Thank you Greg, ladies and gentlemen.
I am delighted to address the Queensland Division of the Institute about corporate governance.
It is a topic that has been occupying the minds of directors for many years now, and a topic on which the Institute has been a major contributor to the policy debate.
Ladies and gentlemen, some might expect the Minister for Financial Services & Regulation to talk about Corporate Regulation rather than Corporate Governance.
But I believe that proper regulation is just one element of what we need so we can achieve the right sort of corporate governance.
Indeed, you must start with the broad economic policy settings that provide business with the stability and the certainty to plan, and the right incentives to invest and to strive for profits.
As this audience well knows, an environment of low interest rates, low inflation and strong economic growth is a basic foundation and, right now, Australia can boast all three.
With interest rates at historic lows, inflation at 1.2% in the year to March and industrial disputation at the lowest levels since 1913, the Government's record speaks for itself in this area.
On regulation generally, our stance has been to cut unnecessary burdens on business, while preserving the rules that makes sure that stakeholders are protected.
In corporate governance, some regulation is certainly necessary to protect shareholders and investors and creditors and employees.
But that doesn't mean we should regulate every little aspect of the way our companies are run.
We must be mindful of the lesson in the old saying about the company that didn't perform because it spent so much effort trying to conform.
Indeed, the lesson is older than that. In his First Inaugural Address in 1801, Thomas Jefferson expressed his wish for:
a wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned...
The Australian Government believes that corporate regulation works best when it leaves the stakeholders "to regulate their own pursuits of industry".
After all, a prosperous company is one that is able to benefit all stakeholders.
The best use of the law in this area is to facilitate a partnership for prosperity between the company and all its stakeholders.
As you will see, the Government's reforms have been directed at clearing away the kind of over-prescriptive regulation that gets in the way of such partnerships.
Over the last 18 months, there has been a keen international focus on corporate governance partly because of weaknesses that were exposed by the recent market volatility, particularly in our own region.
This has led to an important statement on the issue by the OECD - its Principles of Corporate Governance - which were approved by Ministers of all 29 member countries in May.
The OECD Principles are non-prescriptive and non-binding. They offer useful insights in five areas about how to promote partnerships for prosperity that involve all the stakeholders in a company.
The Government strongly supports the OECD's Principles and they are consistent with the Government's view that regulation is just one element in a proper corporate governance framework.
But they also reflect the areas where the rights of different stakeholders must be promoted and must be upheld.
The first area addressed in the Principles relates to the need to protect shareholder rights. Australian law and practice already cover the basics here.
The rights of shareholders to have their shareholding recognised in law; to participate and vote at general meetings; to have a vote on fundamental changes such as amendments to the company's constitution these are matters that Australian shareholders take for granted.
The second area addressed in the OECD's Principles relates to equitable treatment of shareholders. Among other things, this area deals with class rights and the disclosure of material interests in transactions affecting the corporation.
The Government is moving to tidy up the law in both these areas. For example, in the Corporate Law Economic Reform Program Bill known as the CLERP Bill it is proposed to apply the rule requiring disclosure of interests in contracts to any material personal interest a director has in a matter relating to the affairs of a company.
Directors of proprietary companies are currently entitled to give a general notice about interests in other companies or firms, rather than having to disclose each interest in each relevant transaction.
The CLERP Bill will extend this sensible rule to directors of public companies.
The CLERP Bill will also provide relief for the directors of closely held, often family, proprietary companies. Directors of these companies will no longer have to give notice of conflicts of interest where the other directors are aware of the nature and the extent of the director's conflict.
So here we have balanced and practical reforms. Reforms that try to meet the needs of all stakeholders and try to facilitate their working together for the greater prosperity of all.
The Government has sought to achieve a similar balance in the third area covered by the OECD's Principles recognising the rights of stakeholders.
This area recognises that rights are not of much use unless they can be enforced. But at the same time, directors must not feel so overburdened with the threat of litigation that they take no commercial risks.
It is for this reason that the Government has provided in the CLERP Bill for a statutory derivative action, which is balanced by the introduction of a statutory business judgment rule.
The business judgment rule will offer directors a safe harbour where they make an informed decision in good faith while believing the decision is in the best interests of the company.
The statutory derivative action will enhance shareholders' rights to pursue an action where the company is unable or unwilling to do so.
However, the Government has provided clear safeguards in the Bill to make sure that company management is not undermined by unjustified or vexatious litigation.
These new rules will strike a balance between the need for directors to get on with running the company, and the desirability of allowing shareholders the chance to look after their interests.
The OECD Principles also address the need for timely and accurate disclosure on relevant matters. Of course, trust is essential for any effective partnership between a company's stakeholders.
And good disclosure is fundamental for creating trust.
The Government's focus in this area has been to promote meaningful disclosure rather than just more disclosure.
To this end, the CLERP Bill provides a greater commercial and international focus to the making of accounting standards to make sure financial reporting standards are more relevant for business.
It requires the Australian Accounting Standards Board to prepare a cost/benefit analysis before making a standard. What is more, the Bill will facilitate the use of a "statement of purpose" to help in the interpretation of accounting standards.
The final area covered in the OECD Principles relates to the responsibilities of the board.
Pleasingly, this area is largely in alignment with the guidelines in Corporate Practices and Conduct. Of course, the Institute had a major role on the working party that produced that publication, which was chaired by Henry Bosch.
In talking about the OECD Principles, I have referred a number of times to proposals in the Government's CLERP Bill.
It would be remiss of me to not put those remarks in context. So let me briefly report on the Corporate Law Economic Reform Program in general, and the current CLERP Bill in particular.
As this audience knows, the CLERP Bill is an important part of the Government's program to modernise the regulation of business and modernise the regulation of our financial markets.
It has recently been suggested that the Bill waters down protection for investors.
This is entirely misconceived.
You will have noticed from examples I have already given that a theme of the Bill is to balance the rights of different stakeholders and fine tune the operation of the law not to remove anyone's rights.
The Bill has been the subject of a report by the Parliamentary Joint Committee on Corporations and Securities. The Government will be moving amendments to the Bill in the Senate that will implement almost all of this committee's recommendations.
The exception is the Committee's recommendation that rollover relief from capital gains tax be provided for takeovers and compulsory acquisitions. Instead, that recommendation will be considered by the Review of Business Taxation, chaired by John Ralph.
The CLERP Bill was passed by the House of Representatives on 3 June 1999 and I am keen to see the Bill debated in the Senate as early as possible during this year's Spring sittings, which start in August.
The Government will consider the start date once the Bill has passed through the Parliament.
Ladies and gentlemen, the current CLERP Bill is by no means the end of the corporations law reform program.
In March I released a consultation paper called Financial Products, Service Providers and Markets an Integrated Framework', a paper that builds on proposals contained in the Government's CLERP 6 paper released in December 1997.
Since the consultation paper was released over 110 submissions have been received from stakeholders with consultations meetings being held in all Australian capital cities. And these meetings have been attended by more than 400 people.
I have also been exploring international developments in this area in promoting Australia as a centre for global financial services.
I recently returned from the United Kingdom and the United States where I met with a wide range of finance practitioners and government officials.
The key message from those discussions was that, to keep up with the pace of globalisation in the financial services industry, we need a regime that attracts capital by facilitating innovation while ensuring adequate market integrity.
We also need a regime that is technology neutral a regime that does not focus on paper-based delivery, but encourages a wide range of electronic media.
As such, the CLERP proposals are designed to accommodate the foreseeable technologies and, as far as possible, as yet unforeseen technologies that could emerge.
These imperatives and the views expressed in the submissions are now being analysed considered by the TreasuryGovernment, and I expect that draft legislation will be released for public consultation later this year.
At this stage we are working towards a start date for CLERP 6 of July 2000.
However, I must stress that the timing of the reforms is less significant than getting them right.
If more time is needed to develop a regime that achieves the correct balance, then more time will be taken.
Ladies and gentlemen, I have mentioned a few areas where the Government is promoting a sound framework for corporate governance.
But I hope that I have also conveyed my main message that good corporate governance needs to be achieved through co-operation between government and through co-operation between stakeholders.
I know from the Institute's previous work how effectively you can contribute to that process and I look forward to working with you on future challenges.
Thank you.