ABOVE BOARD
SPRING EDITION - 2008

Ethics Policy

Perhaps your Board should consider establishing an ethics policy or reviewing the one that you may already have. They have become a must in the US for corporations hoping to avoid potential disaster under the new Federal sentencing guidelines. By showing evidence of a solid ethics infrastructure, companies in the US can convince prosecutors that any violations may deserve leniency. While we haven’t reached that point in Australia, it’s probably useful to establish some values and guidelines for the good of all Board members and staff. The common topics for Directors included in such a policy would be:

• Directors conflict of interest
• Fair dealing
• Use of company assets
• Confidentiality on Board discussions
• Insider trading
• Reporting obligations.

A weakness in a lot of Boards specific policies including ethics could be a lack of a solid enforcement and sanctions process. Whether it be ethics or any other Board policy, make sure they have real teeth in them, and that everyone affected knows and understands the policies.

Asset Protection

There is no doubt that Directors operate in a highly complex world of potential liability and litigation. Like a lot of other professionals these days, you should consider protection of your assets, and not rely simply on Directors and officers insurance as your only safeguard. I recently attended a seminar conducted by Steve Grant, who is a lawyer specialising in estate and asset protection. He has developed the beta strategy, a legal means of asset protection for people such as Company Directors. It does not involve the transfer of any assets to other parties and appears to be a cost effective option for Directors to consider. You can talk to Steve Grant on 3252 5044.

New Valuation Standard

Often Directors are asked to consider valuation reports on their own assets or other companies’ assets or M & A purposes. The new professional accounting standard APES225 valuation services has now been issued and it will be effective from 1st January 2009. It appears to improve the consistency, transparency and quality of such valuation reports provided by accounting firms. Also it seems that it will make such reports easier for Directors to understand with guidance for companies about when evaluation needs to be done. It is also aimed at providing Directors with greater confidence in the quality and integrity of valuation reports that they will be asked to consider.

Workplace Liability

I wonder if you agree with the opinion of the Australian Industry Group. They believe that Queensland’s strict workplace liability laws for Directors and managers should be dumped in any national safety model. In the opinion of AIG, they are currently quite unreasonable and similar to the much criticised NSW system. Current moves to harmonise a national approach to such workplace liability law probably won’t be achieved by lifting the standard of liability to the levels currently in NSW and QLD. Regulators should take this opportunity to develop a fresh approach to the best safety laws in a harmonised model rather than simply cut and paste the current versions in each State. Currently, we seem to have unreasonable and unbalanced laws in some States combined with the disproportionate emphasis on prosecution of Directors. Such systems are not only unfair, but have not resulted in good OH & S performance anyway.

Climate Change

There is no doubt that this topic is growing in recognition in the community and raises some interesting challenges for Company Directors. The current Federal Government is certainly driving a number of initiatives in this area and every business in Australia will need to be able to see the impact of such changes on the company’s future. I don’t think we can bury our head in the sands and don’t think that it will affect our individual companies. Instead Directors I think should prepare for the opportunities arising from a transition to a lower carbon world as well as reviewing the needs for any new compliance in such a changing environment. The Carbon Pollution Reduction Scheme is targeted to commence in Australia in mid-2010. It’s possible that investors and your customers will be requesting information in relation to your company’s strategies in relation to this issue. It might be worth a topic at a future Board meeting. Whatever our personal views on the whole issue of climate change, there is no doubt that the future is already here.

Control Assurance

Recently one of the Boards that I chair used the services of Dr Ted Dahms. We wanted a review of our corporate governance and risk management systems, and he completed an excellent report to assist the Board. He has a number of free publications available through his website which I think you would find most interesting. Have a look at www.Plumcon.com.au to see the articles or to contact him. I’m happy to recommend his services to you and your Board.

Book Review

For those of you that have met me in workshops over the years, you’ll know that I have always recommended an excellent book for the Directors of not-for-profit organisations. It’s called “The Book of The Board” by David Fishel. I ran into David recently and he mentioned that he’s now produced the 2nd edition as an update to the original publication. I have since read a copy of it and it’s even better than the 1st edition. Personally, I think the Directors of all not-for-profit Boards should have a copy as it covers everything they need to know in the not-for-profit sector governance area. I’m not sure of the price but it’s probably about $40 and available through his publisher at www.federationpress.com.au It’s well worth the look.

Well, it’s springtime and I hope that the warmer weather makes us all smile a little more than we did in winter. Please feel free to contact me for a confidential discussion regarding any of the ways that Directors Australia can assist you or your Board of Directors.

Until next time
Warren Tapp

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