Category: Media Release

• Date: 29 August 2013
• Type: Media Release

A global network of director institutes has today released a paper supporting improvements to the way organisations report to their shareholders and other stakeholders, including in ways guided by the International Integrated Reporting Framework. However, the network has argued that any changes to the way organisations report should reduce the overall reporting burden on organisations.

These views are expressed by the Global Network of Director Institutes (GNDI) in their response to the International Integrated Reporting Council’s (IIRC) consultation on the draft international Integrated Reporting framework.  

“Directors believe corporate reporting should result in concise, simple and focused reports that identify the material business risks that an entity faces, how that entity manages those risks and how they determine their success in managing those risks,” said John Colvin, Chair of GNDI.

“However, we have significant concerns that should Integrated Reporting be mandated, it is likely  to result in overly
prescriptive, compliance driven corporate reporting ” said Mr Colvin.

GNDI put forward a number of concerns with integrated reporting mandates in the perspectives paper, which includes: 

– The potential to significantly increase the cost of compliance for entities, as well as increasing the volume of reporting. 

– The need to ensure that there is genuine investor demand for the disclosures in an Integrated Report.

– The potential increase in directors’ liability for the disclosures in an Integrated Report and the lack of an internationally harmonised safe harbour for
forward looking statements.

“Before any integrated reporting framework can be agreed to, the IIRC must identify the types of entities that would apply an integrated reporting framework and ensure global consistency” said Mr Colvin.

“They must also provide guidance on how the Integrated Reporting framework would fit within individual countries corporate governance framework, tax and corporate laws and determine the cost, benefits and implementation implications for entities and their shareholders.”

GNDI is supportive of entities and their boards effectively communicating those issues of significance to their shareholders in their corporate reporting. 

“These factors must be addressed and encompassed within a principles-based, non-regulatory, “if not, why not” framework that recognises the diversity of business, encourages innovation and promotes entrepreneurial activity,” he said.

For further details please contact us.

Read the Integrated Reporting perspective paper.

• Date: 16 May 2013
• Type: Media Release

The issue of when to change audit firms should be a matter for the individual company, its directors, audit committee and shareholders and should not be subject to externally imposed regulations requiring mandatory rotation of audit firms, according to an international network of company directors.

In a perspectives paper released today by the Global Network of Director Institutes (GNDI) on the issue of Mandatory Audit Firm Rotation (MAFR), Chair of GNDI and CEO of the Australian Institute of Company Directors, John Colvin said that while it is important to enhance auditor independence, objectivity and professional scepticism, imposing a regulated time limit on tenure is not the best way to achieve these goals.

“Mandatory Audit Firm Rotation is a concept that is often debated by governments in formulating a response to media, regulators and political pressure as a result of financial crisis,” said John Colvin.

“However, there are significant challenges with MAFR, including the loss of audit knowledge, increase in time and expense, loss of flexibility, loss of industry specific knowledge, increase in global complexity and reduced accountability.”

“Further, the timing, costs and benefits associated with such a change is likely to vary between industries and geographies, and will also depend on the specific circumstances of individual companies.”

“Given this, we believe that it is the board of a company or its audit committee that is best placed, with the experience and intimate knowledge of the company’s business, to determine or recommend to shareholders when the interests of the company would be better served by a change in audit firm,” he said.

“However, audit partner rotation rules and expected personnel changes in both the company and the audit firm can mitigate the negative impacts of long tenure, without the unintended consequences of MAFR.”

GNDI’s view is based on the following concerns with MAFR:

• MAFR would result in losing the cumulative audit knowledge gained over years at arbitrary intervals.  However, it should be noted that when the same audit approach is followed continuously, there may be an increased risk that errors remain undetected.
• MAFR would increase the amount of time management spends during a transition on educating the new auditors on the company’s operations, systems, business practices and financial reporting processes.  Shareholders indirectly bear those costs.
• A regulatory time frame that sets out when MAFR should occur does not provide the flexibility to enable companies to defer an MAFR when it is at an inopportune time and may not be in the best interests of the company’s shareholders.
• MAFR may reduce the ability of audit firms to accumulate sector/ industry expertise and impact on the ability of audit firms in attracting and retaining talent in specialised industries or remote locations.
• MAFR may increase the complexity of audit compliance within global companies, as there may be differing audit rotation requirements in various jurisdictions.
• MAFR would reduce the accountability and responsibility of the audit committee for periodically assessing the performance of the auditor and, based on that assessment, for determining if, and when, to require a rotation or tendering of the audit.
• MAFR would also eliminate the right and ability of shareholders to determine who their auditors should be and when it is necessary to change their auditors.
• The imposition of mandatory time limits that restrict a company’s choice of auditor is an artificial impediment to the free deliberation of the board or its audit committee.

“In this perspectives paper, directors are arguing strongly that regulators should focus on improving the quality of the audit, by reinforcing the board or its audit committee’s responsibility for the oversight of the audit, audit firm and quality and, where necessary, enhancing the expertise of the audit committee and potentially expanding communications between the audit firm and the audit committee,” said Mr Colvin. 

“Further, work may be required to ensure that users of financial statements increase their understanding of the role and nature of an audit, thus narrowing the audit expectation gap,” he said.

For further details please contact us.

Read the Mandatory Audit Firm Rotation paper.

International director network releases landmark paper on board diversity

• Date: 06 Feb 2013
• Type: Media Release

The Global Network of Director Institutes (GNDI) has today released their joint policy perspective setting out the significant and positive impact a diverse board can have on business outcomes and arguing that mandatory quotas is not the most effective way to improve board diversity.

At the release of the policy paper, Chair of GNDI and CEO of the Australian Institute of Company Directors, John Colvin FAICD said that the paper highlights that improvements to board diversity should be driven by recognition of the benefits of diversity.

“Board diversity is an important governance issue but is a means to an end, not an end in itself,” said John Colvin.

“If all individual directors on a board view issues in a similar way, there is a risk that the board will approach issues too narrowly, suffer from “group think”, or fail to adequately consider and evaluate alternative ideas or options in relation to the organisation,” he said.

“Boards that are composed of directors with different perspectives, experience, backgrounds and views in relation to issues affecting the organisation, may contribute to better problem solving and decision-making, foster greater innovation, and enhance board effectiveness and performance,” said Mr Colvin.

The paper emphasises that diversity encompasses, but is not limited to, gender, ethnicity/race, nationality, religious beliefs, cultural or socio-economic background, and age.

It reflects a clear view from the director institutes of the GNDI that because systems of organisational governance vary significantly around the world, the approach that each organisation takes to diversity will vary; all organisations are different and there is no “one size fits all” formula.

“Each organisation must examine its individual circumstances, existing board composition and should ideally conduct a skills gap analysis to determine its specific needs,” said Mr Colvin.

“For this reason, the GNDI does not support mandatory, externally imposed quotas and argues there are many other effective mechanisms to improve board diversity,” he said.

Initiatives and practices which may be employed by organisations to increase the diversity of their boards could include establishing diversity policies and objectives, improving transparency in board selection and appointment processes, and implementing board evaluation processes that assess the board’s performance and the potential contribution of diversity to board effectiveness.

“Companies could also better encourage diversity throughout the organisation, especially in the ‘pipeline’ of middle and senior management,” said Mr Colvin.  

The Global Network of Director Institutes (GNDI) was founded in 2012. It brings together member-based director associations from around the world with the aim of furthering good corporate governance. It is an international network among nine leading membership organisations for directors in Australia, Brazil, Canada, Europe, Malaysia, New Zealand, South Africa, the United Kingdom, and the United States. The following membership organisations are members of GNDI and collectively represent more than 100,000 corporate directors worldwide:

• Australian Institute of Company Directors (AICD) 
• Brazilian Institute of Corporate Governance (IBGC) in Brazil 
• European Confederation of Directors Associations (ecoDa) 
• Institute of Corporate Directors (ICD) in Canada 
• Institute of Directors in New Zealand (IoDNZ) 
• Institute of Directors in Southern Africa (IoDSA) 
• Institute of Directors (IoD) in the United Kingdom 
• Malaysian Alliance of Corporate Directors (MACD), and 
• National Association of Corporate Directors (NACD) in the United States. 

Read the GNDI policy perspective paper on board diversity.

For further details please contact: Michelle Wood, Media and Government Relations Advisor,

(02) 8248 6612 or 0466 655 115, mwood@companydirectors.com.au

• Date: 07 Jan 2013
• Type: Media Release

John Colvin FAICD, Chief Executive and Managing Director of the Australian Institute of Company Directors, has been unanimously elected chairman of the new Global Network of Director Institutes (GNDI).

GNDI is an international partnership between nine leading membership organisations for corporate directors in Australia, Brazil, Canada, Europe, Malaysia, New Zealand, South Africa, the United Kingdom, and the United States. 

John Colvin will be supported in his role by Stan Magidson, President and CEO of the Institute of Corporate Directors (ICD) in Canada, who will serve as deputy chairman. 

“The GNDI brings together the leading associations serving corporate directors around the world to complement the work of its member organisations, providing a global voice and a forum for sharing knowledge, insights and leading practices,” said John Colvin. 

“I am pleased to have been elected the Chair of this group which will discuss issues that are having an impact globally on corporate governance, promote best practice and advocate on relevant governance matters that cut across national boundaries,” he said.

Work to establish the group and develop a charter has been ongoing over the last two years and culminated in the first formal meeting of the group in Wellington, New Zealand in December 2012. At this meeting it was agreed that GNDI members would collaborate to:

• Anticipate and explore emerging issues having global impacts on corporate governance.
• Develop and promote leading practices and programs that enhance the ability of corporate directors to ensure long-term, sustainable performance for the benefit of shareholders and other stakeholders.
• Educate key influencers regarding the benefits and values of exemplary leadership in the boardroom.
• Amplify the voices and perspectives of corporate directors on matters related to boardroom leadership.

The member institutes of the GNDI represent directors from over 9 countries, with this number anticipated to grow in coming years as other director institutes from around the world join the organisation. 

The following membership organisations are members of GNDI and collectively represent more than 100,000 corporate directors worldwide:

• Australian Institute of Company Directors (AICD)
• Brazilian Institute of Corporate Governance (IBGC) in Brazil
• European Confederation of Directors Associations (ecoDa)
• Institute of Corporate Directors (ICD) in Canada
• Institute of Directors in New Zealand (IoDNZ)
• Institute of Directors in Southern Africa (IoDSA)
• Institute of Directors (IoD) in the United Kingdom
• Malaysian Alliance of Corporate Directors (MACD), and
• National Association of Corporate Directors (NACD) in the United States.

Further information:

To find out more about GNDI, please contact us (the GNDI secretariat at Australian Institute of Company Directors) or your local organisation for directors.