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Global Corporate Governance Developments High profile corporate scandals are forcing companies to be more accountable and open. The essence of corporate governance is the establishment of processes to ensure that directors and controllers of companies are held properly accountable to their shareholders, that they are subject to checks and balances to prevent the abuse of power, and that matters affecting shareholders' interests are properly disclosed. White Papers and publications relating to corporate governance are as follows:
August 2004
January 2004
November 2003
November 2003
September 2003
July 2003
March 2003
January 2003
_______________________________________________________ KPMG's 2004 Fraud Survey (Australia) The lesson for board members and management from KPMG's 2004 Fraud Survey is clear - organisations that take appropriate fraud control measures will be less likely to suffer fraud than those who are wholly reactive in their approach to fraud. The survey, a joint project of KPMG Australia, the University of Melbourne and the University of Queensland, provides comprehensive insight into contemporary fraud issues in Australia and New Zealand. These include: the financial impact of fraud; the profile of the typical corporate criminal; the linkage between poor corporate governance and fraud; the conditions that increase the risk of fraud; strategies used to combat fraud; and unethical behaviour and factors that create the conditions for these to occur.
Across the board (October 2004) “Across the board” is a regular newsletter published by KPMG’s Audit Committee Institute in Australia to alert board and audit committee members to emerging issues relating to financial reporting, oversights of risk management and internal controls, evaluation of internal and external audit, and significant changes in board and audit committee practice in Australia and internationally. The seventh issue of “Across the board” looks at how the continuing debate on corporate governance standards has heightened the expectations held of boards. It examines what board members need to know about financial statement fraud and how they can reduce fraud risks. In addition, it discusses how to meet shareholder expectations at the AGM.
NYSE Proposed Amendments to Corporate Governance
Listing Standards On 3 August 2004, the New York Stock Exchange (NYSE) submitted for approval amendments to its corporate governance listing standards. The amendments were proposed in order to address a number of issues prompting questions and requests for interpretive guidance since the listing standards were first approved in November 2003. One of the proposed amendments would require audit committees at listed companies to "meet to review and discuss" annual and quarterly financial statements, and "review the company's specific Management's Discussion & Analysis disclosures." Other proposed amendments would more accurately reflect how the applicable look-back periods should be applied; change the substance of the independence standards regarding affiliations with a listed company's internal or external auditor, and other areas of the corporate governance listing standards. These amendments will not be effective until approved by the Securities and Exchange Commission. The listing standards approved in November 2003 are accessible below under the section titled "U.S. Stock Exchange Final Corporate Governance Listing Standards". The NYSE proposed amendments to the listing standards can be accessed through the following link: NYSE Proposed Amendments to Section 303A Corporate Governance Rules
_______________________________________________________ OECD Countries Agree New Corporate Governance Principles
The governments of the 30 OECD countries approved a
revised version of the OECD's Principles of Corporate Governance in
April 2004, adding new recommendations for good practice in corporate
behaviour with a view to rebuilding and maintaining public trust in
companies and stock markets.
NYSE
Releases Listing Standards FAQ On 29 January 2004, the New York Stock Exchange (NYSE) released its "NYSE Listed Company Manual Section 303A Corporate Governance Listing Standards Frequently Asked Questions" (FAQs). This 16-page document contains, in a question-and-answer format, information about the NYSE's recently revised corporate governance listing standards, including: transition periods; disclosure and certifications; independence determination; non-management director communications requirements; compensation committee requirements; audit committee requirements; code of business conduct and ethics requirements; and foreign private issuer disclosure. _______________________________________________________ New Corporate-Governance Listing Standards This edition of KPMG's Defining Issues describes new, more challenging listing rules from the New York Stock Exchange (NYSE) and the Nasdaq Stock Market, Inc. (NASDAQ). The rules, which were approved by the Securities and Exchange Commission (SEC) on 4 November 2003, expand director independence requirements and mandatory board and audit-committee responsibilities beyond what the SEC mandated earlier this year. Most listed U.S. companies must comply with the new rules by the first annual meeting after 15 January 2004, but no later than 31 October 2004. New
Corporate-Governance Listing Standards
_______________________________________________________ U.S.
Stock Exchange Final Corporate Governance Listing Standards SEC Approves NYSE, NASDAQ Strengthening of Corporate Governance Listings On 4 November 2003, the Securities and Exchange Commission (SEC) approved new rules proposed and adopted by the New York Stock Exchange (NYSE) and the Nasdaq Stock Market, Inc. (NASDAQ) requiring strengthening of their corporate governance listing standards. Listed companies will have to comply with the new standards by their first annual shareholders' meeting after 15 January 2004 or 31 October 2004, whichever comes earlier. The SEC's approval results in new requirements regarding board composition, structure and process, and other corporate governance matters initially proposed by the NYSE and NASDAQ late in 2002 and later amended during 2003 based on feedback from the SEC, the public, and internal committees. These new listing standards also address the definition of director independence, the composition and responsibilities of the audit committee, the requirement for an audit committee charter and the requirement for independent directors and independent committees. The requirement for independent directors and independent committees includes a requirement that: a majority of board members be independent; executive sessions of independent directors are held; and independent oversight of executive compensation and director nominations exist. These requirements were also impacted by the final rules issued by the SEC during 2003 in accordance with the Sarbanes-Oxley Act 2002, however, these requirements go beyond the SEC's rules. The SEC press release approving the new rules, the final NYSE and NASDAQ exchange listing standards related to this topic can be accessed through the following links: SEC Press Release Approving the New Rules NYSE: SR-NYSE-2002-33 – Final NYSE Corporate Governance Rules SEC Approved Order of NASDAQ Corporate Governance Rules SEC Approves Amex Enhanced Corporate Governance Listings On 1 December 2003, the Securities and Exchange Commission (SEC) approved new rules proposed and adopted by the American Stock Exchange (Amex) which enhance its corporate governance listing standards. These standards will generally be effective by the first annual shareholders' meeting after 15 January 2004 or 31 October 2004, whichever comes earlier. These new listing standards, among other things, require each issuer listed on the Amex to comply with the standards for audit committees mandated by Section 10A(m) of the Securities Exchange Act of 1934 and Rule 10A-3 there under. The rule change also includes provisions relating to board independence and independent committees, codes of conduct and other corporate governance issues. Amex has amended its original proposal to harmonize it with the rule changes recently approved by the SEC for the NYSE and NASDAQ.
The final Amex listing standards can be accessed through the following link:
Amex Final Listing Standards – "Spotlight" (1 December 2003)
_______________________________________________________ Corporate Governance:
Business under Scrutiny KPMG
International sponsored the research on what business leaders and senior
executives globally think of corporate governance, transparency and
regulations for the second year. The white paper "Corporate
Governance: Business under Scrutiny" was produced independently by
the Economist Intelligence Unit ("EIU") and is based on a survey
of international executives and in-depth interviews with leading
corporate, academic and regulatory figures. The
white paper states that corporate governance is still a front-burner issue
for senior executives. In a survey of 310 senior managers around the
world, executives reported that top management is spending more time on
governance now than it did 12 months ago, and will be devoting even more
attention to the issue in 12 months' time.
Revised Combined Code in the UK (revised in July 2003) The revised Combined Code on Corporate Governance in UK, issued by the Financial Reporting Council on 23 July 2003, is derived from Derek Higgs’ review into the role and effectiveness of non-executive directors and Sir Robert Smith’s guidance for audit committees. The revised Code contains main and supporting principles and provisions. The Listing Rules require companies to make a two-part disclosure statement. In the first part, companies have to report on how they apply the code principles – in future this will extend to cover both the 14 main and 21 supporting principles. The form and content of this part of the statement are not prescribed. In the second part of the statement, companies have to confirm the extent of their compliance with the 48 detailed Code provisions and explain the rationale behind any non-compliance. The revised Combined Code will replace the 1998 Code
currently annexed to the Listing Rules and apply in respect of accounting
periods beginning on or after 1 November 2003. The Financial
Services Authority will consult on the necessary rule changes, but not on
the Code itself.
_______________________________________________________ Non-Executive Directors' Survey 2002/3 In view of the changing Corporate Governance Framework and the publication of the Higgs and Smith reports, we have surveyed the views of non-executive directors in the U.K. on a variety of issues. These include roles and responsibilities, knowledge, skills and attributes, widening the pool of non-executive directors and improving public confidence.
_______________________________________________________ Higgs Report – Review of the Role and Effectiveness of Non-executive Directors Derek Higgs was appointed by the Secretary of State for Trade and Industry and the Chancellor of the Exchequer to lead an independent review into the role and effectiveness of non-executive directors. His report was issued on 20 January 2003. The report does not propose a prescriptive rules-based framework on the duties of non-executive directors but forms the basis for additional Combined Code recommendations together with additional guidance focusing on the independence of non-executive directors. There will be a 'fatal-flaws' consultation period ending 14 April 2003 following which a revised Combined Code will be finalized and listed companies will have to state the extent of their compliance with the revised Combined Code for accounting periods starting on or after 1 July 2003. The full report is available at: http://www.dti.gov.uk/cld/non_exec_review/ A summary of the guidance is available below.
_______________________________________________________ KPMG's White Paper on Corporate Governance Following the enactment of the Sarbanes-Oxley Act of 2002 in the US, KPMG has published a white paper entitled "A New Focus on Governance - Managing Stakeholder Expectations to Sustain Business Value". This white paper reviews the corporate governance environment in the major economies and suggests an approach boards can take to assess and manage the specific stakeholder expectations they face. As demand for good corporate governance increases, this white paper should help executives at all levels to be better informed.
Corporate Governance – The New Strategic Imperative KPMG International has sponsored new research on what business leaders and senior executives globally think of corporate governance, transparency and regulations. The white paper "Corporate Governance: The New Strategic Imperative" was produced independently by the Economist Intelligence Unit ("EIU") and is based on an online survey of global executives and in-depth interviews with corporate leaders.
Sarbanes-Oxley Assistance Services The Sarbanes-Oxley Act of 2002 requires CEOs and CFOs to make quarterly certifications on whether financial statements are true, complete, and fairly stated. Accounting firms cannot provide financial statement audit clients with services that involve attestation of their own work. Please refer to the following publication to learn how KPMG can assist you in addressing Sarbanes-Oxley issues for both audit and non-audit US clients. Please contact the HKACI at hkaci@kpmg.com.hk with any questions or comments. Sarbanes-Oxley Assistance Services (KPMG Audit Clients) Sarbanes-Oxley
Assistance Services (KPMG Non-audit Clients)
_______________________________________________________ Recognising the importance of good corporate governance to a company, the Guide for Company Directors reflects recent developments in theory and practice in this area. It also includes recent statutory and regulatory changes affecting directors' duties, to assist directors in fulfiling their roles and responsibilities in managing a company.
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