CFOs Split When Asked if Corporate Governance Stifles Entrepreneurial Activity

Views are polarised among CFOs in Australia and Asia when asked if corporate governance inhibits their entrepreneurial activity, according to a new survey by the Institute of Chartered Accountants in Australia (ICAA). The Institute’s CFO Survey 2011: Corporate Governance Performance and Insights – canvassed the opinions of 250 CFOs of listed companies in Australia, Singapore, Hong Kong and Malaysia. 

 

Download survey summary here.

 

Of all respondents 38% disagreed that greater emphasis on corporate governance reduced their entrepreneurial activity and a further 27% of respondents were reluctant to agree or disagree.

 

“Only 35% of respondents actually believed increased emphasis on corporate governance reduced their entrepreneurial activity. This suggests that some of the comments from directors and other business people about increased governance requirements hindering their risk-taking may be overstated," says ICAA Director Asia, Bill Palmer.  “It may also indicate that as a result of the global financial crisis there is greater recognition by CFOs of the fact that good risk management contributes to, rather than detracts, from effective risk taking.”

 

Overall 86% of respondents agree auditors demonstrate sufficient levels of professional scepticism. While, 66% agreed that auditors vigorously challenged management assumptions.

 

Meanwhile, 57% agree or strongly agree that auditors vigorously challenge management projections. This was lower in Hong Kong (40%) and higher in Singapore (65%). 

 

When asked about corporate social responsibility and integrated reporting, 65% of respondents indicated their company did not report on Environmental Sustainability as this, and other Corporate Social Responsibility (CSR) issues are not mandatory, while some 34% said it wasn’t relevant. Of those currently not reporting on these areas, some 54%, indicated they have no intention to do so in the next year. 

 

“When it comes to CSR reporting, there is still a long way to go in changing the mind-set of companies,” says Palmer. “CFOs can’t ignore the fact stakeholders are becoming increasingly aware and concerned about environmental and social impacts. It’s just a matter of time before stakeholders make companies more accountable,” he adds.

 

The survey also finds that in tough economic times, business prefer tax incentives for investment. More than 50% of all respondents indicated increased tax incentives for investment from government would help their business, as opposed to controlling interest rate rises and exchange rate appreciation. Although, a notable minority of about 30% of respondents in Singapore and Malaysia identified controlling interest rate rises as a priority.     

 

Another finding is that 51% of respondents had dealt with the impact of the global financial crisis by deferring capital expenditure with some 37% also reducing staff numbers. Reducing staff numbers was higher in Australia at 47% of respondents, compared to Singapore, Hong Kong and Malaysia where the level was closer to 30%.

 

 

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