Country Analyses, Second Edition
Edited by Christine A. Mallin
Chapter 15: The development of corporate governance in Australia
Geof Stapledon* INTRODUCTION From the mid-1980s until the end of the 1990s, issues of corporate governance received sporadic attention in Australia. Government, business, institutional investors, professional advisers, consultants, academics, the Australian Stock Exchange (ASX) and the media took an interest in governance issues mostly during periods of economic decline. All this changed with the major corporate collapses and scandals of 2001 and 2002 – which included not only Enron, WorldCom, HealthSouth, Global Crossing and other companies based in the United States, but also five publicly traded Australian companies: a telecoms company (One.Tel); a general insurer (HIH); a retailer (Harris Scarfe); and two mining companies (Pasminco and Centaur). Since the corporate collapses, corporate governance has remained a front-page issue in Australia. This chapter reviews the current state of corporate governance in Australia, with emphasis on key trends and developments. The approach adopted is to look at several corporate governance ‘mechanisms’; that is, mechanisms that play a role in decreasing the divergence between managers’ and shareholders’ interests that Jensen and Meckling articulated in their famous 1976 article. The mechanisms reviewed are: • market forces (particularly the market for corporate control and product market competition); • legal environment protecting investors; • monitoring by shareholders (particularly large blockholders and institutional investors); • monitoring by non-executive directors; • disclosure rules and governance codes; • independent audit; • incentive remuneration for senior executives. The chapter’s focus is the publicly listed sector. More than 1900 domestic companies are listed on the ASX, although the 100 largest companies account 330 Australia 331 for more than 90...
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