Effective governance identifies culture as an important element of creating sustainable value. As part of their overall stewardship and oversight of the organisation, directors must take a proactive approach to understanding and assessing the culture in their organisation and work with management to take advantage of opportunities and lead-change where necessary.
The Australian Institute of Company Directors has launched a practical tool to help directors govern organisational culture. It provides a framework for understanding the formal and informal drivers of culture and how to influence both. Get the tool here.
The ASX has seen examples of listed entities making market announcements it suspects are designed to ‘ramp’ the price of the security rather than to inform the market. The ASX is warning all listed companies that if it detects what it suspects to be a ‘ramping’ announcement, it will not hesitate to suspend the entity and issue a query letter. The ASX reminds all listed entities of the guidance in ASX Compliance Update no 02/18 dated 15 March 2018 about disclosure of customer contracts.
Loyalty, Bonus or Reward Securities
There has been an increase in listed entities issuing ‘loyalty’ securities, usually intended to reward security holders who participate in an issue of securities for their loyalty in holding those securities for a given period. These may conflict with the requirements of Listing Rule 6.1 and Listing Rule 12.5.
Securities in listed entities are expected to be freely trade-able. The ASX recommends listed entities proposing to issue a ‘loyalty” (or similar) securities to first apply to the ASX for in-principle advice that the terms of the securities will satisfy Listing Rules requirements.
Updated Guidance on Climate Change Disclosure
ASIC has updated its regulatory guidance to the disclosure of climate change-related risks and opportunities. This follows the publication of ASIC Report 593: Climate Risk Disclosure by Australia’s Listed Companies, which recommended, among other things that companies and directors:
ASIC has made it clear that climate change is an area of ongoing focus.
Boards cannot afford to ignore oversight of non-financial risks
ASIC’s report Director and Officer oversight of non-financial risk found the boards reviewed were challenged by important elements of non-financial risk management and their oversight of these risks was less mature than required. The report concluded that boards:
Remuneration practices are a major driver of organisational culture and behaviours and the Board plays a key role in determining remuneration governance. Actions that Boards can take to improve remuneration policies include:
Financial governance includes the response to reporting obligations, internal and external, and the consideration of critical financial issues and risks implicit in those processes. For NFP directors this means:
The AICD has published Financial Fundamentals for Not-for-Profit Directors – a resource for NFP directors to develop their financial literacy. Other AICD resources for NFPs include Not-for-Profit Governance and Performance Study and other free resources to help NFPs understand and achieve good governance.
Sources of information: Australian Government; Australian Institute of Company Directors (AICD); Australian Securities and Investments Commission (ASIC); Australian Securities Exchange (ASX); Governance Institute of Australia (GIA).
Disclaimer: Mertons’ Corporate Snapshot is only intended to provide a general overview on matters of interest. It is not intended to be comprehensive and is not legal advice. We attempt to ensure that content is current but we do not guarantee its currency. You should seek legal and / or professional advice before acting or relying on any content.