New rules lift hurdle

THE new corporate governance guidelines issued recently by the Australian Stock Exchange could create a divide between large and small companies, local experts have warned.

“A lot of things that are in there, many companies are doing them already,” BDO corporate finance partner Sherif Andrewes said.

“The fear is that small companies may have to match the large companies.”

Mr Andrewes said it was important to remember the ASX had issued guidelines, not rules.

Key changes include having a majority of independent directors, having an audit committee, an independent chairman and earlier disclosure of remuneration agreements.

PricewaterhouseCoopers partner Simon Ford described the guidelines as an excellent best-practice framework.

He was pleased Australia had followed a principles-based approach rather than the rules-based approach adopted in markets such as the US.

“It has brought together a lot that is already done,” Mr Ford said.

“But I think you’d be surprised at how many companies aren’t doing some of these things.”

Mr Sherife said a particular concern was the ability of smaller companies to find genuinely independent directors with financial expertise.

He anticipated that very few companies would be affected by the new guidelines on remuneration disclosure.

Mr Ford said PwC had already been assisting companies that anticipated tighter corporate governance standards.

One of the biggest issues to emerge from these reviews was striking the right balance between operational, financial and legal skills on the board.

The reviews had also revealed wide variations in companies understanding and approach to risk management.

Mr Ford said the challenge was to move beyond making lists of risk factors to entrenching risk management into the culture of the organisation.

A third area of concern was the timeliness and quality of financial data going to the board. Mr Ford said companies had to be smarter in the way they updated and closed off their accounts each month.

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