system.
The AICD argues significant reforms are needed to combat the excessive short-termism in national policy-making and political processes and to boost confidence in federal democratic systems.
Reforms to address the inconsistent and undemocratic outcomes produced by the current Senate voting and preference model are a vital step in improving the governance of the nation.
Ensuring the Senate voting system delivers results more closely aligned with the will of voters will strengthen confidence in the Senate’s role and representation.
The AICD provided a submission to the Joint Parliamentary Committee inquiry into the Senate reform proposals that supported reform. In a public statement issued in March, the AICD raised concerns regarding:
- Gaming of preferences, leading to preference distribution that does not reflect the will of voters.
- The outcome of the 2013 election, following which there were concerns after one Senator was elected based on only a small number of votes.
- The views of AICD members, where 83 per cent of our members rated the quality of public policy debate as poor or very poor, including concerns with the Senate.
The AICD is preparing to take a much stronger position on governance-of-the-nation issues, bringing the perspective of our broad membership into the debate.
Independence on super boards
The AICD has provided comments to the Fraser Governance Review, which was established following the federal government’s attempts to pass legislation requiring more independent directors on the boards of superannuation funds.
We provided our views that the process is neither independent, nor are its terms of reference appropriately broad.
However, the AICD has long held that members of superannuation funds would benefit from independence on their boards and that the sector has nothing to fear and much to gain from greater independence and transparency. As such, it is important that we provided our views to this review.
We questioned whether an optional code of conduct, such as the one being advocated by industry super funds, for one segment of the superannuation industry is the most effective framework for guiding governance practice. A consistent set of standards should apply to all funds, based on recognised principles of governance, with a scope broader than independence of directors. Any such standards would best be set and monitored independently, for example through prudential standards and/or legislation.
The Australian Prudential Regulation Authority has demonstrated support for the inclusion of independent directors on the boards of organisations in other regulated industries under Prudential Standard CPS 510, which requires the boards of authorised deposit-taking institutions, general insurers and life companies to have a majority of independent directors at all times.
We see no convincing reason why not-for-profit (NFP) funds should be treated differently from for-profit funds or other public entities that deal with public funds when it comes to adopting recognised standards of governance practice.
Federal government engagement
In late March, the AICD board and senior chairs from Australian Securities Exchange companies and NFP organisations held a series of meetings in Canberra as part of our government relations strategy.
The delegation met with senior members from the federal government, opposition and the Greens as well as backbenchers from all sides of politics. The group also took the opportunity to meet with a number of federal government departmental secretaries.
The visit was an opportunity for elected official and senior public servants to hear about matters of importance to the director community. Issues that were discussed at length included the need for insolvency law reform; reform of funding arrangements for NFPs; the urgent need for reform of Australia’s governance systems; greater independence on superannuation boards; board diversity and the growing trend for short-termism in Australian boardrooms.
The AICD intends to take a similar delegation to Canberra each year to increase our engagement with parliament and ensure the director community’s voice is heard on important public policy issues.
Safe harbour and insolvency
The AICD has been a vocal advocate of the need for reform to insolvent trading provisions that create undue incentives towards risk aversion for directors. The National Innovation and Science Agenda package released in December 2015 committed the federal government to much needed safe harbour reforms – protections that will allow boards the breathing space to consider restructuring options for entities that can be saved, delivering real value in jobs and value to the economy.
The federal government has started initial consultations on legislative drafting and concepts and the AICD is investing significant resources in this reform to ensure it works for directors.
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