AICD progress on reforms to cyber regulation, virtual AGMs, board diversity

A recent federal discussion paper is canvassing options for new regulatory cyber governance standards for large businesses in Australia. The paper considers both a mandatory governance standard and a voluntary, principles-based standard in consultation with industry – noting that a mandatory standard may be too onerous.

Cybercrime submission

The AICD supports in-principle the concept of a voluntary cyber governance standard and has lodged a submission with the Department of Home Affairs in response to the Strengthening Australia’s cyber security regulations and incentives paper. The submission calls for a stronger national public-private cyber-resilience partnership. Clearer pathways to law enforcement support, good-practice guidance on governance, intelligence-sharing and hands-on expertise for organisations that are the victims of cybercrime will be required.

A stronger national partnership will do more to build Australia’s cyber-resilience than regulatory settings that focus on corporate liability or individual companies. Read the AICD submission here.

Modernisation of corporate laws

Last month, the Federal Parliament passed laws that materially improve Australia’s securities class action settings. Under the changes, corporations and their officers will only be liable for breaches of continuous disclosure laws where material information is intentionally, recklessly or negligently shared or withheld from the market. The introduction of a fault element for launching civil actions on continuous disclosure is a balanced and appropriate setting, aligned to other major overseas jurisdictions.

It is equally important to note that, despite commentary from opponents of this reform, the changes do not in any way water down continuous disclosure obligations. A director or company that does the wrong thing, is reckless or negligent, will still be on the hook, as they should be. We expect that these changes will reduce the risk of opportunistic securities class actions and help reduce the pressure on D&O insurance.

Virtual AGMs

The legislation also covered very welcome temporary relief for virtual AGMs and electronic documentation through to March 2022. Separately, the Government continues to consult on new draft legislation to permanently allow virtual AGMs, electronic signatures and communications.

In further welcome news, ASIC has announced an additional two-month extension for all public companies to hold their AGMs. This applies to companies with balance dates between 21 February 2021 and 7 July 2021.

Our Updated Joint Guidance with the Governance Institute of Australia, Law Council of Australia and the Australasian Investor Relations Association will assist members in navigating the evolving legal landscape.

The AICD has actively participated in these reform debates, and we are pleased that progress is being made. We appreciate the input and support of listed company members.

Clayton Utz sexual harassment roadmap

As part of the AICD’s program of work on the board’s role in effectively addressing workplace sexual harassment, the AICD commissioned a report by Clayton Utz to provide a practical roadmap of the relevant board-level and legal considerations for effectively responding to workplace sexual harassment.

The AICD commissioned this report to support directors in driving real and substantial change in how sexual harassment complaints are addressed.

Financial Accountability Regime (FAR)

Federal Treasury recently released an Exposure Draft of the FAR legislation. This follows a recommendation of Commissioner Hayne to extend the Banking Executive Accountability Regime (BEAR) to other APRA-regulated entities, with ASIC to co-regulate the regime.

The AICD supports strong accountability and compliance within the financial services sector and a greater focus on non-financial risk. However, we have concerns with the FAR Exposure Draft. For example, the proposals would require directors to ensure that their entity complies with all obligations under Acts, regulations, determinations and orders. In the AICD’s view, this drafting is inappropriate, and does not reflect the role of non-executive directors and the board. AICD’s submission recommending changes can be viewed here.

We will continue to engage with the Government on the FAR, noting that it may well set a template for how accountability structures are established outside financial services.

Gender diversity on listed company boards – Australia’s success

The University of Queensland Business school recently released a significant research report on Australia’s achievement of 30 per cent women directors on ASX 200 boards. The report reveals how Australia joined just two other countries to exceed 30 per cent women on its top listed company boards without legislative intervention.

The report highlights two significant milestones: the ASX Corporate Governance Council Recommendations on reporting of board diversity, and the contribution of the AICD’s Chairs Mentoring Program. The report emphasises that progress could not have been achieved without the support and commitment of many individuals including ASX chairs, directors, investors and the media. The researchers also note potential risks to future progress on gender diversity, including the limited pipeline of women into CEO and senior executive roles.

The AICD was pleased to support the research, which will contribute to ongoing progress on this important governance issue. Since the release of the report, the AICD was also pleased to announce that for the first time ever, there are no all-male boards on the ASX 200.

Climate Governance Initiative

The AICD recently launched the Australian Chapter of the Climate Governance Initiative (CGI). The CGI is an expanding global network with over 20 bodies globally working in collaboration with the World Economic Forum, including in the US, UK, Canada and France.

The AICD is pleased to host the Australian Chapter as we increase our support on this important challenge for directors. Drawing on this global network for best practice tools and resources is critical to helping our director community to tackle this global challenge. We will be working with interested directors, stakeholders and experts on climate governance resources and events, and connecting with and contributing to the global director network.

To mark the launch of the CGI in Australia, the AICD together with Minter Ellison released an introductory Director’s Guide to Climate Risk Governance. Please visit the new CGI Australia section of our website for further details.