Credit Management
Good governance – what is all the fuss about? By Jody Wright*
Society’s expectations of firms and how they act continues to rise. The most recent statement from the regulators is Crown Inquiry Report Volume 2 Chapter 4.1. Following revelations made during the Financial Services Royal Commission, ASIC set up the Corporate Governance Taskforce to review the corporate governance practices in large listed entities: “In recent years, the level of scrutiny into matters of corporate governance across corporate Australia has intensified consequent upon events such as the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Financial Services Royal Commission) and investigations into the conduct of specific entities, such as into the CBA by the Australian Prudential Regulation Authority (APRA).” These types of Inquiries have resulted in an inordinate amount of focus by ASIC and other regulators on the conduct of management and senior executives in the financial services industry, particularly banks and insurance companies.
How did we get here and what does good governance look like?
Jody Wright
So why is this happening and is this trend about to expand to other industries and what does this mean
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for boards and management level employees across Australia? To answer these questions, it is necessary to first look at the definition of “corporate governance’ and what “good governance” actually means. Corporate governance has included many definitions over the years and from the early day definition espoused by Justice Owen in the HIH Royal Commission Report, has developed into a detailed allencompassing definition involving the elements of control and accountability. The Governance Institute of Australia defines governance as “the system by which an organisation is controlled and operates and the mechanisms by which it, and its people are held to account. Ethics, risk management, compliance and administration are all elements of governance”. The question then becomes, what is good governance and it is this rapidly changing concept which is resulting in Inquiry after Inquiry, a shift in the focus of investigations and prosecutions by ASIC and other regulators and an increase in regulatory powers.
Change in expectations Companies need to be aware that a significant contributor to the ever changing concept of “good governance” is consumers. Public
