The chair of the Australian Stock Exchange’s corporate governance council has led a robust defence of a draft new code, hitting back at critics who claimed it was written by “left-wing activists”.
Elizabeth Johnstone issued a statement pointing out that many critics have “missed the point” that the new code remains “a consultation draft, not a final or fixed position.”
She said: “It is wrong to label the consultation draft as the work of ‘left-wing activists’ or ‘social engineers’. It is the work of those who invest in, raise capital from, and provide professional support for, the market.”
Johnstone said the council was about to publish 100 submissions to its current consultation which would be considered when drafting the fourth version of the governance code.
She also denied that the code—known as the Principles and Recommendations—had contributed to boards being inundated with papers.
“The overwhelming majority of the council’s recommendations go to the structures and processes listed entitites should have in place as part of a robust framework and don’t require lengthy ongoing reporting to the board.”
Johnstone’s comments are the latest instalment in a heated debate in Australia about governance.
Governance proposals recently faced criticism from David Murray, chairman of AMP bank, who claims the code represents “regulatory overreach”.
Murray argues that charging risk, audit, remuneration, nomination and governance committeess with aiding the board undermines the chief executive and the board.
Academic Angelo Aspris, senior lecturer in finance at the University of Sydney, said: “Principles and recommendations have become a significant distraction for boards. They have been forced to focus on compliance—and not of the type that is beneficial to shareholders (i.e. reviewing financial reports and ensuring they are meeting continuous disclosure obligations).
“This leaves little time to deal with strategic decisions associated with forward-looking factors.”
Aspris added: “Corporate governance should not be proscriptive and firms should not be denounced for choosing to follow alternative and more effective paths.
“Murray’s statement that “we will not be guided by ASX corporate governance principles where they either weaken accountability or distract the company to less important issues” should be celebrated.”