Agenda - 30% gender diversity target slipping out of reach

The AICD’s Gender diversity progress report for the period March – May 2017 the percentage of women being appointed to ASX200 boards has fallen in the first six months of the year.

The AICD’s Gender diversity progress report for the period March – May 2017 the percentage of women being appointed to ASX200 boards has fallen in the first six months of the year.

There are still 13 companies on the ASX200 with no women on their boards, and the drop in female appointments means the AICD’s target of achieving 30% female representation by the end of 2018 may be slipping out of reach.

The Gender diversity progress report shows the monthly rate of female appointments to ASX200 boards has declined from 44% in 2016 to just 30% in 2017. This equates to 17 female appointments compared to 40 male appointments in the first five months of 2017.

AICD chairman Elizabeth Proust AO FAICD said research showed that gender diversity on boards led to better business outcomes, and that 30 per cent was the tipping point where critical mass was reached in a group setting.

“While we’ve made great progress since 2009 when women made up only 8.3% of ASX200 boards, the drop in the rate of female appointments in 2017 is of significant concern,” she said.

“What is clear is that there is no supply problem, only one of demand.

“The AICD is calling on chairs and boards on the ASX200 to continue to show leadership on gender diversity and to refocus their efforts on achieving the 30 per cent target as a priority.”

The latest report includes a full list of ASX200 companies and the number of women on their boards, diversity statistics from the region.

A full copy of the report is available from companydirectors.com.au/diversityreportjune.

A cyber view from the boardroom

The Australian Securities Exchange (ASX) has released its first ASX 100 Cyber Health Check Report: Capturing the opportunities while managing the threats, which gauges how Australia’s largest publicly listed company boards view and manage their exposure to the rapidly evolving cyber world.

The report notes, “while the extent of cyber risk management varies broadly across companies, this report demonstrates a high level of risk awareness at the top levels of corporate Australia and a commitment to take further action. Significant progress has already been made, but there are gaps when it comes to building organisational preparedness and resilience.“

An industry-led initiative, the ASX 100 Cyber Health Check forms part of the federal government’s Cyber Security Strategy.

This policy encourages government, regulators and businesses to collaborate to tackle cyber risk. The research helps boards and executives to better understand how mature their cyber risk management is.

It identified five trends:

1. Cybersecurity is a major and growing risk for boards.
2. Effectively tackling cyber risk requires a culture of collaboration.
3. Boards demonstrate an understanding of the seriousness of cyber risk.
4. Companies are improving their cyber risk management but there is still much more to do.
5. Defining and analysing exposure is fundamental

The research drew on insights from boards of ASX100 companies which are taking action to strengthen Australia’s resilience to cyber attack.

As the report states, “the partnership of industry, government and regulators working together demonstrates the critical importance of strong national cybersecurity to Australian business and the millions of investors who hold shares in Australian companies.

“The sharing of best practice, and increased awareness and engagement by directors and executives of listed companies, are important steps in building the cyber resilience of Australian business.”

New research supports change in director incentives

Controversial new US research suggests a shift in the way boards are remunerated could encourage higher standards of governance.

The research by Sanjai Bhagat, Professor of Finance at the University of Colorado, indicates the way directors are incentivised needs to change.

Directors are typically compensated by a cash retainer, as well as receiving reimbursements for attending board and committee meetings. Many also receive incentives in the form of shares and options.

In an article published in the Harvard Business Review (HBR), Bhagat suggests directors should be required to hold shares in escrow, or only exercise options, two years after their final board meeting.

He told HBR, “I believe corporate directors should not be paid any retainer fees or other cash compensation. Of course, this change wouldn’t prevent every scandal or solve every problem with corporate governance. But it would help channel director attention toward longer-term profitability.”

His research shows that companies in which directors own more stock perform better in future years than those companies whose directors own less stock.

Organisational culture reduces risk of corruption

A survey by Deloitte Australia and New Zealand has shown the impact of bribery and corruption in an organisation is much greater than merely financial.

The Deloitte Bribery and Corruption Survey 2017, also shows that while organisations understand the risks associated with bribery and corruption, the Australian response to these events is slow compared to the rest of the world.

In a statement, Deloitte’s Australian Forensic leader Chris Noble said: “Most respondents say reputation is the biggest risk for organisations, whether domestic or international. And 77 per cent of respondents believe the best way to prevent domestic corruption is to get the organisational culture right.”

Tone at the top and getting processes right were identified as key factors directors need to improve to prevent bribery and corruption incidents.

Deloitte says organisations need to be proactive and vigilant if they wish to combat bribery and corruption.

Nevertheless, improvements in awareness around bribery and corruption are being driven in part by tightened anti-bribery and corruption regulation, in addition to advanced detection and training systems.

“Global uncertainty is also increasing this focus,” said Noble. “Our cross-Tasman regulators are actively enforcing agendas to minimise money laundering, terrorist financing, corporate misconduct and fraud. There is also greater international cooperation, collaboration and benchmarking between law enforcement agencies to facilitate cross-jurisdictional investigations.”

According to Deloitte, tip-offs are still the most common method of detecting fraud. The professional services firm notes an organisation’s staff are the first – and best – line of defence in the fight against bribery and corruption.

It notes that boards and executives need to set the tone and management should execute anti-bribery and corruption programs on the ground.

The report notes that in volatile times, companies cannot afford to be overconfident when it comes to preventing, detecting and responding to foreign and domestic bribery and corruption.

Online voting up

Executive pay remains the top issue for listed companies and their directors, as a result of the growing number of ‘strikes’ against public companies’ remuneration reports, according to Computershare’s recent report, Insights from Annual General Meetings held in 2016.

As the report notes, last year was the first time a company in the ASX50 received a strike against its remuneration report.

“Transparency, non-financial measures and the perceived appropriateness of long-term incentives and short-term incentives proved common themes of discontent between proxy advisors, security holders and company boards,” the report states.

The number of shareholders who attend AGMs remains tiny, with just 0.16 per cent of shareholders going to meetings. This is consistent with last year.

But there has been a significant change in the number of shareholders going to smaller companies’ AGMs, with a 17 per cent attendance rate for entities outside the ASX300. Shareholders of smaller companies are also becoming more engaged with the businesses they own, with a 20 per cent jump in voting.

When it comes to voting trends across all companies, Computershare’s data, which is based on a sample of 24,000 attendees at almost 750 AGMs, showed issued capital voted by security holders at AGMs increased to 56.3 per cent, the highest figure in almost five years.

Attendance trends stable

When it comes to the different groups of people who attend AGMs, the research showed:

• 58.0 per cent of total attendees were security holders.
• 37.2 per cent were visitors.
• 4.8 per cent were proxy holders.

A similar make-up of attendees has been seen over the past five years, with only a marginal rise in the number of security holders who attend, and a decline in the number of visitors attending.

As the report shows, “proxy holder attendance decreased gradually over the four years prior to 2016 but saw a five per cent increase in 2016 across all indices.

“This change was more pronounced in our 20 largest clients, where proxy attendance increased by 15 per cent in 2016. With proxy accountability on voting outcomes becoming more topical in Australia, their presence and not just their vote may start to receive more attention in 2017.”

Digital voting on the rise

A trend last year was the rise in the number of companies offering digital voting. According to the research, digital technologies, on top of the rise in postage costs, contributed to a 15 per cent rise in meetings offering online voting in 2016.

However, the rise in digital voting at AGMs did not lead to an overall increase in voting. Last year, the number of shareholders voting dropped to a record low of just 4.2 per cent. The report also found 2016 was, “the first time in five years voting didn’t decrease significantly from the year before.” A five-year analysis illustrates the average yearly decrease at between eight per cent to ten per cent a year, culminating in a 24 per cent decrease since 2012.

In 2016, the number of security holders voting moved only marginally from 2015, from 4.3 per cent to 4.2 per cent.

The findings show voting trends are being driven by businesses in the ASX300, because voting remained stable for the first time in five years within the ASX50 segment.

According to the report about 3.8 per cent of security holders in this group voted. This is in line with attendance trends in the ASX50, which have also stabilised.

WESFARMERS STANDOUT

Computershare’s research showed Wesfarmers‘ AGM was the largest in 2016, with more than 1,333 people attending.

The business has consistently attracted more than 1,000 people to its AGM over the past three years.

It’s a flagship event in Western Australia, with shareholder benefits including entertainment, giveaways and gift bags.

ONLINE VOTING TRENDS 2016

• 4.2 per cent of security holders voted online.
• 34 per cent of all votes were lodged online.
• 68 per cent increase in online voting in five years.

QUEEN’S BIRTHDAY 2017 HONOURS LIST

The Australian Institute of Company Directors congratulates the following members who appeared on the Queen’s Birthday Honours List this year.

ORDER OF AUSTRALIA

Companion (AC) in the General Division

• The Right Honourable the Lord Mayor of Melbourne Robert Doyle AC MAICD
• Mr Jacques Nasser AC FAICD

Officer (AO) in the General Division

• Professor Ian Anderson AO MAICD
• Mr Philip Bullock AO GAICD
• Mr Andrew Fletcher AO FAICD
• Professor Mohamed Khadra AO FAICD
• Professor Linda Kristjanson AO FAICD
• Mr Peter Shelley AO FAICD
• Ms Gabrielle Trainor AO FAICD
• Mr Michael Wilkins AO FAICD
• Dr Katherine Woodthorpe AO FAICD
• Member (AM) in the General Division
• Mr Michael David Agostini AM GAICD
• Dr Amanda Bell AM FAICD
• Mr Peter Butler AM MAICD
• Mr Ian Carson AM FAICD
• Mrs Simone Carson AM GAICD
• Mr Michael Ebeid AM MAICD
• Ms Linda Fazldeen AM FAICD
• Mr David Larkin AM MAICD
• Dr John Leyden AM MAICD
• Ms Alison McClelland AM MAICD
• Mr Peter Milne AM MAICD
• Ms Leonie Morgan AM GAICD
• Mr Alistair Murray AM GAICD
• Dr Geoff Newcombe AM GAICD
• Dr Nicolas Radford AM FAICD
• Mr David Robinson AM MAICD
• Mr Kosmas Sclavos AM FAICD
• Mr Terry Slater AM MAICD
• Mr Marcus Stafford AM FAICD
• Mrs Josephine Sukkar AM AAICD
• Mrs Sheree Vertigan AM MAICD

Member (AM) in the Military Division

Australian Army

• Brigadier Michael David Prictor AM GAICD

Medal (OAM) in the General Division

• Mrs Margaret de Wit OAM GAICD
• Ms Sandra Hills OAM MAICD
• Mrs Victoria Kvisle OAM JP MAICD
• Emeritus Professor John Marley OAM MAICD
• Cr Karin Orpen OAM MAICD
• Mr Roger Perry OAM MAICD
• Mr Gregory Redington OAM GAICD
• Dr Deen Sanders OAM GAICD
• Ms Karen Spiller OAM FAICD
• Mr Barry Vains OAM MAICD
• Mr Peter Veenstra OAM MAICD
  

Medal (OAM) in the Military Division

Royal Australian Navy

• Captain Michael Harris OAM MAICD

MERITORIOUS

Public Service Medal (PSM)

New South Wales

• Ms Kerryn Boland PSM MAICD
• Mr Gregory Evans PSM GAICD

Australian Police Medal (APM)

Victoria

• Detective Superintendant Michael Hermans APM MAICD
  

Queensland

• Inspector Robert McCall APM MAICD

MILITARY – DISTINGUISHED AND CONSPICUOUS

Commendation for Distinguished Service

Australian Army

• Brigadier Michael Annett CSC GAICD

Note: While much care is taken to include all members honoured, we apologise in advance to anyone who may have been overlooked.