Case studies

Beyond the boardroom door

Research Project Title: The Changing Roles of Company Boards and Directors

Over the last six years, there has been a raft of regulatory and legal changes in the policy and practice of corporate governance in Australia. The major changes have been the Federal Government latest reforms in the Corporate Law Economic Reform Program (CLERP), a new set of guidelines drawn up by the ASX and the HIH Royal Commission report.

However, the debate on corporate governance practice and reform in Australia, as in other jurisdictions, often centres around the perceived conflict between regulation and business interests, with limited knowledge of how governance policy and processes are actually working - and are affecting behaviour - in boardrooms across the country.

In 2003, CCG researchers Professor Thomas Clarke and Alice Klettner, an English/Australian lawyer, began a national survey of company boards and directors, - the most substantial survey of corporate governance practice ever conducted in Australia. 'We went out into the field across the country and interviewed a range of corporations, from the ASX100 through the 300, to the ASX full register of smaller and unlisted companies, and we also interviewed foreign companies by way of comparison,' says Professor Clarke.

The survey, supported by an ARC grant and Sydney legal firm Dibbs Abbott Stillman, went beyond the usual methodology of looking at companies' published statements. Before visiting each company, Alice Klettner reviewed all of the company's documentation. 'It meant that we were not going to be discussing superficial things with them that were already public knowledge,' says Professor Clarke. 'So I feel that our account has a qualitative authenticity that much of the rest of the research lacks.'

Companies were invited to participate in the research which, Professor Clarke notes, led them to speak to those that had already embraced corporate governance. 'These companies would be among the better-governed companies in Australia. However, what did surprise us was the degree of professionalism, not only in the ASX100 but through to quite small companies.'

The results of the research, announced in late September 2007 at the offices of Dibbs Abbott Stillman to a conference of senior business people, add much-needed substantive data to the corporate governance debate. 'The compliance tick-box mentality is just useless. It's self defeating, and what we wanted to see and discover more about was intelligent engagement [with the regulations], and I think we did find that very substantially,' says Professor Clarke. 'What we found was professional managers doing a highly competent job and not complaining about it, understanding the reasons for it and seeing that those activities did add value in the sense of the probity and assurance for investors.' Alice Klettner agrees. 'What is useful to draw out is that [corporate governance] actually adds value, and can be implemented in a positive way.'

The 'good practice' principles derived from the research are being disseminated through the Chartered Secretaries of Australia, the Australian Institute of Company Directors, the CPA and other bodies. They have already influenced the teaching of corporate governance, and Professor Clarke hopes it will inform future policy development.

The research has been the major project of the Centre for Corporate Governance since its launch and has, directly and indirectly, influenced the substantial library of books on corporate governance published by Clarke and the CCG - a total of 20 volumes in just five years.

The research has also led to a number of new avenues of study. Some of the companies interviewed during this research were mining and resource companies, and this has led into one of the next research projects for the Centre - corporate responsibility and sustainability. The Centre is pursuing an ARC Linkage grant with Canberra University and the support of the Australian Government Treasury to look at the governance of small companies. 'A great accusation about corporate governance is that it has all been designed for the ASX100,' says Professor Clarke. 'But there has to be some understanding that [small companies] can only do this in stages, in a developmental process.'

Contact: Professor Thomas Clarke, Faculty of Business
Email: Thomas.Clarke@uts.edu.au
Tel: (02) 9514 3479