This year has been big on the policy reform front, and a parliamentary committee has also called for major changes to audit and consulting firms.
This has been a busy year for the AICD policy and public affairs team, contributing to reviews and working to bring good governance principles and Australian director perspectives to the table.
One of the most significant reforms in 2024 has been the introduction of mandatory climate reporting. The new regime will see Australia become one of the first developed economies to implement new global sustainability standards.
The AICD was at the forefront of efforts to deliver a sensible phase-in of new obligations, including a regulator-only transition period, and has developed director guides and tools to support boards. This year also saw reviews into two of AICD’s priority policy areas — continuous disclosure laws, and regulation of shareholder meetings and communications.
We were pleased to see the government accept the recommendations of the continuous disclosure review and commit to retaining the fault-based approach for shareholder class actions.
While government has yet to respond to the AGM review, the AICD welcomed the independent panel’s recommendations. These include removing the constitutional hurdle for non-listed companies to hold virtual meetings and retaining flexibility on format for AGMs.
Industrial relations has also been an active area of reform. The Closing Loopholes Act 2023 legislative changes passed late in 2023 introduced new criminal offences for wage and superannuation underpayment — a key area for strong board oversight. Further reforms through 2024 have redefined the definition of casual employment and introduced new “right to disconnect” provisions.
Boards are also grappling with the positive duty to prevent harassment and address psychosocial risks, with the positive duty commencing for employers from December 2023. The AICD has guidance to support directors (see breakout) as they navigate new legal duties at federal and state levels.
On cyber governance, the government moved forward with its 2023–30 strategy, including reforms to strengthen legal protections for information shared with the government during major cyber incidents, ransomware payment reporting and a cyber incident review board. The AICD has championed a collaborative approach on cyber resilience between industry and government.
With a federal election looming, we also have a full regulatory pipeline ahead for 2025. Among other issues, the APRA review of governance standards; major reforms to the Privacy Act 1988; finalisation of the ASX Corporate Governance Principles & Recommendations fifth edition; implementation of the McMillan review into the Modern Slavery Act 2018; and regulation of cyber, AI and audit (see below) will feature.
The AICD will continue to advocate for policy settings that drive good governance outcomes and support directors in their important and challenging roles. Thank you to all members who have guided and contributed to our policy and practice work over the past year, including directors on the AICD’s advisory committees and division councils.
Reform calls for professional services and audit firms
The conduct and regulation of audit and professional services firms has been in the policy and public spotlight, with the PwC tax scandal as the focus. In November 2024, the Parliamentary Joint Committee on Corporations and Financial Services handed down its report into the audit, assurance and consultancy industry. The report proposes that the governance and structure of the big four consulting firms be brought more into line with corporations. Among the 40 recommendations are: mandating that firms with more than 3000 staff meet Corporations Act 2001 requirements for governance and accountability; capping of partnerships at 400; a ban on non-audit services by large firms to audit clients; operational separation of audit and non-audit activities; and enhanced penalties and regulatory oversight. The committee also recommended auditor tenure and fee disclosure, 10-year tenders, and mandating digital financial reporting for listed companies.
The government is required to respond to the report within three months. The AICD’s reporting committee will look closely at the recommendations and implications for boards. We are also awaiting the outcomes of the Treasury consultation on the regulation of accounting, audit and consulting firms conducted earlier in 2024.
Separately, in November, ASIC released its annual report on financial reporting and audit surveillance. Of note for directors, ASIC has flagged surveillance on auditor independence and conflict- of-interest measures. Auditor rotation and provision of non-audit services is also in the regulator’s sights.
The AICD has a resource to support directors in fulfilling their obligation to conduct periodic comprehensive review of the external auditor.
ASIC flags enforcement and priorities
In November, ASIC appeared before the Parliamentary Joint Committee, giving evidence on enforcement activities and priorities. ASIC noted its focus on greenwashing, including its first win in a greenwashing civil penalty action against Mercer Superannuation. Other notable enforcement included infringement notices to the ASX for breaches of pre-trade transparency, and commencement of civil action for alleged misleading statements relating to the CHESS replacement project. ASIC’s chair also highlighted actions on stock market manipulation and financial services issues.
The decline in public listings, and growth of private equity and credit markets, is also a growing area of focus for the regulator. A discussion paper and research on trends is expected before year’s end. The AICD will be closely engaged with this important topic.
This article first appeared under the headline ‘A year of reform’ in the December 2024/January 2025 issue of Company Director magazine.
Louise Petschler GAICD is General Manager Education & Policy Leadership at AICD.
Practice resources — supporting good governance
Examples of the AICD’s contemporary governance practice resources for members:
Climate Governance
- Director's Guide to Mandatory Climate Reporting.
- Members can also access AICD’s free climate governance e-learning and short course.
Positive Duty:
- This joint report by the AICD and ACSI includes practical examples of better governance practice.
Cybersecurity
- Developed by AICD and the Cyber Security Cooperative Research Centre, the Cyber Security Governance Principles guide good practice, outlining key questions and red flags.
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