-Regulatory uncertainties impose additional pressure on Australian directors in tough economic times-
Mallesons Stephen Jaques has launched Directions 2012 - a report examining the current issues and challenges facing Australian directors and boards.
Mallesons undertook an online survey of directors in November 2011 to capture the current opinions of directors on a variety of issues. Our report reflects survey responses from directors representing more than 300 organisations across a wide range of industry sectors, and our analysis of the issues and challenges facing Australian directors and boards in 2012.
Directions 2012 highlights a number of key issues which are causing uncertainty, and placing additional pressure on directors and boards, at a time when they are faced with significant business challenges and risks in the current economic climate.
Volume, pace and unpredictable nature of regulatory reform creating uncertainty
“The volume and populist focus of regulatory reform is creating frustration and uncertainty for corporate Australia,” said Nicola Charlston, Partner of Mallesons and co-author of the report.
The survey results demonstrate that directors are currently required to devote substantial amounts of time to regulatory and compliance matters.
“This raises the key question of whether the time that boards and directors are now required to devote to regulatory and compliance matters is detracting too significantly (and detrimentally) from the time that would otherwise be available for them to pursue their traditional role – the oversight of the strategic direction and management of the company,” said Meredith Paynter, Partner of Mallesons and co-author of the report.
The report notes that recent reforms relating to OHS and carbon tax have heightened the risk of personal liability for directors in areas that are traditionally the responsibility of management and that relate to the day to day operations of the company.
Directors nominated the carbon emissions policies and carbon tax as the top regulatory reform issue that received their attention in 2011. Directors’ duties (and the implications of recent cases), executive and director remuneration, and OH&S laws were the next top ranked regulatory reform issues for 2011.
Implications of a tough domestic business environment
The report highlights key issues and challenges relating to the tough domestic business environment, and the opportunities and hurdles in pursuing cross border investment opportunities. In particular, political uncertainty, ineffectiveness or interference, implications of the multi-speed economy, and capital management issues were rated as the top three challenges of doing business in Australia over the past 12 months.
"A potential by-product of this ongoing uncertainty is the deterrent that it provides to major investment in the Australian economy," said partner Nicola Charlston.
On a positive note, there are significant opportunities for Australian companies to invest in foreign assets and businesses, but this is also presenting new challenges for directors. For example, to take advantage of opportunities in China, directors and boards need to adapt to a vastly different regulatory system, compared to the system in Australia.
Outlook and challenges for 2012
Industrial relations reform will be a significant issue in 2012.
“Directors are calling for IR reform to improve Australia’s competitiveness, which is particularly important at the moment given the current global and domestic economic issues”, said Nicola Charlston.
More generally, uncertainty regarding the direction and expected outcomes of reform proposals is expected to remain an ongoing source of frustration for companies and boards in 2012.
It will therefore be important for government and business to work together to develop new laws and regulation, and in some cases reform existing laws and regulation. This should contribute to improved productivity, wealth creation and appropriate management and governance practices.
“What we need is smarter regulation and a more rigorous cost/benefit analysis to be undertaken before and after reforms are implemented,” said Meredith Paynter.
The full Directions 2012 Report is available here.
Mallesons Stephen Jaques is a leading law firm in the Asian region. For over 180 years, the world’s leading organisations have entrusted us to advise on their most critical legal challenges. We couple high performance with intellectual rigour to provide legal solutions that are innovative and often ground breaking. This approach enables us to help our clients adapt to the increasingly challenging markets in which they operate - no matter where they are in the world - and ensures that they have a voice to help them shape the legal and regulatory landscape.
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