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Chapter One - Introduction
Background
1.1
On 30 June 2006 the committee resolved to inquire into the engagement
and participation of shareholders in the corporate governance of the companies
in which they are part-owners. The committee agreed to examine the following
terms of reference:
- barriers
to the effective engagement of all shareholders in the governance of companies;
- whether
institutional shareholders are adequately engaged, or able to participate, in
the relevant corporate affairs of the companies they invest in;
- best
practice in corporate governance mechanisms, including:
- preselection and
nomination of director candidates;
- advertising
of elections and providing information concerning director candidates,
including direct interaction with institutional shareholders;
- presentation of ballot
papers;
- voting arrangements (eg. direct,
proxy); and
- conduct of Annual General Meetings.
- the
effectiveness of existing mechanisms for communicating and getting feedback
from shareholders;
- the
particular needs of shareholders who may have limited knowledge of corporate
and financial matters; and
- the
need for any legislative or regulatory change.
Conduct of the inquiry
1.2
The inquiry was advertised in the Australian newspaper on 11
July, 27 July, 8 August, 22 August and 5 September 2007. The government also
invited written submissions from a range of industry stakeholders, academics
and government departments and agencies. Details of the inquiry were placed on
the committee's website.
1.3
A total of 45 submissions were received and a list of them is included
in Appendix 1.
1.4
The committee held two public hearings; in Canberra on 15 April 2008 and Sydney on 16 April 2008. A list of the witnesses who appeared at the
hearings is included in Appendix 2 and copies of the Hansard transcripts are
available on the internet at: www.aph.gov.au/senate/committee/corporations_ctte/sharehold/index.htm.
.
Report structure
1.5
Chapter Two outlines Australia's current regulatory framework for corporate
governance, the role of shareholders in ensuring good corporate governance, the
importance of effective communication between company boards and shareholders
and the voting mechanisms through which shareholders enforce the accountability
of company boards. The final section of the chapter canvasses the opinion of
contributors to the inquiry on the most appropriate way to approach shareholder
engagement reform.
1.6
Chapter Three examines possible improvements to the flow of information and
dialogue between companies and shareholders, with attention also given to the disclosure
of stock lending and margin lending activities; as well as examining issues specific
to the separate institutional and retail investor groups.
1.7
Chapter Four assesses issues raised with the committee pertaining to the
efficacy and integrity of different absentee voting mechanisms and the ability
of shareholders to express their views effectively through the voting process.
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