Putting policy into practice

The AICD made a strong contribution to public policy in 2021, also focusing on contemporary governance practice issues, insights and scholarships, writes Louise Petschler GAICD.

Public policy progress

This was a big year for governance policy, sparking debate and legislative review. Much of the COVID-19 temporary regulatory relief expired in the early part of the year — unfortunately, the virus and its impacts did not. The AICD’s focus shifted to permanent reform, with consultation, engagement and stakeholder collaboration driving our advocacy work.

Securities class actions & litigation funding

AICD’s 2021 reform priorities included a better balance for Australia’s securities class action settings to reduce the risk of opportunistic claims and lower the pressure on D&O insurance costs.

After a long campaign, in August reforms to the Corporations Act 2001 passed federal parliament, reintroducing a permanent “fault” component for civil breaches of continuous disclosure laws. The AICD was a vocal supporter of this contested reform, viewing it as a more appropriate and balanced threshold that brings Australia more in line with similar common law jurisdictions.

Importantly, the changes do not lessen Australia’s robust continuous disclosure rules. Any director who knowingly seeks to mislead the market, or who is reckless or negligent with respect to their disclosure obligations, will face substantial penalties — as they should. These are significant improvements to Australia’s corporate law that reflect AICD’s policy principles. The focus on Australia’s “hot” securities class action environment saw another long-standing AICD concern — regulation of litigation funders — progress, with the AICD contributing director views.

Modernising the Corporations Act

One of AICD’s long-standing policy priorities has been the modernising of corporate law. COVID-19 exposed outdated drafting, with temporary relief required to allow companies and directors to execute documents electronically, sign minute books and run virtual member meetings.

The AICD was a strong advocate for the current temporary relief on these issues. Over this year, we have been promoting making these changes permanent. In October, legislation to this effect was introduced into federal parliament. The Bill in its current form covers executing documents virtually and use of e-signatures (including for board minutes).

Meeting notices would be able to be distributed electronically, provided members have the option to choose their preferred format. The option of virtual AGMs would also be enabled on an ongoing basis — provided company constitutions allow this. Obligations for members to have a reasonable opportunity to participate continue, regardless of format. The Bill will also require that listed company AGMs decide all substantive resolutions by poll, not a show of hands.

The AICD is a strong supporter of modernising the law. Well-run hybrid and virtual AGMs can boost opportunities for shareholders and members to participate in meetings. However, some investor groups, have raised concerns that virtual AGMs could become the “norm” for ASX 300 companies — and be run in a way that reduces accountability. The AICD has issued good- practice guidance to directors and companies on running virtual AGMs and promoting participation and transparency.

Charities & NFPs

The AICD has contributed to policy work on not-for-profit fundraising reform (where positive traction is being made), Australian Charities and Not-for-profits Commission secrecy provisions and charity reporting thresholds, among other reform proposals. AICD joined other stakeholders in raising concerns about new regulations on unlawful activity by charities.

Duties & liability

Promoting appropriately framed director liability provisions is an ongoing focus. The AICD has advocated for balanced liability settings over the past year, in areas from continuous disclosure to cyber governance. Clear accountability for directors who are negligent or deliberately breach their duties is critical. Equally, diligent directors acting with due care should not face excessive personal liability. The AICD has contributed to various regulatory proposals including the Financial Accountability Regime and proposed cyber governance standards, promoting appropriate recognition of the governance role of non-executive directors.

Insights & updates

The AICD continues to invest in member insights and research, including our marque Director Sentiment Index and the annual NFP Governance and Performance study. Member webinars and podcasts are also available — such as the popular Dismal Science podcast (with AICD chief economist Mark Thirlwell MAICD) and NFP Matters (with NFP sector lead Phil Butler GAICD).