In a recent speech to the Australian Institute of Directors, Australian Securities and Investments Commission (ASIC) chairman Greg Medcraft outlined ASIC’s expectations for directors. Previous speeches focused on the director’s role as a gatekeeper, and Mr Medcraft has said this will continue to be a focus for ASIC.
The chairman stated that directors should ensure their company has strong internal and audit compliance functions. He stated these functions are worthless unless the directors back it up with supervision and review, and that these processes are ingrained in the company’s culture. He considered culture a very important point and stressed directors should drive the right compliance culture in the workplace.
The case of Australian Securities and Investments Commission v Healey [2011] FCA 117 was discussed and Mr Medcraft stated ASIC key takeaways are:
- Scepticism – directors must question and scrutinise the information provided to them. Wilful blindness is no excuse.
- Accounting knowledge – there is an expectation directors have basic financial and accounting knowledge and should be able to read a balance sheet and profit and loss statements.
- Accountability and control – directors are responsible for the systems, protocols and controls that ensure good corporate governance and effective risk management.
Mr Medcraft believed that culture should be added to the above list. If ASIC finds a company’s culture is weak, this can alert ASIC to regulatory problems in the company and they will be more inclined to investigate that organisation for potential corporate governance failures.
In addition, the chairman stated culture and risk governance are key factors in improving corporate governance in overseas jurisdiction. It is essential for a company to proactively identify risks and a company’s risk governance and culture are key to improving corporate governance.
If you would like further information on your obligations as a director please contact:
Meagan O'Connor
Principal
Sladen Legal
+61 3 9611 0106
moconnor@sladen.com.au
Luke Duggan
Lawyer
Sladen Legal
+61 3 9611 0176
lduggan@sladen.com.au