Australian Governance Standards Associate Professor Rosemary Teele Langford, Melbourne Law School

Broader Context Spotlight on governance in Australia Banking Royal Commission Brought to light poor governance in financial institutions and urged the regulator (ASIC) to take a ‘Why not litigate?’ approach Global implosion in trust in institutions Release of ASX Corporate Governance Principles and Recommendations – These were somewhat controversial because the consultation draft contained text on the importance of an entity’s social licence to operate, which was subsequently removed Review of the Australian Charities and Not-for-Profit Commission (ACNC)

Australian regulatory and governance framework Constitutional aspects Australian Charities and Not-for-Profit Commission Act 2012 Australian Charities and Not-for-Profits Commission Regulations 2013 Governance standards Other layers of regulation

Overview of governance standards 1. Purpose and not-for-profit nature of a registered entity 2. Accountability to members 3. Compliance with Australian laws 4. Suitability of responsible persons 5. Duties of responsible persons (referred to as ‘responsible entities’)

Governance Standard 5(2) A registered entity must take reasonable steps to ensure that its responsible entities are subject to, and comply with, the following duties: To exercise the responsible entity’s powers and discharge the responsible entity’s duties with the degree of care and diligence that a reasonable individual would exercise if they were a responsible entity of the registered entity; To act in good faith in the registered entity’s best interests, and to further the purposes of the registered entity; Not to misuse the responsible entity’s position; Not to misuse information obtained in the performance of the responsible entity’s duties as a responsible entity of the registered entity; To disclose perceived or actual material conflicts of interest of the responsible entity … To ensure that the registered entity’s financial affairs are managed in a responsible manner; Not to allow the registered entity to operate while insolvent…

Appraisal of the Governance Standards ACNC Review: The system is ‘complex and confusing’ and it is ‘unreasonable to expect volunteer directors working within the sector to understand and comply with multiple jurisdictional and sometimes inconsistent governance requirements’. Accountability and Enforcement Issues Duties are imposed on the entity rather than on individuals Some duties in the Corporations Act have been turned off Interaction with associations legislation is complex Detection and sanctions Anecdotal Evidence

Overall The governance standards per se are not problematic Problems with application Constitutional issues in Australia Need for simplification Note also AICD NPF Principles