Corporate Watchdog: Regulation Is Working: Australian Securities and Investments Commission Chairman David Knott Shares Some Observations on Corporate Governance and Disclosure Issues, as Well as the Financial Services Reform Bill. (Regulation)

By Knott, David | Journal of Banking and Financial Services, December 2001 | Go to article overview

Corporate Watchdog: Regulation Is Working: Australian Securities and Investments Commission Chairman David Knott Shares Some Observations on Corporate Governance and Disclosure Issues, as Well as the Financial Services Reform Bill. (Regulation)


Knott, David, Journal of Banking and Financial Services


With so much written and spoken about corporate governance over the past ten years, there was a real danger that the expression had become hackneyed and the concept itself weighed down by process.

It is not so much that we had forgotten the 1980s and the discredit into which our corporate markets then fell. It was more, I think, a growing inclination to question the relevance of the 1980s to our contemporary circumstances.

Indeed, I have sensed in more recent years a degree of frustration and even irritation at continued reference to corporate governance -- the sentiment that it's time to move on to more important things.

There is a risk of converting principles into processes. When that happens, people in commerce are tempted to consign the principle to the legal pigeonhole, no longer viewing it as having front-line economic force. I think we have seen some of that with our approach to corporate governance, just as we have in some areas of disclosure.

The relevancy question also has some force. We are not reliving the 1980s and in my view we will not do so. We do not have the endemic and systemic governance issues which confronted us a decade ago. We do not have the grossly inflated balance sheet asset values which then prevailed; we do not have the "entrepreneurial" presence and structural manipulation which profiled so highly in that decade. We also do not have a climate of high inflation and excessive commercial property values which contributed to the magnitude of the 1980s collapses.

We have done a great deal since that time to address all of these issues. Our institutions and standards of corporate conduct, taken overall, lose nothing in comparison to our peer group of developed countries and are regarded as a benchmark by many of our neighbours.

However, recent events serve to remind us that corporate governance is not just a legal ritual for managing and containing directors' liabilities, but a living economic dynamic which underpins shareholder interests and wealth creation.

Despite our generally good score card, we do have some serious cases which highlight the disastrous business consequences which can flow from poor governance. The collapse of HIH, with its debilitative cascading effect across so many layers of our community; the failures of One.Tel and Harris Scarfe; and, of course, a series of failed new economy floats over the past 12 months: all of these now have to be tested against acceptable standards of corporate governance.

The only good thing I can say is that they each appear to have their individual characteristics and causes -- that they do not reflect a systemic governance decline, despite the unfortunate coincidence of their timing.

These words of comfort are not intended to convey complacency about our markets environment. The best governed of companies can still succumb to competitive and economic forces. Good governance is of itself no assurance of corporate success, any more than corporate failure necessarily implies poor standards of governance.

Throughout the 1990s there has not been a single year in which the number of corporate insolvencies, receiverships and administrations was lower than 6000 -- and only a fraction of these can be attributed to failure of governance in the sense that we are talking about it today.

Businesses fail. They always have and they always will. The limited liability company remains the mainstay of our private enterprise system, a system based on the premise that failure alone is not culpable and that risk is to be acknowledged and shared.

Disclosure and dotcoms

The need to be forward looking -- to assess the future economic environment and plan for its opportunities and risks -- is just as relevant for regulators as it is for business.

When the dotcom sector took off in 1999 it didn't take us long to recognise the potential dangers.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Corporate Watchdog: Regulation Is Working: Australian Securities and Investments Commission Chairman David Knott Shares Some Observations on Corporate Governance and Disclosure Issues, as Well as the Financial Services Reform Bill. (Regulation)
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.