Corporate HQ Advisory Newsletter

August 2012

Welcome to the winter edition of our Corporate HQ Newsletter.

After our first post-Centro annual reporting season, and at the beginning of a fresh season, it is appropriate to look back over the major duty of care cases brought by ASIC in recent times. It is also appropriate to identify key lessons for directors seeking to manage their 'core, irreducible' and other responsibilities, while guiding their companies towards profitability. I offer a brief account.

The James Hardie decision in the High Court has reminded us of the importance of proper minute taking, and the statutory strict liability surrounding that process. Mark Standen explores these issues.

There will be a more intense focus than ever on the remuneration report in this year's annual reporting season, because of the introduction of the two strikes rule, with some companies facing the prospect of a second strike. In that context, ASIC's views about the content of the remuneration report are especially significant. Mark Standen and Michelle Milligan outline ASIC's expectations.

Fortunately, in difficult times there is still a steady stream of new listings on the ASX. From a corporate governance point of view, the ASX's new good fame and character requirement for directors of companies seeking to list (or re-list) on ASX requires attention, as Paul Washington explains.

Finally, the turmoil surrounding the remuneration arrangements of Australian listed companies is slight compared with recent events in the United Kingdom.The UK government's 'say on pay' response is correspondingly extreme by Australian standards. Nicola McGuire, who has recently joined the Corporate HQ team, provides a succinct account of what could appear on the Australian legislative agenda in future, if the two strikes rule is seen to fail.

In this edition

Directors' duties: some reflections after the James Hardie, Fortescue and Centro cases 

Australia's statutory duty of care and diligence is not much different from the equivalent duty under the laws of Delaware and the United Kingdom. But uniquely, it has been a focus of attention in major regulatory litigation in this country.

Board minutes after the James Hardie decision 

The James Hardie decision has focussed attention on, the nature and importance of board minutes, the recording of dissent and abstentions; and the requirements of the Corporations Act for signing and recording of minutes.

ASIC's guidance on remuneration reporting

In February 2012, ASIC issued its most recent guidance on improved disclosure of remuneration arrangements for directors and executives. This guidance was based on a review of 50 remuneration reports of ASX 300 companies for the year ended 30 June 2011.  It followed the release in June 2011 of similar guidance arising from a review of 60 remuneration reports for the year ended 30 June 2010.

Good fame and character – directors of listed companies

Since 1 January 2012, the Listing Rules have required entities seeking admission to the official list of ASX to satisfy ASX that each director or proposed director of the entity as at the date of listing is of 'good fame and character.'

Executive remuneration reform in the UK

In our February 2012 newsletter we discussed the UK government's proposals for reform of executive pay rules, which were announced in January 2012. These proposals followed Vince Cable’s September 2011 discussion paper, which attacked the prevailing UK executive pay climate.  That was said to encourage 'rewards for failure', pay ratcheting and an increasing inequality between corporate executives and employees. In this article, we give an update on those reforms and discuss some potential implications for Australian executive pay rules.