Governance News 23 October 2019

60 minute read (PDF download) 22.10.2019 Mark Standen, Siobhan Doherty, Kate Hilder

This issue features, among other things, coverage of recent AGM results, ASIC's TPD review and coverage of Commissioner Danielle Press' recent speech outlining the regulator's priorities foe the insurance sector.

Remuneration Navigation Show below Hide below

In Brief | Reminder: Submissions on APRA's draft, stronger and more prescriptive remuneration requirements — [draft] CPS 511 — are due by 23 October
In Brief | Slow to include ESG metrics in incentive plans? FTI & CGLytics have jointly released a whitepaper analysing the extent to which ESG issues have been integrated into executive pay in UK and Irish companies. The report notes that despite the fact that pay is generally accepted as a key driver of C-suite behaviour, the proportion of companies to include ESG measures in remuneration plans 'has lagged somewhat' with only 27.4% of the FTSE 350 and ISEQ 20 companies including measurable ESG criteria in executive incentive plans. Further, even at these companies, the proportion of pay being driven by ESG performance is small. On average, at the 27.4% of companies, ESG-related measures account for less than 15% of bonuses
In Brief | Ditch LTIPs? The FT reports that the Purposeful Company has issued a report urging 25% of UK companies to consider shifting their executive remuneration policies away from long-term incentive plans towards restricted share awards, to incentivise long term performance

Meetings and proxy advisers Navigation Show below Hide below

Recent AGM results: AGL, CBA, Origin, Worley Parsons
ACCR resolution at BHP (London AGM): 70% of shareholders voted against ACCR special resolution seeking BHP suspend its membership of lobby groups whose climate stance/advocacy is at odds with the goals of the Paris Agreement
Headed for a quieter AGM this year? ISS, Glass Lewis and Ownership Matters have reportedly 'greenlighted' Myers' remuneration report ahead of the AGM
In Brief | Not really catching on? ISS' analysis of the prevalence of virtual shareholder meetings — ie digital only format with no in-person attendance option — in the US has found that despite the 7.7% increase in the number of virtual annual meetings among Russell 3000 firms, the number of new adopters has decreased in each of the last two years. Further, companies that have adopted a virtual meeting format and those who have stuck to the physical meeting format were all found to have comparable governance structures and practices

Disclosure and reporting Navigation Show below Hide below

United Kingdom | FCA feedback statement on climate changes and green finance released
United Kingdom | 'Blue sky' ideas? The FRC is seeking feedback on what information users need/are looking for in corporate reports
In Brief | Gap between investor expectations and climate reporting: The UK FRC Financial Reporting Lab has released a report flagging that companies are falling short of investors' expectations for clearer reporting on climate related issues and calling on companies to address the shortfall. The report outlines what investors want to understand, questions companies should ask themselves, recommended disclosures, and a range of examples of the developing practice of climate-related reporting. Sir Jon Thompson, CEO of the Financial Reporting Council, said 'The FRC itself recognises the need to play a more active role in this space and this report is an important step in recognising climate change as a priority and building on the FRC’s activities'

Regulators Navigation Show below Hide below

An increase in enforcement and supervisory activity: ASIC 2018-2019 Annual Report released
Increased focus on non-financial risk: APRA 2018/2019 annual report released
Budget supplementary estimates hearings 23-24 October: Treasury, APRA, ASIC, FASEA, the Australian Office of Financial Management and the Productivity Commission (among others) will be questioned
ASIC and the European Securities and Markets Authority will cooperate on benchmarks

Financial Services Navigation Show below Hide below

Top Story | 'It is apparent that urgent change is required': ASIC's review of TPD insurance calls on insurers and superannuation trustees to raise standards, but the FSC has queried whether the findings remain current
ASICs' strategic priorities in the insurance sector
Robo advice needs to meet the same requirements as advice provided by a human financial adviser: ASIC has announced that an Sydney based AFS licensee has voluntarily shut down two robo advice tools following concerns raised by ASIC
Pushing ahead with new ethical requirements for financial advisers: FASEA has released code of ethics guidance ahead of 1 January commencement date
Standardised reporting on operational outages on the way? The Reserve Bank of Australia Payments System Board annual report identifies system outages as a 'concern', and separately, flags that 'policy issues associated with the growth of BNPL services' will be included in its 2020 review of card payments regulation
APRA has confirmed it will not appeal the IOOF decision, but will consider revising prudential standards and/or seeking law reform to ensure 'member interests are protected to the maximum extent possible'
'ASIC enforcement and regulatory update': Update from ASIC Commissioner John Price
Time for regulators and industry to 'lean into' the challenge of meeting high community expectations: In his opening statement to the CFA Societies Australia Investment Conference, ASIC Chair James Shipton called on industry to put people first
'House of brands model' a path for other superannuation funds to follow?
Treasurer Josh Frydenberg has welcomed the appointment of Tim Read as President of the BCA
In Brief | ANZ has provided an update on the potential implications of APRA's proposed changes to the capital treatment by Australian ADIs of their investments in banking and insurance subsidiaries
In Brief | No decision until November? In August, ASIC consulted on a proposed ban on the sale of binary options to retail clients, and on plans to impose restrictions on the sale of CFDs. Reportedly, due to the high volume of submissions received, and the concerns raised in them, the regulator is not expected to make a decision until early November (which is reportedly later than ASIC's original plan)
In Brief | The AFR reports that QBE has withdrawn its membership of the Business Council of Australia. Reportedly, QBE said that its position is 'not a response to any one policy issue'. The AFR comments that QBE's decision follows the withdrawal of Medibank Private and IAG from the BCA and comes as NAB and ANZ face ACCR shareholder resolutions calling on them to follow suit, due to the BCA's climate stance
In Brief | Treasury Laws Amendment (2019 Measures No 2) Bill 2019 passed both Houses on 17 October

Accounting and audit Navigation Show below Hide below

United Kingdom | The UK FRC says that the accounting profession needs to lead by example on diversity
In Brief | Amendment to FRC Bulletins: The FRC issued a revised standard for the audit of Going Concern – ISA (UK) 570. As a result Bulletin 2008/10 Audit issues when financial market conditions are difficult and credit facilities may be restricted and Bulletin 2008/10 Going Concern Issues During the Current Economic Conditions are being withdrawn with immediate effect

Risk management Navigation Show below Hide below

OAIC is consulting on draft privacy guidelines for the Consumer Data Right
New AML Bill introduced: Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Bill 2019