Australian companies found to be engaging in corporate wrongdoing could soon face penalties of up to $3 million, but small business groups say there’s some way to go before the maximum fines even begin to cause pain for big businesses that do the wrong thing.
Fairfax reports the federal government is preparing to release a review from its Australian Securities and Investments Commission (ASIC) enforcement taskforce this week, which will recommend strengthening penalties for corporate misbehaviour, including raising the maximum civil penalties for corporate misconduct from $1 million to $3 million for body corporates.
The government established the ASIC taskforce in October 2016 to investigate the effectiveness of its enforcement mechanisms after years of concern that the watchdog’s powers and penalties did not go far enough to deter breaches of corporate law in Australia.
This week the government is expected to release its response to a suggestion from the taskforce that the maximum civil penalties ASIC can seek under the Corporations Act be increased from $1 million to $3 million, after years of calls for tougher penalty limits to be put in place.
The Corporations Act 2001 is the federal legislation covering all Australian companies and sets out obligations for company registration, reporting, fundraising and takeovers.
Revenue and Financial Services Minister Kelly O’Dwyer will also unveil whistleblower legislation this week, reports Fairfax, which will require companies to have whistleblower policies. The legislation will also expand the definition of a whistleblower to a range of parties, including contractors, suppliers and the spouses of whistleblowers.
News of these moves comes one week after the announcement former Goldman Sachs banker James Shipton will be appointed as the new chairman of ASIC after Greg Medcraft’s departure in November.
The focus on penalties also comes just months after the Turnbull government announced long-awaited policies to address phoenix activity in Australia, including a pledge to introduce company director identification numbers to allow better tracking of director behaviour across their lifetimes.
Council of Small Business Australia chief executive Peter Strong says while news the government is considering stronger maximum penalties under the Corporations Act is “good”, calls for these measures have been years in the making.
“Big business have [tended to] just include a fine in their expenses,” he says of low penalties for corporate misconduct.
While he welcomes an increase, Strong says that for larger corporations to be truly discouraged from acting in ways that ultimately undercut SMEs, increases in penalties need to be “much bigger”.
“It’s not enough, and this has been shown time and time again,” he says of the role of fines as a deterrent.
When it comes to encouraging good corporate behaviour more broadly, Strong suggests one option could be to consider how regulators and courts could force businesses engaging in corporate misconduct to pass the penalties they might have received from this onto the smaller suppliers and businesses who would have been negatively affected by their actions.
Another option on the table for penalising businesses engaging in misconduct is to give regulators scope to forfeit company profits that have been reaped from corporate misbehaviour, reports Fairfax.
SmartCompany contacted the office of Minister O’Dwyer but did not receive a response prior to publication.