Large-caps set high corporate governance standards, but independence still an issue for someThursday 29th May 2008 | 12:32 PM« Back to ListingAustralia’s largest publicly listed companies generally meet all aspects of best practice guidelines for corporate governance; however full independence still remains a key issue for some major companies. The 2008 BDO Kendalls Large-Cap Corporate Governance Survey, released today, shows that while independence at the board level is not an issue for most (70%) of Australia’s top 20 listed companies, a number of large companies do not meet best practice guidelines in relation to their audit, remuneration or nomination committees. The survey methodology used has been developed by BDO Kendalls over a number of years and in some cases sets a higher standard than the ASX best practice principles for corporate governance. Areas highlighted included some companies having audit, remuneration or nomination committees that were either not made up of all independent directors or the chair was not independent. The survey findings are based on the 2007 annual report disclosures of the 20 largest Australian listed companies by market capitalisation as at 13 March, 2008. Several companies (15%) were also found to be paying a high proportion of non-audit fees to their statutory auditors. News Corporation and Newmont Mining were the only companies not to have a formal Share Trade Policy. Also, 40% of the top 20 companies did not have a dedicated Risk Management Committee. However, despite some of the largest caps needing to improve in certain areas, the broad finding for Australia’s biggest listed companies is that their corporate governance structures are robust and in most areas meet best practice guidelines. “Overall the corporate governance structures for the top 20 companies by market capitalisation are of a very high standard, and in the majority of cases the structures put in place meet all best practice guidelines,” said BDO Kendalls Director of Risk Advisory Services, Andrew Pearce. “We believe that good corporate governance is essential if companies are to operate to the highest standards. Some companies could tighten up their corporate governance structures slightly, particularly in relation to their committees, however most companies have satisfied best practice guidelines and, importantly, exhibit full independence in relation to their committees.” BHP Billiton’s corporate governance structures are regarded as outstanding, with the mining giant complying with best practice standards in every area. Rio Tinto’s structures are also regarded as excellent in most key areas, although not all members of its nomination committee are independent and nor is there a formal risk management committee. Aluminium group Alcoa, and miner Newmont Mining were all seen as having high standards of corporate governance, complying with most aspects of best practice guidelines, with oil and gas company Woodside Petroleum leading the way with meeting all best practice guidelines. Iron ore contender Fortescue Metals met the majority of best practice guidelines, however the independence of its board, remuneration and nomination committees was less than 100% and it did not have a dedicated risk management committee. Australia’s four major banks, National Australia Bank, ANZ, Westpac and Commonwealth Bank, all have outstanding corporate governance structures in place, complying with every aspect of best practice guidelines. Telecommunications group Telstra and retailer Woolworths also comply on all levels and have outstanding governance standards in place. Exchange traded funds, Ishares MSCI EAFE and Ishares MSCI Emerging Markets, both have high levels of corporate governance in place, however, in both cases the chief executive is also the chairman of the board, which is not recommended by best practice corporate governance guidelines. The level of non-audit fees paid to their statutory auditors is high relative to external audit fees. Media company News Corporation also has its chief executive serving as the company’s chairman, but in most other areas has reported excellent governance standards. Property group Westfield has achieved a high level of corporate governance, however in relation to its audit and nomination committees it does not have 100% independence. Diversified conglomerate Wesfarmers has outstanding corporate governance, apart from it not having 100% independent audit and nomination committees and no dedicated risk management committee. Pharmaceutical company CSL and insurer QBE Insurance also have outstanding levels of corporate governance, although their nomination committees have less than 100% independence and no dedicated risk management committee. “All things considered, the findings of the BDO Kendalls 2008 Large-Cap Corporate Governance Survey are very encouraging as the largest companies set an extremely high standard for other listed companies to follow,” Mr Pearce said. “As was demonstrated by the findings of the BDO Kendalls Mid-Cap Corporate Governance Report released last year, many of the companies listed on the ASX still have a few areas for improvement to measure up to the largest corporations in Australia.” Mr Pearce added that access to suitably qualified independent directors amid calls for directors to limit their breadth of directorships remained a serious constraint toward achieving full independence. For more information, contact: Paul Dwyer Press release published by www.seekingmedia.com.au |
