SA Director
Issue No. 8 - December/ 2002/january
Legally Speaking
by Andrew Corletto
REFORM AND MORE REFORM
A series of new legislation is beginning to work its way through Parliament that could significantly change the way companies are governed.
Last year’s high profile corporate collapses have driven the need for increased corporate regulation to prevent the excesses that characterised some of these collapses. The reforms now being introduced into Parliament, through the release of the latest stage of the Federal Government’s Corporate Law Economic Reform Program (CLERP 9), will significantly affect CEO’s, CFO’s and company directors as the new corporate governance framework is formed.
Director Bonuses Under Threat
The “Corporations Amendment (Repayment of Director’s Bonuses) Bill 2002” was introduced into Parliament in September. The Bill aims to give the liquidator of a company the power to recover from directors payments or issues of options or shares made as a result of an “unreasonable director related transaction”.
Significantly, for a transaction not to be caught, it must be reasonable for the company - both at the time that the obligation was incurred and when the company is required to meet the obligation.
The proposed legislation is problematic in that:
- it may increase a focus on the short term, with executive directors demanding that any bonus be based on short term performance, to avoid any long term uncertainty; and
- it fails to include executives who are not directors who may also receive bonus payments.
Audit Reforms
With the role of the auditor now under close scrutiny, the CLERP 9 reforms propose a series of changes to the relationship between a public company and its auditor. Significant changes are to:
- Impose a mandatory two year period between the time when a partner of an audit firm involved in the audit of a client can become a director of that client or take a position w...
