The IRG finds that the articulation of the Principles has been generally well received. Early feedback suggests that companies using the Principles to trigger discussion and engage in internal governance review have seen it as making a positive contribution to corporate practice.
Where company practice diverges from the recommendations set out in the Principles, IRG is supportive of those who provide clear, informative explanations of alternative governance mechanisms, which achieve the same integrity outcomes. The IRG is particularly encouraged by companies who embrace the spirit of the Principles and clearly communicate how they address the underlying risks associated with each.
The IRG considers that the flexibility inherent in the disclosure regime has stood up to scrutiny and is not proposing any wholesale changes to the Principles or any differential disclosure obligations according to segmentation of companies. It will however be recommending additional guidance or clarification in some areas.
The 'if not, why not' reporting regime is in place to enhance transparency and disclosure whilst allowing companies the flexibility to demonstrate the practice that best suits them. The IRG is concerned that some market commentators and industry analysts have failed to grasp the fact that companies have an obligation to explain their governance practice by reference where appropriate to the recommendations, not an obligation to 'conform' to those recommendations.
The IRG believes there is great danger of simplistic interpretation of companies' disclosure, particularly of alternative governance mechanisms. The group cautions industry analysts who consider utilising surveys to capture such information, since the 'if not, why not' form of disclosure does not lend itself to box-ticking analysis.
The IRG will be making recommendations to the Council in the first quarter of next year, once initial analysis of feedback is complete. The group thanks those who have already provided valuable feedback and welcomes further contribution.
Comments should be provided in writing to the IRG Secretariat, (details below) or direct contact is invited with the members of the IRG:
- Peter Abraham;
- Geoff Ashton;
- Graham Bradley;
- Rick Crabb;
- Erik Mather;
- Tom Pockett;
- Ian Pollard;
- Jerome Vitale.
Australian Stock Exchange
Tel: (02) 9227 0989
Fax: (02) 9227 0436
Email: tanya.davey@asx.com.au
