Executives at the corporate regulator have helped themselves to “performance bonuses” again this year. This, despite the backdrop of systemic corporate corruption and blatant regulatory failure exposed by the Royal Commission into the banks. Michael West reports.

The annual report for the Australian Securities & Investments Commission (ASIC) for 2017-2018 shows performance bonuses actually rose to $8.974 million, from $8.5 million last year. Performance bonuses were first introduced in 2008 and have since doubled.

As there is no disclosure of why performance bonuses are being paid, or what kind of things represent “performance”, the raison d’etre for the bonuses remains guesswork.

Suffice to say that, in a year of revelations about rampant misbehaviour by Australia’s leading financial institutions – charging fees for no-service, charging fees to dead people, systemic overcharging, cover-ups and other assorted customer abuses – the performance bonuses are … what is the word … intriguing.

Meanwhile, the regulator, which ought to be setting the gold standard for financial reporting, has opted to publish “Reduced Disclosure” financial statements which means it doesn’t have to disclose certain features of its management remuneration.

The annual report once again confirms what a fecund cash-cow is ASIC for the federal government – more than ever this year.

The agency collected $1.2 billion for the government last year – sharply up from $998 million the year before. In return, the government awarded ASIC with $348 million for its budget.

A new line appears in the notes to the accounts: “Supervisory Cost Recovery Services” of $247 million. This is the government’s initiative to charge the banks for their regulation. Another money-spinner.

Corporate search revenues rose from $62 million to $64 million (for charging people like yours truly to access “public” information about companies – $40 per set of financial statements).

Revenue from fines shot up from $118 million to $155 million. This represents late fees and so forth, fines historically levied on small operators. It may be, although it is yet to be confirmed, that ASIC has begun fining big business. In the past, we have exposed systemic reporting failures by the likes of the Business Council of Australia and drug giant Johnson & Johnson which ASIC appears to have let off scot free; no fines.

According to the annual report:

“Alongside this, the important work of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services

Industry (the Royal Commission) has also been highlighting the misconduct that ASIC has been investigating and acting on for some

time.”

This is quite a strange claim as, if the corporate regulator had been doing its job, there would have been no need for a Royal Commission. It suggests that ASIC is living in a parallel universe where it thinks one thing and everybody else thinks something entirely different.

There is a new mission statement this year:

“In everything we do, we are guided by our recently adopted vision of a fair, strong and efficient financial system for all Australians.”

As for the move to reduced disclosure, retired UNSW accounting academic Jeff Knapp said the transition sends out the wrong message to those in corporate Australia whom it regulates.

“ASIC should set the highest example for financial disclosure in the market,” said Knapp. “It should be an exemplar and be doing a Tier 1 financial disclosure.”

One of the reasons that multinational tax avoidance has so flourished over the past decade is the failure of regulators, and the accountancy sector, to insist on full “General Purpose” financial reporting by multinational companies operating in Australia.

This allows large corporations to conceal the likes of relate party transactions designed to avoid income tax.

In a recent speech at the Centre for Policy Development, ASIC Commissioner John Price called on companies to consider “going beyond strict legal requirements” and to consider adopting the voluntary Task Force on Climate-related Financial Disclosures recommendations as a framework for reporting.

ASIC should practise what it preaches.