|Issue No 52||05 May 2000|
Superman on Corporate Governance
By Mark Lennon
Much has been made of late of the importance of trustees of super funds playing an increased role in what is known as corporate governance.
Corporate governance as the term implies is concerned with the way companies are managed. What this means in practice is still evolving. In its narrowest terms it is simply concerned with how the board governs the company. But more broadly the concept concerns itself with matters such as the structures, designation of responsibilities and levels of accountability within the organization.
The push for greater corporate governance is clearly a reflection of the changing structure of our economy and the parameters within which companies operate. Deregulation, globalisation, more transparent systems of reporting, and the growth of superannuation funds and other institutional investors all account for why the governance of corporations is coming under increasing scrutiny.
The call for greater involvement on the issue is coming from across the political spectrum. The Minister for Financial Services, Hon. Joe Hockey has recently gone public and called upon fund managers and trustees to become more involved in the governance of companies particularly in light of the recent problems at AMP.
On the other side of the coin, the CFMEU, together with trade unions overseas, have recently taken an active role in its quest to wring changes to the board of Rio Tinto. The union has argued quite rightly that the company's board presently has too many executive directors sitting on it and consequently doesn't comply with the principles of good corporate governance. They have been seeking that superannuation funds support motions at Rio Tintos AGM that would rectify this situation.
For many superannuation funds the question of corporate governance really starts with the fund itself. Trustees responsibility to members is to first ensure that the fund is run according to the principles of good corporate governance. This means that concepts such as a clear definition of roles, performance monitoring, trustee training and risk management to name a few have been considered by the trustee board and appropriate strategies have been put in place.
As to the governance of companies in which funds have invested - the issue is a little more problematic. Probably the largest impediment to funds being more active in this area is the nature of there holdings. Most funds invest in companies through fund managers who hold the monies in unit trusts. This means that the funds holdings in a particular company are arms length and that the level of influence they can exert is limited. That is the fund cannot easily direct the fund manager as to how they should vote on a particular issue.
This is not such a problem for large funds that in many instances hold shares directly and therefore have clear voting rights.
Whatever the impediments at present the issue of corporate governance is one that super trustees will have to address as the size of their investments will continue to grow making funds in many instances substantial shareholders in particular companies.
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Unions: Laying It On the Line
A complex international legal web underpins a long-running South Coast picket.
International: Alive and Kicking
Those representing right wing political forces and strategists for multi-national corporations would be disappointed by the success of the recently concluded Congress of the WFTU in Delhi.
Economics: Fair Trade not Free Trade
The successful MAI and Seattle campaigns have sparked a new debate about the role of the World Trade Organization.
History: The Manchester Movement
Manchester, in Asa Briggs memorable phrase, was the shock city of the early nineteenth century, a small and obscure market town that in a matter of a few years had become a huge city.
Satire: Passing the Buck
Government report tells bosses how to lie and pass the buck: Reith blames Kemp
Review: A Book to Set the Left Right
The Australian Finacial Review's Stephen Long gives his verdict on 'Tales from the new Shop Floor'.
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Last Modified: 15 Nov 2005