Andrew Murray (WA, Australian Democrats) Share this | Hansard source

I initiated this reference to the Parliamentary Joint Statutory Committee on Corporations and Financial Services, but the committee was very pleased to take it up. I want to commence my remarks by thanking the previous chair of the committee for his wholehearted support and members of the previous opposition, the Labor Party, for their support for this inquiry. The essential understanding was that our markets and our corporations have grown so large and have become so complex that we need to find mechanisms which support improvements in accounting standards and governance practices in Corporations Law and market law with a better ability for very large companies to interact and relate to their shareholders.

One of the difficulties we have of course is that shareholders are often represented indirectly; they are either hidden behind nominee companies—and I do not mean that in the sense that they hide but rather that that is the vehicle they invest in—or hidden behind superannuation trust funds and other funds. It is important we recognise that these intermediaries between the ultimate beneficiary owners of the shares and the company themselves need to be given facilities and the ability to engage on behalf of the ultimate beneficiary shareholders and that the mechanisms for engagement should be as modern, as helpful and as technologically up to date as possible.

Essentially, if I were to capture one theme that emerges from the committee’s report Better shareholders—better company: shareholder engagement and participation in Australia, it would be that we do not want too much more black-letter law in this area but we do want much better practice. That is best facilitated through regulatory intervention and the development of a cross-sectoral understanding of how best to advance better engagement, better shareholder engagement and better participation in Australian companies. We had very much in mind a couple of good examples of how well things could be facilitated. The first was the committee’s strong endorsement, after interviewing the Chair of the Panel on Takeovers and Mergers in Great Britain, of the ability of bodies to develop practice which actually facilitated market acquisition and activity. This did not need too much of a change in law—obviously the law had to allow for the takeover panel themselves to be constituted but the actual practice was developed on a flexible basis. The second, and probably more directly relevant, example was the development of corporate governance principles by the ASX, ASIC and selected and representative members of the corporate community. That has been very effective indeed in keeping up to the mark on corporate governance.

We as a committee felt, and the recommendations clearly indicate this, that shareholder engagement was not up to the mark, and there are a number of areas, which Senator Chapman mentioned in his tabling remarks, which need further development. I think this is a particularly useful report not just because I originally motivated it but because I think its directions and its conclusions are intelligent and insightful. I think that if these recommendations were to be accepted then they would considerably improve shareholder engagement, not least of all through the processes for constituting boards that were in the past more effective in general than they are at present. Obviously there are some superb boards at present, but the ones at the other end of the spectrum are pretty ordinary. We in the committee hold to the view that, as far as possible, you want to not just weigh up the evidence but also come to a conclusion which most people are comfortable with, because if you can do that within the committee structure then you can start to anticipate that it can be done in the corporate world because it is not overly contentious.

One of the things which, unfortunately, characterised the Howard government was that its reaction time to the committee’s previous reports and recommendations was often abysmal. It took far too long and in our view did not facilitate the quick and efficient development of new law, new regulation or new or better practice in these areas. I would hope that the new government will take a shine to answering these reports quickly. I am deliberately addressing my remarks—through you, Madam Acting Deputy President—to the members of the Labor Party present. I have seen a huge improvement in how quickly questions are being answered on notice from estimates—a great improvement on previous practice. Let’s extend that improvement to answering committee reports as quickly as is reasonably possible.

Personally, I tend to take a more advanced view on shareholder engagement matters than do most of my colleagues. I think there are considerable opportunities for greater lateral thinking, and people who are acquainted with my arguments on corporate law will recognise that I have supported the idea of a corporate governance board for many years—that is, of course, a small board with a very limited remit, principally in the governance area, which is elected by shareholder and is not shareholding. I have always thought the main board has to remain elected by shareholding and must concentrate on the main job of the company, which is to do well and to advance the interests of the shareholders, but I have long thought that a separate corporate governance board, which a couple of writers think of as a corporate Senate, would be a considerable advance on corporate practice in Australia. And of course it is possible; it is not prohibited in law. You can do it in your own constitutions. So, in my very last speech with respect to corporate law matters, I would encourage the new committee to keep testing the boundaries to make sure we continue to be as proud of Australian companies as we should be.