Good morning.
I'm delighted to be here to open the 2013 Corporate Law Teachers' Association (CLTA) Conference. I'd thank the CLTA, and in particular Professor Peta Spender and her team at the ANU College of Law, for the invitation, and for their first class efforts in organising this event.
The CLTA and this conference are very highly regarded. So it's an honour to be here at what's arguably Australia's premier law school and thus a very fitting venue for this important forum.
This is a good time to reflect on progress we've made in this area, and — in line with the theme of your conference — to look ahead to the "progressive possibilities" for future reform.
Progress on corporate law reform
As a Labor Government, it's perhaps no surprise we've taken a progressive approach to corporate law reform, with the aim of driving a culture of change in Australia's boardrooms.
This is about promoting greater transparency and accountability, shareholder participation, and improving productivity through appropriate regulation.
Since the Federal Labor Government has been in office, we've introduced many substantial reforms to strengthen Australia's corporate law and corporate governance frameworks and improve the stability, integrity and competitiveness of Australia's financial markets.
And we're already seeing results.
For example, since the Gillard Government's 2011 reforms to make boards more accountable about their decisions on executive pay, there has been a distinct shift in boardroom culture, with several companies being affected by the "two strikes" rule at AGMs.
Naturally, there's been a lot of focus on those companies that have received a second strike, such as the recent case of Penrice Soda. But the success of these reforms shouldn't be judged by the number of first or second strikes recorded. Rather, we should look at the overwhelming majority of companies that haven't had strikes.
This shows that companies are now showing more restraint and ensuring levels of executive remuneration are reasonable.
It shows that companies are engaging more with shareholders and being more responsive to their concerns about the level and composition of executive pay.
And it's important to note that these evidence-based reforms seek to ensure that executive pay remains closely linked to the performance of a company.
These reforms came out of growing community concern over the size of executive pay packets during the global financial crisis, a crisis that prompted many questions about the role of corporate regulation.
Perhaps reflecting similar concerns, some recent court judgements have increased the burdens imposed on directors, especially non-executive directors of public companies. For its part, the Government has been working to reform the law to limit the use of strict liability and the reversal of onus of proof – in this case, to reduce red tape.
In December last year, the Parliament passed the Personal Liability for Corporate Fault Reform Bill 2012. This Bill fulfilled the Commonwealth's commitment under the Seamless National Economy National Partnership Agreement to implement a nationally consistent and principles-based approach for the imposition of personal criminal liability for corporate fault, or 'derivative liability'.
This legislation is an important Council of Australian Governments deregulation initiative designed to remove unnecessary compliance burdens from company directors and corporate officers. Several states have now passed similar legislation. When all of the states and territories have passed legislation, this will result in personal criminal liability for corporate fault being applied much more consistently and fairly, thus making it easier for firms that operate across Australia to do business.
We have also made progress on the audit front, with the Corporations Legislation Amendment (Audit Enhancement) Act 2012 being passed last year with the support of both the Opposition and audit professionals. All the measures in the Act were designed to enhance audit quality and to further support an effective Australian market by promoting stakeholder confidence in the integrity of financial reports.
Current reform agenda
I'd now like to briefly outline the Government's current reform agenda, as we continue to build on our successes…
I have already mentioned the progress we have made in strengthening Australia's executive remuneration framework. To make it even stronger, we've developed draft legislation containing further reforms, and released it for public consultation.
The Government's proposals would further improve and simplify disclosure requirements in annual remuneration reports.
The reforms will simplify remuneration reports by removing unnecessary disclosure requirements and improve transparency by introducing clearer categories of pay to help shareholders better understand the company's remuneration arrangements.
They will also require listed companies whose financial statements have been materially misstated to disclose details of whether any remuneration has been 'clawed back'.
On top that that, we're also reforming the regulation of insolvency practitioners and insolvency administration.
Because the insolvency system plays such a key role in both the level and nature of business activity taking place within our economy, it's imperative that the community maintains its confidence in the effective regulation, high professional standards, transparency and accountability of insolvency practitioners.
In December last year, the Attorney-General and I released the draft Insolvency Law Reform Bill 2013 for public consultation. The draft law is designed to reform and modernise the way corporate and personal insolvency professionals are registered, disciplined and regulated.
Reducing costs for business is a big priority for this Government. This is why a key focus of the reforms is to align the laws that govern insolvency administration and insolvency practitioner regulation across the corporate and personal insolvency (or bankruptcy) regimes. This will benefit insolvency practitioners, creditors, shareholders and other stakeholders.
And if that wasn't enough, we're also fine-tuning Australia's takeover laws. While the takeovers laws have been largely successful in achieving their policy objectives, we need to ensure that the law continues to operate effectively in response to market developments.
To this end, in October last year, I announced the release of an initial scoping paper by Treasury on policy issues relating to takeovers law. The scoping paper covered issues relating to the operation of creeping acquisitions, the use and disclosure of equity derivatives, the impact of undisclosed associations, clarity in takeovers proposals, and the impact of social media on takeovers.
In November 2012, Treasury, together with ASIC and the Takeovers Panel, convened a series of roundtable discussions with industry in Melbourne, Sydney, Brisbane and Perth. These discussions provided the Government with valuable input from industry on the operation of the takeover laws in Australia.
Treasury is continuing to advise the Government on whether we need to progress amendments to the law in this area.
Future reforms
Looking further ahead to possibilities for future reform…
We're liaising closely with the Financial Reporting Council (the FRC) to develop an integrated reporting framework which will allow Australian companies to provide the public and other stakeholders with a concise, periodic "integrated report" about the way in which the organisation's strategy, governance, performance and prospects lead to the creation and preservation of value over the short, medium and long term.
The FRC is closely monitoring the work of the International Integrated Reporting Council which expects to release a final Integrated Reporting Framework in December this year.
We are also working closely with the FRC to closely monitor domestic and international audit developments. As part of its statutory role, the FRC provides strategic ministerial advice in relation to the quality of audits conducted by Australian auditors.
This work forms part of a broader Government initiative to improve the information stakeholders receive to help them make informed investment decisions.
On this topic, you may be familiar with the discussion paper, The AGM and Shareholder Engagement, which the Corporations and Markets Advisory Committee or 'CAMAC' released in September last year.
As you can see, the Gillard Government has pushed ahead with important corporate law reforms, and we have further reforms in the pipeline.
In carrying out this work, we have been careful to strike the right balance — the balance between providing industry with regulatory certainty while managing regulatory complexity — so that we can achieve effective levels of investor protection and optimal regulation of the market, while promoting a healthy business environment.
Engaging with government
I'm pleased to see this conference will focus on some fundamental questions about corporate law and financial markets, and examine alternative visions for regulation that promote accountability, fairness and democracy – all things this Government is committed to.
I note there's a wide range of issues on the agenda, including progressive critiques of corporate law, regulatory theory and human rights. So I'm looking forward to hearing of the outcomes of your discussions.
It's always good to have opportunities like this to come together to share new ideas and push boundaries. In the corporate law space, I believe there's a healthy level of engagement and cross-pollination between scholars, the legal profession and government.
For example, one of the best mechanisms we have in place is CAMAC, which I have responsibility for. CAMAC provides independent advice to the Government on issues that arise in corporations and financial markets law and practice.
But of course, there could always be more interaction between government, the profession and academia, on law reform and policy more generally. It's pleasing to see developments like the recent opening of the Institute of Public Policy within the ANU's Crawford School, headed by former Treasury Secretary Dr Ken Henry, that aim to build stronger linkages between the academy and public service.
I would encourage the CLTA to get involved in some of the broader policy debates and discussions that are taking place here at the ANU and elsewhere. I know our Government is always keen to hear about good policy ideas so would be keen to engage with you on progressive possibilities into the future.
Conclusion
Thank you again for the opportunity to come and speak with you, and I trust you have a productive and enjoyable conference.