Andrew Murray (WA, Australian Democrats) Share this | Hansard source

I rise to speak to the motion moved by Senator Chapman in relation to the tabling of the corporate responsibility report of the Joint Committee on Corporations and Financial Services. I want to acknowledge and thank the secretariat for the extremely comprehensive and voluminous exercise that they had to go through to assist the senators to produce this report. The submitters were also of great assistance. I also want to record my thanks to Senator Chapman and Senator Wong for their efforts in arriving at the final report.

The Australian Democrats support the committee’s report, titled Corporate responsibility: managing risk and creating value. The report, including the supplementary report of the Labor members of the committee, significantly advances parliamentary understanding of corporate responsibility issues, and the recommendations of the committee will assist considerably in Australian corporate entities lifting their game in corporate responsibility reporting. Our own support for the report has no codicil attached to it, although I have made some additional remarks to clarify our views on a number of additional issues raised by Labor in their supplementary report.

We Democrats take the view that corporate responsibility reporting and its development in Australia is still in its early developmental stages and needs to be nurtured and encouraged. We note that Australia lags many of the more advanced OECD countries and we look forward to Australia catching up to what is going on in those leading countries.

If the Australian government and the corporate community engage fully with the proposed voluntary development and adoption of corporate responsibility then there will be no necessity for mandatory action in the future. However, it is our explicit intention to keep an open mind on this matter. There may be circumstances where the adoption of a mandatory code would be desirable in the longer term. International trends or conventions may recommend and encourage the adoption of uniform codes in OECD countries on a mandatory basis. If that were the case, Australia should be in a position to adopt such codes. I remind the chamber that both accounting and auditing standards were once voluntary; it is now seen as helpful to regularise them in statute. Whether or not mandatory codes are desirable in the future, it is essential there be a meaningful monitoring of the work of corporations in this area, and that has to be started sooner rather than later with good quality reporting.

It was evident during the hearings and in the submissions from the corporate sector that many companies and directors were taking their corporate social responsibilities seriously and including them in their decision making. The motives for adopting corporate responsibility reporting, however, were due to enlightened self-interest, often, which is another way of saying that they were concerned about the outcomes if they did not adopt them. The motivators could be reputation loss or being unable to hold onto their leading executives who believed in such things or to avoid expensive litigation or community agitation.

On the other hand, there were contributors to the hearings who recognised the significant and material contribution corporate responsibility reporting can and does make to the long-term health of a corporation, particularly with respect to the assessment and understanding of what is characterised as non-financial long-term risk. The need for further progress has of necessity to focus on the laggards as well as the leaders. If there is no ongoing improvement across all sectors in the next three to five years, at least to the level of comparable advanced OECD countries, then in the view of the Democrats it will be essential to revisit the need for a mandatory code.

I was attracted to Labor’s notion in its supplementary report that there could be mandated corporate responsibility reporting in the federal public sector. This sits well with the Australian Democrats’ belief that the government should be taking a facilitation role in developing corporate responsibility in the for-profit and the not-for-profit sectors. There was a good deal of support in the submissions and in the evidence given to the committee for a facilitative function from the government, and that would be appreciated by many in the for-profit and not-for-profit sectors. Such facilitation from the government could include a variety of devices, such as offering staff advice systems or other sorts of assistance, both financial and non-financial, which could assist the for-profit and not-for-profit sectors in ensuring that corporate responsibility was achievable on an affordable and sustainable basis. It may even be more important that such facilitation is made available to the not-for-profit sector, which is often working with limited resources and expertise but which still has a very large footprint in the society in which we live. Those not-for-profits might in other circumstances find meeting corporate responsibility obligations onerous.

Although there was evidence that Australian corporations have started down the road to good corporate responsibility reporting, there is a sense that many of them see that what they have done is sufficient, and this fails to take into account that many corporations lag behind their global counterparts who are continuing to move ahead in this area. There therefore needs to be a monitoring of Australian corporations against international standards.

I thought the choice of the title, Managing risk and creating value, was a good one. It is exactly what corporate responsibility should be attached to—that is, it should be grounded in an assessment of both risk and value from the perspective of the corporation. There does need to be a link in people’s minds—by people I mean the directors of companies, the shareholders and institutional investors—that corporate responsibility is something that helps the company manage risk. It helps with decision making because it requires a more holistic and long-term approach to the health and welfare of the company. Instead of simply looking at the financial return to investors, you would look at it as a return to all investors, including future investors.

This link between risk assessment and creating value is extremely important and should act as a motivational tool in bringing Australian corporations up to the level of many international counterparts. In the past it has been my observation—and I have had experience in the private sector—that corporations have focused almost entirely on financial audits in relation to risk appraisal. Corporate responsibility encourages them to move towards the public sector practice of performance audits, which are risk based evaluations, and it has been shown that performance audits are better at exposing longer term risks to a company than financial audits, which tend to focus on the immediate financial health of a corporation.

The report recognised that other jurisdictions, such as the United Kingdom and France, have ministers in charge of corporate social responsibility, which is an interesting development. I agree with the report that currently a number of Australian federal ministers and agencies are indeed taking an active role in assessing and understanding corporate responsibility, but I strongly support the view of the committee that it is necessary for the Department of the Prime Minister and Cabinet to take a leadership role in this area and to adopt a whole-of-government approach to the coordination and development of corporate responsibility reporting in the public sector and, indeed, to try to encourage it in the private sector.

I noted recommendation 10 of Labor’s supplementary report regarding the United Nations Convention against Corruption and the OECD anti-bribery convention and I look forward to the early introduction of amending legislation to deal with concerns raised in the OECD report about shortcomings in Australia’s adoption in the Criminal Code of aspects of its anti-bribery convention. I have had things to say about that recently in an adjournment speech. The report recommendations and the additional recommendations offered by Labor deserve a serious and early response from the government, the Australian Securities and Investments Commission and the corporate and professional community at large. I am glad for this report; I think it is quite a groundbreaking report, frankly, from the perspective of the committee. I join the other two senators who have spoken in commending the report to the Senate.

Question agreed to.