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    Governance News 18 September 2019

    60 mins  17.09.2019 Mark Standen, Siobhan Doherty, Kate Hilder

    Governance News provides a weekly wrap up of key governance, risk and regulatory developments in Australia and overseas.  This week's issue includes (among other developments): coverage of ACSI's latest CEO pay survey; Equilar's latest gender diversity index; key findings of ISS' latest benchmarking policy survey, consultation on five draft Bills proposing to strengthen ASIC's enforcement and supervision powers; ASIC's second update on implementation of the FSRC recommendations, CEDA's Australia Company Pulse 2019 and ASIC's first use of its new product intervention power.

     

    Full coverage of this weeks content is now available


    Past issues are available

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    https://www.minterellison.com/articles/governance-news-18-september-2019

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    Boards and Directors Navigation Show below Hide below

    • What's the right level of tension/challenge in the boardroom?  Four high profile board members outlined their views in The AFR

    Diversity Navigation Show below Hide below

    • More than 20% of Russell 3000 board members are women for the first time according to Equilar's latest Gender Diversity Index  
    • In Brief | Tougher on board gender diversity? AustralianSuper has reportedly cautioned 52 ASX listed companies that it will vote against the most senior director up for reappointment if the board has fewer than two women 

    Remuneration Navigation Show below Hide below

    • 'Entitlement or reward'?  Most ASX200 CEOs received their bonuses last year, despite declining trust levels in business according to the latest ACSI ASX 200 CEO pay survey 
    • In Brief | Adjustments to CEO pay at BHP?  The Australian reports that BHP CEO Andrew Mackenzie's total pay fell 24.2% to $US3.53m in FY19, down from $US4.66m the previous year.  Reportedly the reduction was made as a result of the group's safety performance (and in particular, a fatality at QLD's Saraji coal mine in December).  'From a performance perspective, while shareholders have benefited during FY2019 from positive share price growth and significant shareholder returns, the year was a challenging one operationally for BHP, and the remuneration outcomes for FY2019 for our senior executives reflect this' the Australian quotes BHP as saying.  The Australian adds that Mr Mackenzie's annual base pay rate was left unchanged at $US1.7m — the same as it was when he was appointed in 2013
    • In Brief | The FT reports 900 equity partners, who share in PwC UK's profits, will receive an average £765,000 for the year to June 2019 — a 7% pay increase on last year.  Reportedly this is the biggest pay increase in since 2009, when partners earned a record £777,000.  The FT observes that the increase has occurred despite a growing regulatory backlash against the accounting group and a warning that profit growth at the Big Four firm would stall next year

    Institutional shareholders and stewardship Navigation Show below Hide below

    • Key findings from the ISS 2019 Benchmarking Policy Survey

    Disclosure and Reporting Navigation Show below Hide below

    • ASIC is reportedly pushing for global regulators to step up their scrutiny of potentially misleading cross border information flows

    Markets and exchanges Navigation Show below Hide below

    • In Brief | The FT reports that Hong Kong Exchanges and Clearing (HKEX) will increase its efforts to buy the London Stock Exchange Group (LSE) by appealing directly to shareholders, following the LSE's rejection of its £32bn offer.   Reportedly the LSE cited concerns about the deal's structure and value, as well as the political risk (given the social unrest in Hong Kong) in rejecting the deal.   According to The FT,  HKEX has until 9 October to decide whether to proceed with a formal offer.  Reportedly, if the HKEX offer succeeds, it would create the largest exchanges operator in the world by revenues

    Regulators Navigation Show below Hide below

    • Top Story | Consultation on draft legislation to further strengthen ASIC's enforcement and supervision powers 
    • ASIC has released its second update on progress towards implementation of the Financial Services Royal Commission recommendations 

    Corporate social responsibility and sustainability Navigation Show below Hide below

    • Shift in expectations? The Committee for Economic Development of Australia Company Pulse 2019 poll  has found that 'Australians expect a broad contribution from business, focused not just on the bottom line, but social and environmental performance as well'
    • Stick to your knitting? The Australian reports that the government has called on business to focus on the future of the economy and workplaces, and on supporting the government's deregulation agenda, rather than on social issues 
    • Japanese companies lead the UK and the US on climate disclosure?
    • Shell has linked executive remuneration to the achievement of 2-3% net carbon emissions reduction 
    • Scope 3 emissions? Market Forces has determined not to file a Scope 3 resolution at BHP following BHP's commitment to set public reduction targets but has said that that it will target Rio Tinto instead
    • ExxonMobil in reportedly in exclusive talks to sell final Norwegian oil assets
    • In Brief | Whitehaven Coal says that climate change and its mitigation could provide positive for our national coal sector?  The AFR reports that Whitehaven's first TCFD compliant sustainability document says that Whitehaven expects to remain cash-flow positive over the next 20 years with its growth projects remaining viable under a scenario which broadly reflects the Paris agreement goals and further that the 'future of the Australian coal sector and high-quality coal producers such as Whitehaven is expected to remain robust over the long term' 
    • In Brief | Ten ACSI members – Cbus, First State Super, HESTA, Local Government Super, VicSuper and Vision Super, ABP (part of APG Asset Management), CalPERS, New Zealand Superannuation Fund and Universities Superannuation Scheme — have been named in the Principles for Responsible Investment (PRI) Leaders' Group for 2019.  ACSI says that more than 20% of those named in this year's Leaders' Group are ACSI members and over 12% are Australian asset owners.  ACSI CEO Louise Davidson said that 'this acknowledges that ACSI members are global leaders when it comes to incorporating environmental, social and governance considerations into their investment strategies'
    • In Brief | Westpac has been named Australia's most sustainable bank in the 2019 Dow Jones Sustainability Indices rated on the areas of climate strategy, environmental reporting, social reporting, financial inclusion and corporate citizenship and philanthropy.  Westpac Group CEO Brian Hartzer said 'To be named Australia's most sustainable bank is reflective of the priorities we have set ourselves to be better and do better.  It demonstrates to our customers and communities that we are serious in our actions to help create a more sustainable future, something that is a great source of pride for our people'
    • In Brief | A delegation of Australian farmers have called on parliamentarians to take urgent action on climate change.  The Australian Farm Institute has released a report outlining the case for development of a comprehensive climate action strategy.  'Action taken now will decrease future impact and importantly will provide opportunity for Australian agriculture to continue to set the agenda on efficient profitable and sustainable climate resilient farming systems' Executive Director of the Australian Farm Institute Richard Heath writes

    Financial Services Navigation Show below Hide below

    • Top Story | ASIC is 'ready and willing' to use its new product intervention powers
    • Pay day lending reform? Centre Alliance MP Rebekha Sharkie has introduced a Bill 'replicating' the government's own proposed pay day lending legislation, with a view to preventing irresponsible lending practices to low-income borrowers
    • COBA calls on parliamentarians not to stifle competition with FSRC red tape: customer owned banking institutions aren't asking to be regulated differently, 'but in proportion to the size, scale and complexity of their organisation' COBA says
    • FinTech/RegTech committee established: On 11 September 2019, the Senate resolved to establish a Select Committee on Financial Technology and Regulatory Technology 
    • In Brief | 'The same rules should apply to both FinTechs and old school banks'?  The AFR reports that Yarra Capital's head of Australian equities Dion Hershan has called for buy-now-pay-later providers to be held to the same rules as other credit providers especially given the number of customer complaints from buy now, pay later schemes is rising in line with the popularity of the service.  'We are far better off dealing with issues before they become systemic. The same rules should apply to both FinTechs and old school banks' Mr Hershan is quoted as saying
    • In Brief | The 'forgotten topic' of financial stability and resilience: In an address to the European Australian Business Council in Melbourne, APRA Chair Wayne Byres emphasised the importance of preventative regulatory action to mitigate financial stability risks.  'The Australian banking system is broadly in good prudential shape. That reflects an unrelenting focus on steadily building resilience within the system' he said 
    • In Brief | Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 has passed the House and has progressed to second reading stage in the Senate.  The Bill implements the government's response to FSRC recommendation 2.4 to remove grandfathering arrangements for conflicted remuneration and other banned remuneration from 1 January 2021 and enable regulations to provide for a scheme under which amounts that would otherwise have been paid as conflicted remuneration are rebated to affected customers
    • In Brief | Treasury Laws Amendment (Putting Members' Interests First) Bill 2019 passed the House of Representatives on 16 September has progressed to second reading stage in the Senate.  The Bill proposes to prevent insurance within superannuation from being provided on an opt-out basis for low balance accounts and to members under 25 years old (who begin to hold a new product on/after 1 October 2019  
    • In Brief | Industry superannuation funds are outstripping retail funds on customer satisfaction? According to Roy Morgan, in six months to July 2019, the average member satisfaction for retail superannuation funds was 57.4% (down 1.2% points from the same period a year ago).  Over the same period, satisfaction with industry super funds improved by 1.1% points from 61.7% in 2018 to 62.8% and is now at its equal highest satisfaction level since March 2008 (63%) (before the GFC began later that same year)
    • In Brief | (Possible) competition inquiry into Australia's banks? The Australian reports that the ACCC is seeking a formal directive from the Treasurer to conduct another inquiry into Australia's banks following consistent complaints that consumers are not being treated fairly.  Consumer group Choice is reportedly strongly supportive of the proposed inquiry
    • In Brief | AFCA 'financial fairness roadshow': Between September and April, AFCA will stop at 77 metro, regional and rural communities across Australia to raise awareness of the services AFCA provides and help guide consumers and small businesses through the process of lodging a complaint

    Accounting and audit Navigation Show below Hide below

    • United Kingdom | The FRC has written to audit committee chairs and finance directors setting out some of the 'generic actions' they should consider in advance of Brexit
    • In Brief | 'We have not seen a significant increase in audit quality': The UK FRC's annual report highlights (among other things) that 25% of audits failed to meet the 90% audit quality target

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