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Perspectives on Cyber Risk
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CPA reportedly under investigation

CPA reportedly under investigation

June 19, 2017 11:40 AM | Print this page

The Australian reports that ASIC have launched an investigation into governance issues at the CPA.

Reportedly, areas ASIC officers are seeking more information about include:

  • whether members have been bullied or harassed
  • whether there have been breaches of the Corporations Act relating to its disclosure of directors' remuneration: CPA members only learned of Mr Malley's $1.8 million-a-year pay packet, together with extra remuneration of $70,000 each earned by some directors for sitting on the board of a financial advice subsidiary after making a formal demand for the information under the Corporations Act. However, members have complained to ASIC that CPA's response is deficient because it does not appear to include remuneration from the organisation's offshore arms in Malaysia and Shanghai.
  • CPA members have also raised concern about the lack of information in a member register provided after a formal request: members are unhappy that the register does not reveal whether members are voting or non-voting, thus making it difficult for them to gather the 5% of voting members needed to call an extraordinary general meeting.

A report in the AFR states that ASIC is investigating accusations of bullying at the CPA: 'The Australian Securities and Investments Commission has sought information from dissident CPA Australia members about possible breaches of the law by the accountants' body. As part of a preliminary investigation into complaints of misconduct, ASIC staff are seeking details about possible bullying or harassment at the Melbourne-based organisation, in addition to claims it has breached corporate disclosure rules, according to sources'. The report notes that ASIC has not commented.

CPA confirms CEO to remain; 3 further board resignations; establishment of independent panel to conduct review
Accountants Daily reports that CPA Australia have confirmed:

  • CEO Alex Malley will be retaining his position as CEO
  • three directors have resigned from the board (Deborah Ong, Jennifer Lang and Martin Hourigan)
  • the board has initiated a process of establishing a three person independent panel to conduct a review of all complaints made 'in relation to CPA Australia and to make recommendations for practices moving forward'. The report notes that the panel will be chaired by former Australian defense force chief Sir Angus Houston. Former auditor-general for Australia, Ian McPhee will also be a panelist. The third member of the panel is yet to be appointed.

In a similar report, the AFR adds that the latest board resignations mean that there are only five directors left on the CPA board which is below the minimum number (six) required to 'make any decisions' and will mean an election of new board members will need to be held.

The AFR suggests that CPA's complex governance structure further distances members from holding board to account
An AFR report suggests that the 'unnecessarily complex governance structure' at the CPA has led to a situation in which members are unable to exercise their right to hold the board to account – to 'overthrow' the board - because they do not hold the number of votes to be able to do so. Yet in public companies, the article argues, 'the ability to unite votes and exercise control by and for the ultimate beneficiaries (ie the owners) is simply sacrosanct. Even though boards inevitably self-perpetuate via filling casual vacancies and promoting selected candidates, there is still a direct mechanism to address this when times really call for it'.

The CPA structure, where members do not directly elect the board, is described as 'more like the concept of "democracy" practiced in many post-communist and communist-controlled countries' because of the lack of direct control able to be exercised by members. The reasons given for having such a structure are suggested in the article to be 'member indifference'. However, the article notes, 'the corporate world demonstrates that the interest in voting increases sharply when there are questions or concerns about how an organisation is run' and the CPA board now faces the challenge of addressing member concerns in a structure where members' ability to 'effect change is highly restricted'.

Senator Nick Xenophon introduces Bill to 'modernise' communication between members
Accountants Daily report that the 'ongoing saga' at the CPA has prompted Senator Xenophon to introduce a Bill in an 'effort to make it simpler for members of professional bodies to communicate with each other'.

The explanatory memorandum to the Bill provides that it 'responds to an outdated provision in the Corporations Act 2001' ss169(1)(a). The bill 'inserts an email address as information that must be contained in the register of members. The register is currently only required to contain the member’s name and address. The inclusion of a member’s email address takes into account that most communication between companies and members is via email. It brings this particular provision of the Corporations Act 2001 into line with modern communication methods. This amendment does not affect the operation of the existing protections that apply to the inspection and use of information on registers'.

[Source: The AFR 13/06/2017; The Australian 15/06/2017;  The AFR 15/06/2017; The AFR 15/06/2017; The AFR 16/06/2017; Accountants Daily 16/06/2017; Explanatory Memorandum: Corporations Amendment (modernisation of members register) Bill 2017; Corporations Amendment (modernisation of Members) Registration Bill 2017]