Grant Chapman (SA, Liberal Party) Share this | Hansard source

I present the report of the Parliamentary Joint Statutory Committee on Corporations and Financial Services entitled Better shareholders—better company: shareholder engagement and participation in Australia together with the Hansard record of proceedings and submissions received by the committee.

Ordered that the report be printed.

by leave—I move:

That the Senate take note of the report.

Good corporate governance needs meaningful engagement between shareholders and company boards so that boards can be held to account by the informed decision of shareholders. Effective shareholder engagement is dependent on clear communication and transparent voting. A problem for companies wishing to engage with institutional shareholders is the difficulty of identifying beneficial share owners behind complex ownership arrangements. The committee recommends an amendment to the Corporations Act to allow owners to be more easily traced.

Some companies also seem reluctant to engage with shareholders on sustainability issues, concerned about their continuous disclosure requirements. The committee recommends that the Australian Stock Exchange clarify the scope of the continuous disclosure requirements as they relate to discussing these matters. A major barrier to engagement is incomprehensible company reports. Companies should be encouraged to voluntarily provide easily understandable, short reports for shareholders. This should replace the current mandatory concise report, which is no longer concise and is difficult to understand. The committee recommends that Australian Securities and Investments Commission establish best practice guidelines for company reporting.

The committee has also recommended that ASIC establish best practice guidelines for company annual general meetings, which could be more shareholder-friendly by being held at convenient times, allowing proper opportunity for discussion and using technology to reach a greater audience. Predatory share purchase offers are also detrimental to shareholder engagement, and the committee recommends that access to share registers be restricted to proper purposes. Previously I have raised this issue in relation to Mr David Tweed and his nefarious activities seeking from shareholders the sale of their shares at much less than their market value, so I welcome this particular recommendation from the committee.

The disclosure rules applying to short-selling and margin-lending activities also require improvement. Covered short sales should be required to be disclosed to the market, and institutional investors should disclose their stock-lending policies to members. The uncertainty over when director-shareholder margin loans are of material significance needs to be disclosed to the market, and this should also be clarified. The integrity of voting systems could be improved via electronic proxy voting systems to provide an audit trail and the prohibition of vote-renting and cherry-picking proxy votes. Direct voting would help overcome proxy voting flaws, and the committee recommends that the stock exchange encourage its uptake with an ‘If not, why not?’ provision in its corporate governance principles and recommendations. To assist shareholders in making informed voting decisions, the committee also recommends that shareholders be able to vote on the basis of AGM discussion by postponing voting until after the close of the meeting. The committee also recommends that director-shareholders be prevented from voting on their own remuneration packages.

The tabling of this report fulfils my final task with this committee, which I had the privilege of chairing for nearly 12 years—the life of the Howard government—and which I have continued to serve on as deputy chairman since early this year. I urge the government to take up these recommendations to enhance shareholder engagement, which I believe will become increasingly important in the years ahead. I thank Geoff Dawson, the secretary of the committee, and the committee staff for their work in supporting this particular inquiry.

In the valedictories for departing senators last week Democrat Senator Andrew Murray was kind enough to comment very favourably on the contribution I have made to Corporations Law and financial services regulation as chairman of this committee for so long. I thank him for that encouragement. Equally, Senator Murray has himself been a valued and thoughtful member of this committee through his contributions over the past 12 years and I want to thank him for the first-class work that he has done to enhance its deliberations.

Following the conclusion of my Senate term next Monday, 30 June, I will certainly continue to observe the work of this committee from afar with keen interest. Its work has probably been my key policy interest for these past 12 years and I certainly will not lose the interest that I have developed in that regard. So I wish its continuing members and staff well in their future work as I commend this report to the Senate.