Demands on directors too onerous: David Murray
The Australian 12:00am June 29, 2018
Glenda Korporaal
AMP chairman David Murray has hit out at the increasingly onerous demands on company directors, saying they have resulted in poor corporate governance in Australia.
In a speech in Melbourne last night to the Australian Centre for Corporate Public Affairs, Mr Murray said directors were being hit with more than 1000 pages of information each month and being put under pressure to become quasi-executives rather than making independent judgments in the best interests of the company.
“If you look at what has happened in the financial services sector, what is happening at the royal commission and with the APRA report into the Commonwealth Bank, the corporate governance guidelines haven’t worked,” he said.
He said ASX corporate governance guidelines for listed companies were too “proscriptive” about the structure of company boards and their committees.
“Directors are being encouraged to work directly with executives on complex matters, which draws them too closely into management,” he said.
“They are faced with regulatory requirements, which include committee structures, which mean they are increasingly dealing with more information from management which is less and less valuable. It is reflective of weaker governance, not stronger governance.
“It doesn’t work. Regulators are holding the boards accountable for compliance rather than the executives.”
Mr Murray was speaking a week after taking on the role of AMP chairman at a time when the insurance giant is under pressure from the banking royal commission as well as corporate regulator ASIC.
Former AMP chair Catherine Brenner stepped down in May following revelations at the royal commission, which also saw the departure of several other AMP directors.
In his speech last night, Mr Murray, a former chief executive of the Commonwealth Bank and chairman of the Future Fund, said the current plethora of corporate governance guidelines being imposed on company boards was leading to responsibilities being “delegated up” from management to company directors.
Mr Murray said the current board committee structure focused on “risk and external audit” issues, which prevented them taking a broader view of issues facing the company.
“Directors are always looking at material or financial risks facing a company, which prevents them focusing on reputational issues which might result from a breakdown of internal control systems in the company,” he said.
“A one-size-fits-all set of governance principles doesn’t help you have a more dynamic industry and runs the risk of important processes falling through the cracks.
“It limits the dynamic development of our understanding of governance models by individuals and doesn’t allow a company to differentiate itself.”
Mr Murray said boards should be looking to develop “a set of beliefs that connect their organisation more closely with the community”.
In a speech last week, Mr Murray argued that the royal commission should not produce an additional layer of laws and requirements on financial services companies.
He argued that there were already strong laws available to regulators, which had not always been enforced in the past.
Mr Murray’s comments imply that current proscriptive corporate governance guidelines are seeing company directors move too close to management, and resulting in extra flows of information to directors as they try to meet the requirements.
He said the ASX guidelines on corporate governance principles should not see “defacto laws” being imposed on directors “that are counter to the corporate laws”.
Mr Murray said the highly proscriptive corporate governance guidelines were also leading to a situation where investors and proxy advisers could “threaten” boards with the prospect of a negative vote against a director or the remuneration report.
Mr Murray urged the ASX to focus on its eight basic corporate governance principles for companies.