There are moves afoot in global regulatory that should cause Australian parliamentarians to reflect more deeply on the structure we have in place to regulate financial reporting, corporate disclosure and audit.
Attempts to bring about the creation of a single sustainability reporting regime internationally through the intercession of the International Financial Reporting Standards Foundation, the body that sits above the International Accounting Standards Board, must, firstly, be taken seriously and result in the creation of a standard setting board for sustainability reporting that has a global reach.
It is important that sustainability reporting and other kinds of non-financial reporting become the province of a global standard setting body rather than individual well-meaning fiefdoms set up over time to try to grapple with how best to tell stories of entities in language that does not involve financial reporting jargon.
Financial reporting has always had limitations and those will continue over time even if a new standard setter is created because financial inflows and outflows are only one way of measuring an entity.
Bodies such as the International Integrated Reporting Council should shut up shop and hand over their work program to a new standard setter so that a focused group of people can deal with these issues in one authority.
What would this mean to a country like Australia?
We need a fundamental regulatory redesign in some parts of our system to get rid of multiple bodies doing different things.
The Federal Government should thank the Australian Securities Exchange for its work on the Corporate Governance Council in the same way as it did the professional accounting bodies for their stewardship of accounting and audit standard setting for many decades.
This should be followed by the establishment under law of a standard setting body that meets in the sunshine – and not behind closed doors with members of stakeholder groups – to develop proper governance disclosure standards, sustainability reporting guidance and other relevant non-financial reporting standards.
The new body should take an active role in setting standards for both for-profit and not-for-profit entities. It is now time to have a centralised standard setter that deals with reporting requirements for clubs, associations and entities that are registered under the Corporations Act 2001.
It is critical that the Federal Government ensure that all standards and requirements are subject to a similar due processes as accounting and auditing standards. All the bodies that set law or de facto law, which the current ASX Corporate Governance principles and recommendations, ought to be the subject of the same degree of rigorous standard setting discipline.
While the ASX has done a commendable job over the better part of two decades the time has come for the corporate governance council to shut down and have a government body take over the work.
The accounting profession had to do that in the public interest when the government decided a new oversight structure needed to be put in place when designing the first tranche of the Corporations Law Economic Reform Program or CLERP as it was known back in 1997 when the series of law reforms was launched by the Howard government.
Creating a single standard setter for narrative, governance and sustainability disclosures also enables stakeholders to focus their efforts on one authority as a developer of guidance.
The underlying question here is whether the Federal Government has the strength of character to take a bold step to move regulation into the future.