An introduction to CLERP 9

An Introduction to CLERP 9, as its title suggests, is aimed at providing legal practitioners and students with an overview of Australia’s corporate governance reforms, but more than that, it also analyses the events that led to the reforms and provides practical examples of how the amendments will change corporate practices.

The book begins by defining what is generally meant by good corporate governance. It then outlines the relevant recent events that led to introduction and commencement of the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (CLERP 9) on 1 July this year. The corporate failures of Enron and HIH – and subsequent Royal Commission – in 2001, and the failure of private auditing firms to warn of their client’s problems are well summarised.

As well as the Sarbanes Oxley Act of 2002, the US equivalent to CLERP 9, the establishment of the ASX Corporate Governance Council and the release of its Principles of Good Corporate Governance and Best Practice Recommendations are examined in detail.

The book covers all the chief changes, including the new rules for audit independence, financial disclosure, whistleblowing, remuneration for directors and executives and continuous disclosure.

Throughout, the book provides a comprehensive and easy to understand commentary on how the CLERP 9 Act alters the Corporations Act 2001 and the ASIC Act 2001, as well as highlighting important changes that affect present practice. For example, the author notes that under the auditor independence rules, when an audit firm contravenes an independence requirement, liability is placed on all members and directors of the audit firm, not just the lead auditor responsible for a particular audit. This, he says, is aimed at introducing a “culture of compliance”.

As well as providing a quick reference guide to how the CLERP 9 Act amends the Corporations and ASIC Acts at the beginning of the book, the table at the end of the book comparing the corporate governance reforms in the US, UK and Australia will be very useful for practitioners trying to make sense of how multinational clients might be liable across different jurisdictions.

"Minerals", "petroleum" and "operations" in the Mineral and Petroleum Resources Development Act 28 of 2002 : a geologist as devil's advocate for a change? "

This article examines the meaning of "minerals", petroleum, "operations" and activities in relation to such substances to determine the ambit of the application of the Minerals and Petroleum Resources Development Act 28 of 2002, the type of rights necessary for such operations and activities and the ambit of these rights. The examination of the meaning of these concepts takes place with reference to prior definitions in statutes and also from a natural science and geology perspective. An attempt is made to show that the legal definitions do no always correspond with the geological meanings and the meanings on the ground. It is questioned whether in recent legislation why more reliance is not placed on input from geologists in the field.

Auditor client specific knowledge and internal control weakness: some evidence on the role of auditor tenure and geographic distance

In this paper we draw on the audit quality and cluster theory literature to examine whether auditor tenure and auditor's geographic proximity to the client (proxies for auditor client specific knowledge) are associated with the incidence of Section 404 internal control weakness (ICW) under the Sarbanes-Oxley Act (2002). Using a large sample of 24,217 firm-year observations for the period 2004-2012, we show that firms with long auditor tenure and in closer geographic proximity to auditors have lower incidence of ICW. Furthermore, we find that the positive association between auditor-client geographic distance and ICW is weaker for firms with longer auditor tenure. Our results suggest that auditor rotation policies could deprive the auditor of client specific knowledge, especially for auditors located further away from their clients. Our results are robust to propensity score matching method and endogenous effects.

City-level auditor industry specialization, economies of scale, and audit pricing

We examine the effects of city-level auditor industry specialization and scale economies on audit pricing in the United States. Using a sample of Big N clients for the 2000-2007 period, and a scale measure based on percentile rankings of the number of audit clients at the city-industry level, we document significant specialization premiums and scale discounts in both the pre- and post-Sarbanes-Oxley Act (SOX) periods. However, the effects of industry specialization and scale economies on audit pricing are highly interactive. The negative effect of city-industry scale on audit fees obtains only for clients of specialist auditors. By contrast, clients of non-specialist auditors obtain scale discounts only when they enjoy strong bargaining power, suggesting that auditors are "forced" to pass on scale economies to clients with greater bargaining power.

State sovereignty and migration control: the ultimate act of discrimination?

Nations zealously guard their borders and carefully vet migrants. This consigns many people to live in states not of their choice and often diminishes their opportunities and their level of flourishing. In some cases it is the difference between life and death. The practice of imposing migration controls is discriminatory. In fact it is the ultimate form of discrimination: 'super-discrimination.' There is no logical or moral reason why non-nationals of a state should not have the same opportunities and freedoms as nationals in that state. One of the most common forms of discrimination is race - treating a person differently simply because of their place of birth. This is one of the clearest and most repugnant forms of discrimination because the location where a person is born is of course merely a happy or unhappy circumstance over which the individual has no control. An accident of birth should not qualify a person for extra privileges or opportunities. The world is a fairer place if to the maximum extent possible luck is taken out of the process for allocating benefits and burdens - which ought to be distributed on the basis of merit and dessert. This paper examines whether there are sound reasons for restricting the flow of world-wide people movement. The main arguments in favour of this policy, relating to security and national building, are ultimately flawed. This exposes a tragic irony given the great efforts that many Western states - which typically have the strongest migration controls - make to stamp out discrimination at the domestic level, and the vast array of international law anti-discrimination instruments, loudly trumpeted by Western nations. This is hypocrisy nearing its finest. The substratum of sovereign states upon which available international law is built is inherently discriminatory and in fact is probably responsible for more harm as a result of the innately discriminatory immigration policies than results from the cumulative operation of all domestic discrimination. The world should move towards loosening migration controls. This would have an enormous number of humanistic benefits, not the least of which is largely eradicating world hunger and poverty.

Auditor independence: regulation, oversight and inspection

Much of what auditors do is unobservable. Indeed, what goes on in an audit has been described as ‘secret audit business’. Audits in this context are of financial reports and those financial reports are the representations of the management of those companies, not the auditors. The audits of financial reports are of value in that they provide a competent and independent (of auditee management) attestation of the validity of those management representations. This attestation lowers the ‘information risk’ for the users of these financial reports. There has been a marked increase in activity to regulate matters relating to independence. The proposals outlined in CLERP 9 are one example of this. The requirements in the United States under the Sarbanes-Oxley Act are a further example.

Audit firms operate in a highly regulated yet highly competitive market. Evidence exists to suggest that audit firms are active competitors in respect of audit pricing and competency, including specialist industry expertise. Until recently, there has been little or no observable evidence that audit firms compete in respect of independence. The issues as they relate to audit independence are complex. One issue is that threats to independence are frequently subtle and difficult to observe and measure. Hence, controlling the decisions that relate to them cannot rely solely on regulation which itself inevitably relies on crude definitions and imprecise measures. Additionally, further regulation may not achieve the desired end without other processes being but in place in tandem.

This paper argues that:

1. auditors of certain classes of companies (in particular, those that are publicly traded) should be provided with incentives or requirements to have observable processes on independence
2. the means of observability should be in the form of an inspection and review process focussing on issues critical to the audit, such as independence
3. expert persons not having a current or past financial interest in the firm or in the commercial outcomes of the review should be used in the inspection and review process
4. the review process should have wide-ranging powers of inspection to examine the policies, processes, structures and ‘culture’ of audit firms
5. the report of the inspection and review should be made public, unedited and in full, and in a timely fashion. The primary objectives of this proposal are to (1) make more transparent to the market for information the characteristics of the audit firms and their process to ensure audit independence, and (2) provide a rigorous oversight of independence decision-making by persons who have no commercial interest in the outcome of the decision.

Limited Liability Act of 1855

Examines the Limited Liability Act 1855 and highlights its significance in the formation of the modern company's legal framework. Looks at the background to the Act, which was repealed after a few months and incorporated in the Joint Stock Companies Act 1856 in an amended form. Considers the Act's legacy in extending the general principle of limited liability for corporate debts to shareholders of registered companies, including its implications in allowing a greater diversification of shareholders.

Making visible the invisible act of doping

This paper describes the construction of the visual space of surveillance by the global anti-doping apparatus, it is a space inhabited daily by professional cyclists. Two principal mechanisms of this apparatus will be discussed—the Whereabouts System and the Biological Passport; in order to illustrate how this space is constructed and how it visualises the invisible act of doping. These mechanisms act to supervise and govern the professional cyclist and work to classify them as either clean or dirty in terms of the use of prohibited doping substances or methods. Contrary to the analysis of liberal anti-doping scholars such as Hanstad, Loland and Møller this paper argues that Foucault’s Panopticon paradigm is a useful tool for the analysis of this apparatus. The Whereabouts System and Biological Passport are the instruments by which the anti-doping apparatus intensifies the construction of the space of surveillance in professional sport. This space of surveillance not only locates and makes visible the physical location of each individual cyclist, but it also makes visible their internal bodily functions, in this case the composition and the fluctuations of the composition of their blood. In making the cyclist visible the instruments do not allow the cause of doping, or the event of doping to be known or observed. Rather what they do is cast the body in terms of abnormalities of time, place or blood. In the case of an abnormality of the cyclist’s blood, the cause itself cannot be identified with any certainty, all that is made visible is a suggestion, or a probability, that doping may have occurred. The ultimate effects are twofold—an internalisation and continual monitoring of one’s self as well as by the authorities, and a radical change in the nature and the definition of the offence of doping. No longer is it positive evidence of doping that is punishable, but what becomes punishable is an abnormality, in the cyclist’s location, or their body, which suggests a probability that the invisible act of doping may have occurred. In the course of this process accepted manners of proving an offence by the use of scientific evidence and expert commentary are transformed. The Whereabouts System and the Biological Passport open up a new manner in which the invisible can be visualised. Through the discourse and the attendant commentary of the expert a new alliance between doping and the law is constructed. The result is a redistribution of the way in which the law visualises and treats the symptoms (the signifier) and the signified act of doping. The Whereabouts System and Biological Passport are the instruments by which the anti-doping apparatus intensifies the construction of the space of surveillance in professional sport. This space of surveillance not only locates and makes visible the physical location of each individual cyclist, but it also makes visible their internal bodily functions, in this case the composition and the fluctuations of the composition of their blood. In making the cyclist visible the instruments do not allow the cause of doping, or the event of doping to be known or observed. Rather what they do is cast the body in terms of abnormalities of time, place or blood. In the case of an abnormality of the cyclists’s blood, the cause itself cannot be identified with any certainty, all that is made visible is a suggestion, or a probability, that doping may have occurred. The ultimate effects are twofold—an internalisation and continual monitoring of one’s self as well as by the authorities, and a radical change in the nature and the definition of the offence of doping. No longer is it positive evidence of doping that is punishable, but what becomes punishable is an abnormality, in the cyclist’s location, or their body, which suggests a probability that the invisible act of doping may have occurred. In the course of this process accepted manners of proving an offence by the use of scientific evidence and expert commentary are transformed. The Whereabouts System and the Biological Passport open up a new manner in which the invisible can be visualised. Through the discourse and the attendant commentary of the expert a new alliance between doping and the law is constructed. The result is a redistribution of the way in which the law visualises and treats the symptoms (the signifier) and the signified act of doping.

Contact zones, third spaces, and the act of interpretation

The conceptual understanding of museums as ‘contact zones’ has been widely appropriated in the museum literature and beyond. But the discussion lacks empirical insights into actual experiences: What does ‘contact’ mean for the person experiencing it? How is it lived, negotiated and contested? Drawing on a long-term narrative study of global visitors to the Museum of New Zealand Te Papa Tongarewa (Te Papa), this paper offers an empirical interrogation and theoretical refinement of the ‘contact zone’. It moves beyond the more usual focus on museological production by shedding light on the meanings made by museum visitors. This paper augments current normative and theoretical approaches with an ethnographic study of processes of intercultural mediation during cross-cultural encounters, translation and dialogue. This is done through a hermeneutic analysis of visitors’ acts of interpretation that facilitates an understanding of ‘cultural action’ in ‘contact zones’ as an interpretive ontological endeavour of the shifting Self within a pluralist cosmopolitan space.