This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.
In this Edition, we examine ASIC’s review of “greenwashing” practices and litigation funding schemes, Aon and the Governance Institution of Australia’s (GIA) Board and Executive Remuneration Report 2021, and COVID-19 related legislative reforms. We also consider what the New South Wales COVID-19 situation means for the market.
GOVERNANCE & REGULATION
ASIC reviews “greenwashing” practices of funds managers. In previous editions of Boardroom Brief, we noted ASIC’s increasing focus on misleading climate change related disclosure, and in particular the risk directors will be in breach of their directors’ duties where there is inconsistency between a company’s stated position on climate risk management and its internal strategy and actions (so-called “greenwashing”). A recent article by ASIC Commissioner Cathie Armour focuses on greenwashing by managed funds and superannuation funds and the threat this poses. The article notes that to meet investor expectations that their funds will be ethically invested, managed funds and superannuation funds are offering investment products focused on environmental, social and corporate (ESG) considerations. ASIC is currently conducting a review to establish whether the financial product or investment strategy is as ESG-focused as these funds claim is the case. The article highlights various examples of misrepresentation, noting that it can arise as a result of a product issuer being unclear on what standards they use to assess the product as environmentally or socially responsible. Boards are advised to look out for greenwashing and ask whether their company’s disclosure around environmental risks and opportunities or their fund’s promotion of ESG-focused investment products accurately reflect their practices.
ASIC consults on guidance and relief for litigation funding schemes. On 9 July, ASIC released Consultation Paper 345, ‘Litigation funding schemes: Guidance and relief.’ In the consultation paper, ASIC is proposing to: provide definitional guidance for key terms in the managed investment scheme (MIS) regulatory regime as they apply to litigation funding schemes; grant relief from the equal treatment duty in relation to distributions of a settlement or judgment sum obtained in connection with a litigation funding scheme; extend relief from the dollar disclosure provisions in relation to certain commercially sensitive information; and not remake pre-August 2020 relief instruments, which are due to expire in January 2023. ASIC is inviting submissions from industry participants and stakeholders about the suitability of the proposed guidance, and whether the proposed relief addresses industry concerns about the workability of the MIS regime for litigation funding schemes. Submissions close on 20 August. See ASIC’s media release.
Governance Institute: Board and Executive Remuneration Report 2021 released. On 6 July 2021, Aon and the GIA released their Board and Executive Remuneration Report 2021 (Report), which sets out the findings of a survey regarding remuneration levels for directors and senior executives in Australia over the previous 12 months. The Report found, among other things, that: fewer CEOs received increases in fixed remuneration (25%, down from 53% the previous year) and those that did receive a pay rise received a smaller increase (1.4%, down from 2% the previous year); fewer non-executive directors received salary increases (21%, down from 28% the previous year); there was a median fee increase of around 5% for the chair and 4% for other board members in the past year; and there was a 10% fall in the number of ASX 300 directors and directors and executives who received some form of short-term incentive bonus (74%, down from 64% the previous year). See GIA’s media release here. GIA members can request an abridged copy of the Report (or a full copy if they participated in the survey) here.
Using technology to hold meetings and sign and send documents. The Government is seeking stakeholder views on exposure draft legislation to support companies and their officers using technology to satisfy Corporations Act 2001 (Cth) requirements. The reforms, contained in the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, seek to reinstate the temporary COVID-19 measures put in place relating to the convening and holding of virtual and hybrid meetings and allow additional time for distribution of financial reports. Submissions close on 16 July. See G+T’s recent article by Sarah Turner, Costas Condoleon and Tash Tourabaly for further details.
OVER THE HORIZON
Markets set to dip with COVID-19’s grip on New South Wales. On Friday, the ASX 200 fell 0.9% as Sydney’s COVID-19 situation continued to deteriorate. Today, 112 new cases were announced, sadly consistent with New South Wales Premier Gladys Berejiklian’s prediction. The long-term impact of COVID-19 on the markets remains to be seen. Shane Oliver, the chief economist at AMP Capital, has estimated that about 0.75 per cent could be knocked off the Reserve Bank’s case for national GDP to rebound 4.75% over this year if the lockdown is extended for another month (to mid-August). Perhaps more damaging to confidence will be the impact of heightened tensions within the Federation, with the potential for “tit-for-tat” strategies to emerge between States (and the Commonwealth) adopting different strategies to the pandemic.