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ASX/SGX merger - Chartered Secretaries Association raises governance concerns

by Hilary Kincaid 28. October 2010 12:19

The Chartered Secretaries Association, in a media release issued earlier today, has highlighted corporate governance concerns regarding the prospective merger of ASX with SGX:

No stakeholder group would disagree with the claim that Australia’s governance framework is fundamentally different from and better than it was seven years ago as a result of the ‘if not, why not’ regime that the [ASX Corporate Governance] Council has put in place. Investors have access to much more information which they use to judge how well the company is run. Board decision making is much more transparent. And using the ‘if not, why not’ approach allows companies to tell their story to investors, so that they have access to the thinking behind decisions. If companies don’t want to tell their story, then investors can vote with their feet.

ASX currently plays an essential role in supporting the work of the Corporate Governance Council. It provides very senior people to chair the Council and assist its ongoing review of the efficacy of the guidelines in changing behaviour. The Council has the backing of ASX’s compliance arm in monitoring and enforcing compliance with the relevant listing rule. A key question is where the supervision of disclosure against the [ASX Corporate Governance] Principles and Recommendations will sit after the merger. If this goes offshore, what does that mean for the corporate governance framework here? And with SGX also having a code of corporate governance in place, operating on a 'comply or explain' principle (which, while basically the same as the 'if not why not' approach, includes key differences) will the merged entity want two codes operating or seek to amalgamate them? Who will be consulted if this is the favoured approach? Australia does not have a tradition of requiring boards of regulated market operators to have ‘public interest’ directors. But there are questions of public interest at play here, and it remains unclear who will address them. Yet these questions must be addressed. While the commercial benefits of the proposed merger are apparent, they should not compromise the integrity of the market. 

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