GOVERNANCE UPDATE: Periodically Geoff Nunn & Associates prepares commentary on the issues confronting boards and directors.
On 23 July, 2019 APRA released a discussion draft: “Strengthening Prudential Requirements for Remuneration” in regulated Financial Services entities. The proposed new Standard (CPS 511) is a direct result of recommendations from the Hayne Royal Commission. Specifically the Final Report highlighted that the structure of executive remuneration, and the KPIs driving STIs and LTIs, was implicated in the misconduct that the Royal Commission uncovered. The Draft Standard has a number of issues and we have offered commentary in our latest Governance Update and lodged a submission with APRA on how the Standard might be enhanced:
The latest World Economic Forum 2019 Global Risk Report indicates an increasingly complex and uncertain risk environment in which corporations and government owned entities are required to operate. Interestingly five of the top ten risks are associated with climate change and two related to the cyber environment. Existing business models are increasingly challenged by disruptive technologies and new entrants to the market. This year’s Edelman Trust Barometer show Australia’s position has improved. However, we still lag other developed economies when it comes to trust in our organisations. A significant challenge for boards of all types. You can download the PDF here:
Repercussions from Royal Commissioner Hayne’s Final Report continue to reverberate across Australia. In this edition of Governance Update we take another look at the question of shareholder primacy. There have again been calls to change the Corporations Act along UK lines thus legally requiring directors to take a broad based stakeholder perspective. You can download the PDF here:
On Wednesday 27 March, 2019 APRA Chair, Wayne Bryes, shocked the business community by announcing, at a banking summit in Sydney, that bank boards may lose the power to set executive remuneration: “I think it’s fair to say that attempts to move away from the conventional model of executive remuneration have not been wholly welcomed.” This would be a major blow to bank board credibility at a time they are working hard to re-build trust with their stakeholder base. In the this Governance Update we explore some of the issues with the current structure of executive remuneration in the banks, and other corporates which follow a similar model. You can download the PDF here:
In his Final Report Commissioner Hayne identified three key challenges for Boards and CEOs. Governance, corporate culture and executive remuneration. Executive remuneration presents it’s own unique problems. The message that continues to emerge is that the current FAR/STI/LTI configuration will be largely retained albeit with a re-focusing of KPIs. In this Executive Remuneration Update we challenge the assumptions underpinning the current model and invite Boards and CEOs to consider other options. You can download the PDF here:
On 1 February, 2019 Royal Commissioner Kenneth Hayne delivered his Final Report into Misconduct in the Banking, Superannuation and Financial Services Sector to the Governor General. As well recommending structural changes to the Financial Services Sector and referral to the regulator for some, he focuses a spotlight on boards and executive teams and invites them to consider a more enlightened approach to corporate conduct and governance. By any measure the Royal Commissioner and his team have done an extraordinary job over the past 12 months. Events have moved a long way from the Inquiry that we didn’t need to have to one of stark revelations of corporate misconduct. We discuss the implications for boards and directors in our February, 2019 Edition of Governance update which can be downloaded here:
2018 was a watershed year for corporate governance in Australia. The impact of various inquiries and reports including the Banking Royal Commission, the APRA Report into the Commonwealth Bank, release of the draft 4th Edition of the ASX Governance Principals, the 2018 Edelman Barometer and the ACCC Report into Retail Electricity Prices cannot be underestimated. The list goes on and debate continues between those who favour a significant re-think of our corporate governance model, possibly along UK lines, and those who support minimal change. Please see our January, 2019 Governance Update:
Hearings of the Banking Industry Royal Commission concluded on Friday 30 November, 2018. As expected the media had a field day with the comments of some Chairs and CEOs. We’ve done our own analysis with a view to looking a little deeper into the issues confronting the Sector and business in Australia more generally. Boards have their work cut out for them to re-build confidence and credibility. We’ve also had a look at the 2018 Remuneration Reports of the Big 4 plus the Bendigo & Adelaide Bank to see if much has changed. It hasn’t. See our commentary here:
The Big Four
Australia’s Big Four Banks have been centre stage in the corporate governance debate during 2018. This looks set to continue during 2019.
In this edition we discuss Board Hot Spots and ongoing issues and concerns for Boards of Directors. The challenges confronting boards in 2018/2019 are unprecedented. See our commentary here:
By any measure the credibility of our corporations in Australia is not looking good at the moment. The Banking Industry Royal Commission has uncovered a litany of transgressions that have shocked the community. This edition of Governance Update explores some underlying causes and the challenges boards of all descriptions face in rebuilding trust. Follow our commentary here:
This edition summarises concerns about the structure of executive remuneration in our larger listed and private companies and how it might be implicated in the negative corporate behaviour that has received so much coverage lately. View our challenges to the executive remuneration orthodoxy here:
ARTICLES: Exploring emerging challenges with a fresh perspective.
In this article Geoff puts on his old hat as a Corporate Remuneration Advisor and questions the assumptions that underlie executive remuneration in most of Australia’s major corporations.
In this article Board Advisor & Corporate Governance Specialist, Geoff Nunn, considers the current crisis of confidence in our corporations and government institutions. He explores the history and offers guidance to directors on a way forward.