Australian Companies Improve in Corporate Governance Reporting
21 June 2007 at 3:15 pm
Australia’s listed companies are continuing to improve their corporate governance reporting according to latest review by the Australian Securities Exchange (ASX).
And the review has found that many more companies are following the recommended Corporate Governance Council’s principles and recommendations while others are adopting ‘if not, why not’ reporting.
The overall reported level for listed companies was higher in 2006 (90%) than in either of the two previous years (2005 – 88% and 2004 – 84%)
Chairman of the ASX Corporate Governance Council, Eric Mayne says the result demonstrates that the market is better informed about the corporate governance practices of listed entities than ever before.
Mayne says overall reporting levels have risen in three successive years, underlining the desirability of Australia’s flexible, principles-based approach to corporate governance.
He says good corporate governance is a culture of transparency and is not restricted to simply adopting the recommendations. Good corporate governance also exists where entities adopt ‘if not why not’ reporting; that is, where entities identify the recommendations they have not followed, explain why they have not followed them, and detail how their practices accord with the spirit of the relevant Principle.
Mayne says disclosure is the key and the more transparent listed entities are about their corporate governance practices, the better placed investors will be to make informed investment decisions.
He says the best form of corporate governance is where there is substantive disclosure as opposed to disclosure that is seen merely as compliance with the form of the Principles.
As well he says the ASX, through its ongoing reviews of corporate governance statements in annual reports, plays an important role in educating listed entities on what good corporate governance disclosure is.
He says the ASX and the ASX Corporate Governance Council also recognise that corporate governance is evolving and will endeavour to ensure that the principles and recommendations remain relevant to the Australian business and investment communities.
The key findings from the review, which combined the results of listed companies and listed trusts for the first time, were as follows:
Overall reporting levels – listed companies
-The overall reporting level for listed companies for all Recommendations, being the aggregate of adoption of recommended practices and of ‘if not, why not’ reporting, has increased to 90% in 2006 from 88% in 2005 and 84% in 2004 – an increase of more than 7% since the first review.
– 17 out of 28 Recommendations had reporting levels of over 90% – up from 14 in 2005 and 8 in 2004.
– An additional 6 out of 28 Recommendations had reporting levels of over 80%.
Overall reporting levels – listed trusts
– The overall reporting level for listed trusts was slightly lower than for listed companies with an overall reporting level for all Recommendations of 85%. In 2005 it was 86%.
– 13 out of 28 Recommendations had reporting levels of over 90% – up from 10 out of 28 in 2005.
– An additional 8 out of 28 Recommendations had reporting levels over 80%.
Top-500 listed entities – listed companies and listed trusts
– The overall reporting level for all Recommendations was over 94%.
Adoption reporting levels
– The adoption rate for all Recommendations, excluding ‘if not, why not’ reporting, in 2006 was 75% for listed companies and 72% for listed trusts, up from 74% and 70% respectively in 2005.
– The average adoption rate for all Recommendations among top-500 listed entities (companies and trusts) was 88%, up from 86% in 2005.
The results emerge from ASXs review of the annual reports and relevant website sections of 1,294 listed companies and 77 listed trusts – 1,371 listed entities in total – that reported with a 30 June 2006 balance date. This number represents approximately 71% of all listed entities at that date.
The review can be found in full here: http://www.asx.com.au/supervision/governance/monitoring_compliance.htm