Working with Australian company directors
Paper presented by Jeremy Cooper, Deputy Chairman, ASIC, to the Federal Court of Australia/Law Council of Australia, Joint Corporations Law Seminar, 26 March 2006, Sydney
There are roughly 1.4 million companies in Australia, which adds up to a lot of directors. The great majority of them operate in one of the most light touch corporate regulatory environments available in the Western world. Small proprietary companies are not even required to lodge accounts with us and their only contact with the regulator is the odd form that needs to be lodged if they change one of their details and the annual statement which comes in a pre-printed format.
Naturally enough, the regulatory burden increases as the size and significance of the corporate entity expands towards the scale of the listed company.
At this end of the scale, company directors feel somewhat besieged by regulatory change, complexity and a perception that there is an ever increasing risk of personal liability. On these issues, perception is reality because what directors believe will affect the way they behave. In a number of areas, excessively cautious and riskaverse behaviour is creating regulatory challenges. For example, one of the key reasons why we are having trouble getting directors to produce clear, concise and effective disclosure documents is directors' fear of exposure to personal liability from investors or penalty from the regulator.
While ASIC believes there are very few company directors in Australia who have fallen foul of the regulator without good reason, we must accept that the perception is otherwise and that these views are genuinely held. We must therefore work harder with directors to get them thinking more positively about the role of regulation and liability in the financial system, while at the same time accepting that many of these perceptions are globally based.