Yesterday, the ASX Corporate Governance Council released the third edition of its Corporate Governance Principles and Recommendations. The new principles will take effect for a listed entity's first full financial year commencing on or after 1 July 2014.
The release marks the first major revision of key Australian corporate governance principles since the GFC and follows the issuing of draft principles and a consultation process examined in an earlier post last August.
The Corporate Governance Principles and Recommendations are available to view at:
http://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf.
McCullough Robertson's companion piece to The Chairman's Red Book. It is written for chairmen and directors of listed and unlisted public companies, providing an overview of relevant laws and regulations applicable to their roles.
Friday, 28 March 2014
Thursday, 13 March 2014
Whistleblower protection under the Corporations Act
Whistleblower protection has received a lot of media attention recently, following the Senate Inquiry into the performance of the Australian Securities and Investments Commission (ASIC) and its alleged failure to act promptly on information provided by whistleblowers in relation to serious misconduct in Commonwealth Bank’s financial planning arm.
Consistent with ASIC’s commitment to improve communication and handling of information brought to its attention by whistleblowers, it has released a new Information Sheet (Info Sheet 52) which provides guidance on the statutory protections available to those who report misconduct or provide evidence of a breach of the Corporations Act 2001 (Cth) (Corporations Act) to ASIC.
The whistleblower provisions of the Corporations Act are designed to encourage people associated with a company to alert the company (through its officers) or ASIC, to illegal behaviour. Information provided by whistleblowers is considered a protected disclosure (provided certain criteria are satisfied), and must be kept confidential. Both the information provided and the identity of the whistleblower may not be disclosed, unless that disclosure is specifically authorised by law.
Generally speaking, for the purposes of the Corporations Act, a whistleblower is a person who is an employee, contractor or member of an organisation, who reports or ‘discloses’ misconduct or dishonest or illegal activity that has occurred within that same organisation. The report must be made to either ASIC, the company’s auditor or member of the internal audit team, a director, secretary or senior manager, or a person authorised to receive whistleblower disclosures (such as a Whistleblower Protection Officer).
It is imperative that companies have a whistleblower policy in place to ensure employees know how to report issues, who to report them to, and how they will be dealt with when the company is alerted.
The policy should also detail the rights of employees to disclose improper conduct on a confidential basis without fear of retaliation.
A whistleblower reporting tool (e.g. a hotline or online portal with analytical capabilities) is also a useful way to detect fraud within an organisation.
Info Sheet 52 is a useful reference tool, to ensure your policy adequately details the protections available to whistleblowers. It should, however, be noted that the protections under the Corporations Act only apply to whistleblowers who report breaches of the Act, as opposed to breaches of other laws, or the company’s internal policies.
To afford the protections under the Corporations Act, the whistleblower must identify their name when making a disclosure, have reasonable grounds to suspect that the information being disclosed indicates that the company, company officer or employee may have breached the Corporations Act and must make the disclosure in good faith.
Identifying the whistleblower is not typically required under other laws, nor is it under many internal policies. Therefore, if a matter that would result in a breach of the Corporations Act is reported anonymously through internal channels, the whistleblower would need to be identified before the matter was referred to ASIC to benefit from the protections in the Corporations Act against civil and criminal litigation.
Further, the provisions of the Corporations Act may be relied on by the whistleblower in their defence if they are the subject of an action for disclosing protected information. It is important to note that no contractual or other remedy can be enforced against the person on the basis of the disclosure.
Where a whistleblower’s employment is terminated because of a disclosure made under the Corporations Act, the whistleblower can apply to Court for an order to be reinstated in that position, or in another position at a comparable level.
The publication of Info Sheet 52 is an important reminder that whistleblowers play a role in detecting serious misconduct within organisations and should be afforded adequate protections. Companies must ensure that procedures are in place so that matters of concern that are raised can be dealt with on a timely basis, either internally or, in the case of a serious breach, by escalating the matter to ASIC or the Australian Federal Police.
Consistent with ASIC’s commitment to improve communication and handling of information brought to its attention by whistleblowers, it has released a new Information Sheet (Info Sheet 52) which provides guidance on the statutory protections available to those who report misconduct or provide evidence of a breach of the Corporations Act 2001 (Cth) (Corporations Act) to ASIC.
The whistleblower provisions of the Corporations Act are designed to encourage people associated with a company to alert the company (through its officers) or ASIC, to illegal behaviour. Information provided by whistleblowers is considered a protected disclosure (provided certain criteria are satisfied), and must be kept confidential. Both the information provided and the identity of the whistleblower may not be disclosed, unless that disclosure is specifically authorised by law.
Generally speaking, for the purposes of the Corporations Act, a whistleblower is a person who is an employee, contractor or member of an organisation, who reports or ‘discloses’ misconduct or dishonest or illegal activity that has occurred within that same organisation. The report must be made to either ASIC, the company’s auditor or member of the internal audit team, a director, secretary or senior manager, or a person authorised to receive whistleblower disclosures (such as a Whistleblower Protection Officer).
It is imperative that companies have a whistleblower policy in place to ensure employees know how to report issues, who to report them to, and how they will be dealt with when the company is alerted.
The policy should also detail the rights of employees to disclose improper conduct on a confidential basis without fear of retaliation.
A whistleblower reporting tool (e.g. a hotline or online portal with analytical capabilities) is also a useful way to detect fraud within an organisation.
Info Sheet 52 is a useful reference tool, to ensure your policy adequately details the protections available to whistleblowers. It should, however, be noted that the protections under the Corporations Act only apply to whistleblowers who report breaches of the Act, as opposed to breaches of other laws, or the company’s internal policies.
To afford the protections under the Corporations Act, the whistleblower must identify their name when making a disclosure, have reasonable grounds to suspect that the information being disclosed indicates that the company, company officer or employee may have breached the Corporations Act and must make the disclosure in good faith.
Identifying the whistleblower is not typically required under other laws, nor is it under many internal policies. Therefore, if a matter that would result in a breach of the Corporations Act is reported anonymously through internal channels, the whistleblower would need to be identified before the matter was referred to ASIC to benefit from the protections in the Corporations Act against civil and criminal litigation.
Further, the provisions of the Corporations Act may be relied on by the whistleblower in their defence if they are the subject of an action for disclosing protected information. It is important to note that no contractual or other remedy can be enforced against the person on the basis of the disclosure.
Where a whistleblower’s employment is terminated because of a disclosure made under the Corporations Act, the whistleblower can apply to Court for an order to be reinstated in that position, or in another position at a comparable level.
The publication of Info Sheet 52 is an important reminder that whistleblowers play a role in detecting serious misconduct within organisations and should be afforded adequate protections. Companies must ensure that procedures are in place so that matters of concern that are raised can be dealt with on a timely basis, either internally or, in the case of a serious breach, by escalating the matter to ASIC or the Australian Federal Police.
Thursday, 27 February 2014
The new Australian Privacy Principles – Is your organisation compliant?
On 12 March 2014, fundamental changes to Australian privacy laws will take effect. The changes introduce new rules about how organisations collect and store personal information. With penalties up to $1.7 million enforceable for serious breaches, organisations must act now to ensure compliance.
As part of the privacy law reform process, the Privacy Amendment (Enhancing Privacy Protection) Act 2012 (Privacy Amendment Act) was introduced to Parliament in May 2012 marking significant changes to the Privacy Act 1988 (Cth) (Privacy Act).
The changes to the Privacy Act include a new set of harmonised privacy principles that regulate the collection and handling of personal information called the Australian Privacy Principles (APPs) applying to most organisations who turn over $3 million or more annually, and to Commonwealth Government agencies. The APPs will replace the National Privacy Principles that apply to businesses and the Information Privacy Principles that apply to Government agencies.
To some extent, the APPs are based on the existing privacy principles but now impose additional obligations on organisations when dealing with personal information. In particular, the APPs require organisations to provide additional discloses in their privacy documentation and internal procedures and policies ensuring the protection and ongoing quality of personal information that they use and store.
APPs are legally binding principles and aim to be the cornerstone of the privacy protection framework in the Privacy Act, by setting out uniform standards for dealing with personal information. The APPs are structured to reflect the personal information life cycle and are grouped into five parts, including:
Under the Privacy Amendment Act, the Information Commissioner receives new powers to seek civil penalties of up to $1.7 million from organisations who commit serious or repeated breaches of privacy. The Information Commissioner may also conduct ‘own motion’ privacy investigations on organisations without first receiving a privacy complaint from a member of the public.
The Privacy Amendment Act also implements changes to credit reporting laws, including the introduction of more comprehensive reporting about an individual’s current credit commitments and repayment history information. The credit reporting changes are also supplemented by a new credit reporting code.
While the Office of the Australian Information Commissioner has released APP guidelines to assist organisations with the transition to the APPs (which must occur on or before 12 March 2014), it will be interesting to see how and when the Information Commissioner exercises its new powers in relation to privacy compliance. Under the APPs, it will therefore be important for relevant organisations to consider their existing information policies, review and update their privacy documents and develop internal procedures to ensure compliance by 12 March 2014.
As part of the privacy law reform process, the Privacy Amendment (Enhancing Privacy Protection) Act 2012 (Privacy Amendment Act) was introduced to Parliament in May 2012 marking significant changes to the Privacy Act 1988 (Cth) (Privacy Act).
The changes to the Privacy Act include a new set of harmonised privacy principles that regulate the collection and handling of personal information called the Australian Privacy Principles (APPs) applying to most organisations who turn over $3 million or more annually, and to Commonwealth Government agencies. The APPs will replace the National Privacy Principles that apply to businesses and the Information Privacy Principles that apply to Government agencies.
To some extent, the APPs are based on the existing privacy principles but now impose additional obligations on organisations when dealing with personal information. In particular, the APPs require organisations to provide additional discloses in their privacy documentation and internal procedures and policies ensuring the protection and ongoing quality of personal information that they use and store.
APPs are legally binding principles and aim to be the cornerstone of the privacy protection framework in the Privacy Act, by setting out uniform standards for dealing with personal information. The APPs are structured to reflect the personal information life cycle and are grouped into five parts, including:
- the consideration of personal information
- collection of personal information
- dealing with personal information
- integrity of personal information, and
- access to, and correction of personal information.
Under the Privacy Amendment Act, the Information Commissioner receives new powers to seek civil penalties of up to $1.7 million from organisations who commit serious or repeated breaches of privacy. The Information Commissioner may also conduct ‘own motion’ privacy investigations on organisations without first receiving a privacy complaint from a member of the public.
The Privacy Amendment Act also implements changes to credit reporting laws, including the introduction of more comprehensive reporting about an individual’s current credit commitments and repayment history information. The credit reporting changes are also supplemented by a new credit reporting code.
While the Office of the Australian Information Commissioner has released APP guidelines to assist organisations with the transition to the APPs (which must occur on or before 12 March 2014), it will be interesting to see how and when the Information Commissioner exercises its new powers in relation to privacy compliance. Under the APPs, it will therefore be important for relevant organisations to consider their existing information policies, review and update their privacy documents and develop internal procedures to ensure compliance by 12 March 2014.
Friday, 14 February 2014
ASIC takes ‘no further action’ on David Jones’ alleged insider trading
Whilst some commentators have intimated the buying of shares by two company directors just three days before the release of price sensitive sales results was on the limits of insider trading laws, ASIC has decided to issue David Jones with a ‘no further action’ letter. Despite ASIC’s decision to not take further action, the share trading has still resulted in the resignation of the relevant directors.
On 10 January 2014, less than two weeks after ASIC announced its conclusion of the two month investigation, accused directors, Steve Vamos and Leigh Clapham, and David Jones Chairman, Peter Mason, have announced their decision to resign from David Jones as part of a ‘board renewal process’. This news comes after significant pressure from shareholders to remove the directors, despite the fact ASIC’s investigation yielded no evidence to prove that the trades were made in violation of the insider trading laws.
The investigation was sparked after criticism emerged following the alleged approval of share trading by two non-executive directors, just three days prior to the release of unexpected positive sales results, and one day following David Jones receiving a scrip merger proposal from industry rival Myer. The directors, who bought a total of 32,500 shares were said to have made the trades to illustrate their long-term commitment to the company. This was said to be because CEO, Paul Zahra, had announced his intention to resign earlier that month under suggestion there were disagreements between various board members.
Peter Mason, who allegedly approved the trading, claimed the directors were not privy to any price sensitive information. Yet his defence became unhinged after both announcements caused share prices to spike significantly, despite the merger announcement also stating the proposal was rejected. Mason allegedly still claimed the directors did not previously obtain the quarterly sales data and that the merger was not materially price sensitive. If it was found the directors did not have the quarterly sales information and the merger proposal did not satisfy the definition of materially price sensitive information, the directors would not have violated the insider trading laws (amongst other possible defences).
For ASIC to successfully prosecute an instance of insider trading, investigators must be able to satisfy four key tests, proving: the directors actually possessed the information at the time of trades; the information was inside information that was not generally available; the information was price sensitive; and the suspected directors knew, or ought to have known, the information was material and not publicly available.
While ASIC has not publicly released any information as to why the investigation was dismissed, it is potentially relevant that investigators may not have formed the view that the directors knew the information concerning the quarterly sales and that the merger offer was price sensitive. While the announcement of the merger did result in an increased share price, the definitions given in the Corporations Act states that, ‘for information to be material, a reasonable person would be taken to expect that the information would, or would be likely to, influence persons decisions in deciding whether or not to acquire shares’. As this was a ‘merger of equals’ where David Jones would not have received any premium on their share price, the value of the company and shares arguably would not have increased, making it difficult to prove the information of the merger was, by definition, material.
Regardless of the findings of the ASIC investigation, the resignations of the directors highlights the ever increasing need for appropriate corporate governance and security trading policies. Particular care should be taken whenever a company is ‘in play’ or pending release of formal results, if management information is available.
On 10 January 2014, less than two weeks after ASIC announced its conclusion of the two month investigation, accused directors, Steve Vamos and Leigh Clapham, and David Jones Chairman, Peter Mason, have announced their decision to resign from David Jones as part of a ‘board renewal process’. This news comes after significant pressure from shareholders to remove the directors, despite the fact ASIC’s investigation yielded no evidence to prove that the trades were made in violation of the insider trading laws.
The investigation was sparked after criticism emerged following the alleged approval of share trading by two non-executive directors, just three days prior to the release of unexpected positive sales results, and one day following David Jones receiving a scrip merger proposal from industry rival Myer. The directors, who bought a total of 32,500 shares were said to have made the trades to illustrate their long-term commitment to the company. This was said to be because CEO, Paul Zahra, had announced his intention to resign earlier that month under suggestion there were disagreements between various board members.
Peter Mason, who allegedly approved the trading, claimed the directors were not privy to any price sensitive information. Yet his defence became unhinged after both announcements caused share prices to spike significantly, despite the merger announcement also stating the proposal was rejected. Mason allegedly still claimed the directors did not previously obtain the quarterly sales data and that the merger was not materially price sensitive. If it was found the directors did not have the quarterly sales information and the merger proposal did not satisfy the definition of materially price sensitive information, the directors would not have violated the insider trading laws (amongst other possible defences).
For ASIC to successfully prosecute an instance of insider trading, investigators must be able to satisfy four key tests, proving: the directors actually possessed the information at the time of trades; the information was inside information that was not generally available; the information was price sensitive; and the suspected directors knew, or ought to have known, the information was material and not publicly available.
While ASIC has not publicly released any information as to why the investigation was dismissed, it is potentially relevant that investigators may not have formed the view that the directors knew the information concerning the quarterly sales and that the merger offer was price sensitive. While the announcement of the merger did result in an increased share price, the definitions given in the Corporations Act states that, ‘for information to be material, a reasonable person would be taken to expect that the information would, or would be likely to, influence persons decisions in deciding whether or not to acquire shares’. As this was a ‘merger of equals’ where David Jones would not have received any premium on their share price, the value of the company and shares arguably would not have increased, making it difficult to prove the information of the merger was, by definition, material.
Regardless of the findings of the ASIC investigation, the resignations of the directors highlights the ever increasing need for appropriate corporate governance and security trading policies. Particular care should be taken whenever a company is ‘in play’ or pending release of formal results, if management information is available.
Friday, 7 February 2014
ASX to introduce online processing for certain corporate actions
In an effort to streamline the announcement process for certain corporate actions, for listed entities, the ASX is proposing the introduction of an online straight-through processing (STP) facility, replacing the current practice of requiring corporate actions to be completed on ASX forms and uploaded as PDF documents. The initiative will require a change in process for listed entities for the announcement of certain events such as the announcement of a dividend/distribution or a reorganisation of capital.
Once a corporate action is submitted, the system will automatically generate a PDF and release the announcement to the market. With more than 110,000 corporate actions announced each year, it is hoped the STP facility will improve the efficiency and timely release of the relevant company data.
The proposed implementation date for the STP is 14 April 2014 (with a six-month grace period in which ASX will encourage, but not enforce, use of the online forms). ASX will also offer listed entities a facility to test the new system in January and February 2014.
For further details, please refer to the ASX website.
Once a corporate action is submitted, the system will automatically generate a PDF and release the announcement to the market. With more than 110,000 corporate actions announced each year, it is hoped the STP facility will improve the efficiency and timely release of the relevant company data.
The proposed implementation date for the STP is 14 April 2014 (with a six-month grace period in which ASX will encourage, but not enforce, use of the online forms). ASX will also offer listed entities a facility to test the new system in January and February 2014.
For further details, please refer to the ASX website.
Thursday, 16 January 2014
Foreign investment decisions lack consistency
Two controversial decisions were made regarding foreign investment in the lead up to the holidays – one was highly publicised by Treasurer Joe Hockey, including through a televised press conference. The other was announced quietly via an emailed media release to a selected audience.
You may have missed the announcement on 11 December that China’s state-owned Yanzhou Coal Mining Company doesn’t need to cut its stake in local unit Yancoal Australia Ltd to below 70% and instead can move to 100% ownership.
By contrast the decision that “Australia’s national interest” will be protected by rejecting Archer Daniels Midland Company’s (ADM) proposed acquisition of GrainCorp Limited was highly publicised.
It could be assumed that public perception rather than issues of competition was the significant factor in the Treasurer’s decision. The Graincorp acquisition had already obtained ACCC approval (indicating competition concerns were not determining factors), while the Yanzhou decision basically overturns restrictions on ownership and conditions set by the Foreign Investment Review Board (FIRB) four years ago.
The Government has continued to express its encouragement of foreign investment, but the GrainCorp decision is hard to understand in that context. Interestingly, the issue of food security was not mentioned as a factor, while it was one of the main focuses of the recent Senate enquiry into foreign investment in the agribusiness sector.
In explaining his decision, the Treasurer referred to concerns expressed by grain growers in eastern Australia that the proposed acquisition by ADM could reduce competition, while acknowledging that a “more competitive network” is currently emerging. The Government’s significant consideration was the “high level of concern from stakeholders and the broader community.” It is unclear who these other stakeholders are but Hockey went on to say: “I therefore judged that allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally. This would not be in our national interest.”
The Yanzhou decision raised a difficult problem for the Government. In allowing this acquisition, there is a risk that the Government is seen as weak by not enforcing its own conditions. The perception that foreign investors are dictating terms to the government could also undermine public support for the foreign investment regime and ongoing foreign investment more generally. However, as the Treasurer points out, since the original conditions were imposed on Yanzhou, significant challenges have emerged for the Australian coal industry – changing the nature of play completely.
Changing circumstances require revision and flexible decision making. In the case of the Yancoal takeover, it is now not so clear that allowing 100% holding is contrary to the national interest.
It will be interesting to observe the Government’s position evolve in 2014.
Media release: Foreign investment application: Archer Daniels Midland Company’s proposed acquisition of GrainCorp Limited
Media release: Foreign investment decision
You may have missed the announcement on 11 December that China’s state-owned Yanzhou Coal Mining Company doesn’t need to cut its stake in local unit Yancoal Australia Ltd to below 70% and instead can move to 100% ownership.
By contrast the decision that “Australia’s national interest” will be protected by rejecting Archer Daniels Midland Company’s (ADM) proposed acquisition of GrainCorp Limited was highly publicised.
It could be assumed that public perception rather than issues of competition was the significant factor in the Treasurer’s decision. The Graincorp acquisition had already obtained ACCC approval (indicating competition concerns were not determining factors), while the Yanzhou decision basically overturns restrictions on ownership and conditions set by the Foreign Investment Review Board (FIRB) four years ago.
The Government has continued to express its encouragement of foreign investment, but the GrainCorp decision is hard to understand in that context. Interestingly, the issue of food security was not mentioned as a factor, while it was one of the main focuses of the recent Senate enquiry into foreign investment in the agribusiness sector.
In explaining his decision, the Treasurer referred to concerns expressed by grain growers in eastern Australia that the proposed acquisition by ADM could reduce competition, while acknowledging that a “more competitive network” is currently emerging. The Government’s significant consideration was the “high level of concern from stakeholders and the broader community.” It is unclear who these other stakeholders are but Hockey went on to say: “I therefore judged that allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally. This would not be in our national interest.”
The Yanzhou decision raised a difficult problem for the Government. In allowing this acquisition, there is a risk that the Government is seen as weak by not enforcing its own conditions. The perception that foreign investors are dictating terms to the government could also undermine public support for the foreign investment regime and ongoing foreign investment more generally. However, as the Treasurer points out, since the original conditions were imposed on Yanzhou, significant challenges have emerged for the Australian coal industry – changing the nature of play completely.
Changing circumstances require revision and flexible decision making. In the case of the Yancoal takeover, it is now not so clear that allowing 100% holding is contrary to the national interest.
It will be interesting to observe the Government’s position evolve in 2014.
Media release: Foreign investment application: Archer Daniels Midland Company’s proposed acquisition of GrainCorp Limited
Media release: Foreign investment decision
Duncan Bedford
Duncan is a Partner at McCullough Robertson and an expert in business and transaction structuring and taxation.
Duncan is a Partner at McCullough Robertson and an expert in business and transaction structuring and taxation.
Friday, 13 December 2013
Strength in numbers – consolidation in the non profit sector
The non profit sector has seen substantial change in recent years, particularly with increasing demands in respect to the quantity and nature of the services to be delivered. Add to this a constantly evolving regulatory and taxation environment, challenges of funding, capacity constraints and an increasing cost base and it is not hard to see why many non profit service providers are considering opportunities to consolidate or collaborate with other providers in their sector.
The benefits of consolidation or collaboration may seem clear, including potential savings in administrative costs, greater geographical reach or a broader suite of deliverables, as well as improved access to funding. Increased size may also generate greater influence within the relevant sector, especially in respect to policy determinations. Ultimately, the key driver in deliberations should be about performance improvement.
Irrespective of the anticipated benefits, typically this is by no means an easy decision to make or implement and senior management needs to be alert to the range of issues which may arise by adopting this approach. Substantial preparation needs to be undertaken to ensure the outcomes sought are clearly identified, as are the possible alternatives to achieving these outcomes and their relative costs and benefits.
If consolidation or cooperation is considered to be the preferred option, then further analysis needs to be undertaken to identify organisations in the sector with which this might be feasible to produce the desired outcomes.
Key considerations in this process include:
However, whilst consolidation or closer cooperation may bring a myriad of issues, typically none of these are insurmountable provided that appropriate planning and preparation are undertaken at an early stage. Usually, this process is significantly aided through the engagement of appropriately qualified and experienced advisers to work with senior management to establish the most suitable pathway and mechanisms to achieve the desired outcomes.
The benefits of consolidation or collaboration may seem clear, including potential savings in administrative costs, greater geographical reach or a broader suite of deliverables, as well as improved access to funding. Increased size may also generate greater influence within the relevant sector, especially in respect to policy determinations. Ultimately, the key driver in deliberations should be about performance improvement.
Irrespective of the anticipated benefits, typically this is by no means an easy decision to make or implement and senior management needs to be alert to the range of issues which may arise by adopting this approach. Substantial preparation needs to be undertaken to ensure the outcomes sought are clearly identified, as are the possible alternatives to achieving these outcomes and their relative costs and benefits.
If consolidation or cooperation is considered to be the preferred option, then further analysis needs to be undertaken to identify organisations in the sector with which this might be feasible to produce the desired outcomes.
Key considerations in this process include:
- Governance and risk management: It is important to understand the legal, tax and governance structures of the other organisation and to consider what legal or structural obstacles will need to be overcome as part of the process. There may also be implications for the decision about what might be the best legal arrangement to implement – be that an MOU, a sharing of resources, a joint venture or a full merger.
- Branding and identity: These arrangements can often impact the brands and identities of the respective organisations. Consideration needs to be given to the use or otherwise of the respective brands, how risk to the brand will be handled and, if new brands are to be created, how costs and ownership rights are to be allocated.
- Engagement and communication: The repercussions of consolidation or closer cooperation also ought to be understood from the perspective of other key stakeholders such as employees, funders, clients, supporters and regulators. The arrangements will require clear lines of communication and effective messaging to ensure that these internal and external relationships are effectively maintained.
- Resource management: Where there is to be a sharing or pooling of staff it is critically important that staff have clarity about the course of action and what is expected of them. Similarly, the potential ramifications to the culture of the respective organisations have to be properly understood and managed. Change can generate uncertainty for employees and gaining and maintaining their trust, acceptance and enthusiasm for the process can be the difference between success and failure.
However, whilst consolidation or closer cooperation may bring a myriad of issues, typically none of these are insurmountable provided that appropriate planning and preparation are undertaken at an early stage. Usually, this process is significantly aided through the engagement of appropriately qualified and experienced advisers to work with senior management to establish the most suitable pathway and mechanisms to achieve the desired outcomes.
As Special Counsel at McCullough Robertson, Swain advises clients on corporate governance, international and non profit matters.
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