Asia-Pacific Regulation Research Group

Summary

This PhD project explores how companies in Vietnam interpret corruption, unethical business behaviour and global anti-corruption norms.

Researcher

• Candice Lemaitre

After completing studies in International Business Law and International Relations in France, Candice worked for several years in the administration and legal sector. In 2016, she completed a postgraduate diploma and a minor thesis on anti-corruption initiatives in Myanmar at The University of Melbourne’s School of Government. She is now currently completing her PhD research project on the transfer of business anti-corruption norms in Vietnam in the Department of Business Law and Taxation, Monash University.

Supervisors

• Professor John Gillespie
• Dr Nicola Charwat

Project background and aims

During the 1990s, an alliance of international intergovernmental and non-governmental organisations proposed a set of regulatory norms designed to reduce corruption. Many governments in developing countries, such as Vietnam, enacted these global anti-corruption norms into their domestic law. Research shows that these regulatory norms have failed to reduce corruption in Vietnam, and many other developing countries. This article draws on empirical research to understand why the anti-corruption norms have not produced the expected outcomes in Vietnam.

This project explores the area of business compliance. Based on data collected from semi-structured interviews with business managers in Vietnam and archival research, it examines how businesses in Vietnam interpret and comply with global anti-corruption norms. It investigates why different types of companies in Vietnam engage with and respond to these norms in different ways. This investigation aims to generate some predictive insights into how companies are likely to respond to anti-corruption regimes based on global anti-corruption norms.

Methodology

This project is based on empirical legal research and uses an interpretive approach to examine why the interpretation of global anti-corruption norms is fragmented in Vietnam. It analyses the ‘communicative processes’ operated among companies in Vietnam through which they build their epistemic assumptions related to global anti-corruption norms. Since epistemic assumptions are identified through narratives, this research project uses discourse analysis as method of content analysis and interviews as data collection method.

Findings

This project suggests that global anti-corruption norms have not been effective in reducing corruption in Vietnam because there is fragmentation in the way companies in Vietnam interpret and respond to these norms. This fragmentation results from differences in the epistemic communities that companies draw upon to interpret global anti-corruption norms.

Output

• 2018 Vietnamese Legal Studies Graduate Student Workshop Presentation
• 2018 Asian Law and Society Association (ALSA) Conference Presentation

Summary

We examine China’s Social Credit system and argue that the new governance mode underlying the SCS relies on the fuzzy notion of “trust,” thus derogating from certain mandates enshrined in China’s Constitution.

Researchers

• Dr Yu-Jie Chen (Institutum Iurisprudentiae, Academia Sinica) (see also U.S.-Asia Law Institute)
• Professor Ching-Fu Lin (National Tsing Hua University)
• Dr Han-Wei Liu (Department of Business Law and Taxation, Monash University)

Project background and aims

This project “'Rule of Trust': The Power and Perils of China's Social Credit Megaproject” is a collaborative effort that brings together three scholars: Dr. Yu-Jie Chen at the Institutum Iurisprudentiae, Academia Sinica (Taiwan) (from August, as an Assistant Professor at New York University, Shanghai) & U.S. & Asia Law Institute at NYU Law School, Professor Ching-Fu Lin at National Tsing Hua University (Taiwan), and Dr. Han-Wei Liu at Monash University. In addition to the research support from other collaborators’ home institutions, our research project was also enabled by the BLT Research Grant. The purpose of this project is as follows.

With the rapid developments in data analytics, computational capacities, and machine learning techniques, artificial intelligence (AI) systems have been increasingly employed by government institutions—social welfare agencies, law enforcement authorities, and courts—to make real-life decisions that impinge upon individuals’ rights and obligations. While the society has benefited from AI-enabled applications in many ways, potential problems tied to their underlying designs should not be overlooked. Depending on the data set and algorithms of each AI, controversies have emerged regarding biases against and harm to underrepresented groups, invisible powers and rules of scores and bets, and separate and unequal economies. Such broader implications have thus engendered scholarly debates over ethical, social, legal, and political dimensions. While existing literature spreads over various aspects of AI—such as legal personhood of robots, regulatory framework for self-driving cars, autonomous weapons, and the use of AI in policing and court proceeding, much of the discussion has focused on the American or European contexts. The interactions between the Chinese government and AI have thus far received scant attention.

As a formidable power in innovation and advanced technologies, China has been pioneering in integrating AI into its national policy and legal infrastructure. Among others, one of China’s most ambitious AI-enabled projects is the so-called "social credit" system. As part of its strategic plan towards a comprehensive framework of social control and stability by 2020, China has rolled out several pilot projects in Shanghai, among other places. The idea of monitoring and rating the behavior of every individual has attracted much media attention, yet questions about the actual operation of the system and its legal, political, and ethical ramifications certainly merit in-depth scholarly examination. How does the Chinese government gather information about each person? What behavioral patterns are monitored, and why? What are the rewards and punishments in the social credit system? Are such rewards and punishments limited to realms of public authority exercised by the government, or can they be translated to multiple other spheres dominated by giant corporations? On what basis does the government justify the use of certain factors for rating/scoring purposes? To what extent is the system transparent and accountable? Does Chinese law adequately address the relevant human rights concerns, including privacy, non-discrimination, and the right to an effective remedy? What does the system tell us about China’s ideology regarding technology and control? The paper aims to investigate questions as such, and through them, examines the AI-enabled powers possessed by an authoritarian regime to enhance its rule of wide-ranging aspects of the lives of its citizens

Methodology

Based on traditional legal analysis, this paper thoroughly examines laws, regulations, and other normative documents at both local and national levels. We consider, in particular, the trajectory of the development of the Social Credit System by tracing how the regulatory tools evolve since the establishment of the People’s Republic of China in 1949. We also engaged a comparative analysis by pointing out how the Chinese government’s new approach distinguishes other jurisdictions when it comes to leveraging disruptive technologies.

Findings

We identify four key mechanisms of the SCS—namely, information gathering, information sharing, labeling, and joint sanctions, and highlight their unique characteristics as well as normative implications. In our view, the new governance mode underlying the SCS — what we call the “rule of trust” — relies on the fuzzy notion of “trust” and wide-ranging arbitrary and disproportionate punishments. It derogates from the notion of “governing the country in accordance with the law” enshrined in China’s Constitution.

This Article contributes to legal scholarship by offering a distinctive critique of the perils of China’s SCS in terms of the party-state’s tightening social control and human rights violations. Further, we critically assess how the Chinese government uses information and communication technologies to facilitate data-gathering and data-sharing in the SCS with few meaningful legal constraints. The unbounded and uncertain notion of “trust” and the unrestrained employment of technology are a dangerous combination in the context of governance. We conclude with a caution that with considerable sophistication, the Chinese government is preparing a much more sweeping version of SCS reinforced by artificial intelligence tools such as facial-recognition and predictive policing. Those developments will further empower the government to enhance surveillance and perpetuate authoritarianism.

Output

• Yu-Jie Chen, Ching-Fu Lin and Han-Wei Liu, ‘Rule of Trust’: The Power and Perils of China’s Social Credit Megaproject,’ Columbia Journal of Asian Law, Vol. 32, No. 1, 2018
• This paper has been described by Professor Frank Pasquale (University of Maryland School of Law), a leading expert in the field of artificial intelligence and laws as “Important paper on the shift from ‘rule by law’ to ‘rule of trust’ at the advent of digital totalitarianism.” Since it was uploaded onto the SSRN on December 20, 2018, this paper has been downloaded many times and has also been discussed on twitter.

Summary

Disruptive technologies drive a transformative reorganisation of economic structures. This project explores how certain Southeast Asian countries can harness their potentials to achieve sustainable development.

Researchers

• Professor Ching-Fu Lin (Institute of Law for Science and Technology, Taiwan)
• Dr Han-Wei Liu (Department of Business Law and Taxation, Monash University)

Project background and aims

This paper was a response to the call by a leading, Geneva-based think-tank—the International Centre for Trade and Sustainable Development (ICTSD) to contribute to its “Programme on Inclusive Economic Transformation.” With the view to empowering least developed countries and low-income countries across the Indo-Pacific region to achieve sustainable development and inclusive growth, this paper explores the implications of disruptive technologies—in particular, artificial intelligence (AI) and blockchain—for the CLMV countries (i.e., Cambodia, Lao PDR, Myanmar, and Vietnam) by addressing the following questions: (1) What is disruptive innovation? ; (2) What, if any, are the social and economic ramifications of these innovations? (3) Whether, and if so, with what policy tools should regulators respond to these challenges? (4) What are, if any, the implications of these regulatory interference for the existing trading and investment regime? (5) Last but certainly not least, what is the role of developing and least developed countries—inter alia, CLMV countries—amid these technological challenges? How do policymakers, through a myriad of legal and policy innovations, envision a future for the balanced coexistence of disruptive technology, inclusive and just society, and sustainable development?

Methodology

As a policy paper and considering its target audience, this paper is based on not only traditional legal analysis, but also empirical data. Also, because the focal point of the paper is CLMV, which are in turn part of ASEAN, we rest our analysis on a comparative study by exploring not only CLMV but other ASEAN countries tap into disruptive technologies and manage their ramifications.

Findings

The paper argues that CLMV can leverage disruptive technologies, as some other countries have done, in five major issue areas, including reshaping property law and land registration, improving participation and access of disadvantaged groups, facilitating international trade through banking innovation, innovating food safety and supply chain management, and reinventing services and manufacturing sectors via AI. Having identified major institutional challenges for the CLMV countries to reap the benefit of disruptive technologies, this paper map out three strategies that help them align disruptive technologies with sustainable development goal. CLMV should, as the first step, improve their infrastructure and human capital. On this basis, the policymakers should engage technologically informed and adaptive regulatory reforms while at the same time, ensuring adequate accountability, transparency, and fairness when incorporating these new technologies into their respective legal regimes.

Output

• This paper has been featured at ICTSD’s website in the form of “Issue Paper series".
• Of particular note is that co-authors were included by ICTSD to join many leading scholars in the field (e.g., Prof. Mark Wu at Harvard Law School; Prof. Petros Mavoridis at Columbia Law School) as part of its “Expert Network".

Summary

Examining the laws governing auditors’ eligibility, particularly the requirement of good character, in ensuring auditors’ effectiveness in Malaysia.

Researcher

• Dr Loganathan Krishnan (Department of Business Law & Taxation, Monash Malaysia)

Project background and aims

This project examines key issues on the office of auditors, concerning the requirement for auditors to be of good character. Therefore, how the requirement of good character is being applied is also assessed. This is important because it will strengthen the role and duties of auditors so that they will be effective watchdogs and gatekeepers for corporate governance. This project also explores the necessary reforms that should be made to the issues concerning the requirement of good character of the auditors.

The Malaysian Companies Act 2016 (CA 2016) provides that a person may be appointed as an auditor if he is capable of carrying out an audit function and he is of good character. In cases where he is found not to be of good character, the approval can be revoked by the Minister of Finance (MOF). The concern is whether the current requirement and procedure to determine the eligibility of an auditor is comprehensive. The concern is also whether approval has been revoked in cases where auditors are involved in financial scandals. This is because involvement in scandals shows that they are not of good character. Thus, this study attempts to answer some of these grey areas pertaining to this issue.

Methodology

The methodology used are literary research which involves legislation, case law, books, journals and media news; analogical reasoning, jurisprudential analysis, historical review and comparative study of the laws in other jurisdictions. The project is based on traditional doctrinal legal analysis and empirical legal research. Media news published from 2004 until 2017 will be referred to. Additionally, interviews will be conducted on audit practitioners, officials from Companies Commission of Malaysia, Securities Commission and Central Bank of Malaysia, academics, representatives of Minority Shareholder Watchdog Group and professional bodies. The interviews will be semi-structured. It will be carried out in Federal Territory, Penang, Johor Bahru and Kuantan as these places are the main business hub of Peninsular Malaysia and to cover large and medium sized firms. This is to obtain a holistic picture of the subject matter.

Findings

Interviews were conducted by auditors and regulators in order to obtain a holistic picture of the issue of the good character of auditors. It can be observed that there were mixed views among the auditors on the issues raised during the interviews. As far as the regulator is concerned, it can be seen that initiatives have been taken to address the issues concerned. The provisions of the Companies Act 2016 in relation to the office of auditors must be re-examined to ensure that the auditors perform a meaningful role in the current corporate atmosphere. The auditors’ role must be reinforced so that it meets the expectations of the stakeholders. Similarly, key reforms must be made to the Companies Act 2016 to achieve the desired objectives. The current practice of conducting interviews and requiring candidates to produce references is unsatisfactory. There is a need to raise the threshold of good character. The statutory provisions must define the parameter of good character and this must be further explained in the by-laws. In cases where the auditors were involved in financial scandals, the Minister should revoke the approval by virtue of s. 263(3) of the CA 2016 to convey a strong message about the importance of having a good character. The MIA should prepare a module of ethics and good character which is based on assignments to ensure that good character is not merely a theoretical result but a practical result. This will consequently ensure the fundamental issue of auditors being effective watchdogs to counter financial scandals. Additionally, auditors would play a more effective role in carrying out their duties so that there would be value added to the auditors’ report. Thus, the issue of good character which determines credibility and eligibility should not be taken lightly.

Output

Journal article

• Krishnan, L. (2018). “Examining the Laws Governing Auditors’ Eligibility in Ensuring Auditors’ Effectiveness”, Company Lawyer, 39(9), 288.

Conference proceedings

• Krishnan, L. (2016), “A Litmus Check of Auditors Credibility to Enhance Effectiveness in Countering Financial Scandals: A Case of Malaysia”, The 11th Kuala Lumpur International Business, Economics and Law Conference, 17th - 18th December 2016, Hotel Bangi - Putrajaya, Selangor, Malaysia.

Summary

“Weak” to “ Strong” Sustainability: Protesting for Environmental Justice in Vietnam. This project examines how access to knowledge affects environmental disputes in Vietnam. It is funded by the UNDP.

Researchers

• Professor John Gillespie
• Associate Professor Nguyen Van Thang
  Asia Pacific Institute of Management, National Economics University, Vietnam
• Dr Le Quang Canh
  Asia Pacific Institute of Management
  National Economics University, Vietnam
• Dr Nguyen Vu Hung
  Institute for Population and Social Studies, National Economics University, Vietnam

Project background and aims

Rapid industrialization has come at a high cost to the natural environment in Vietnam. Frustrated with regulatory inaction, Vietnamese citizens from many social backgrounds have taken direct action to protect their country’s natural environment. Most studies about environmental disputes in Vietnam have focused on large-scale conflicts, leaving smaller-scale rural disputes comparatively under researched. Drawing on in-depth interviews, this research projects explores how knowledge about environmental activism can transform the claims made in small-scale disputes. It examines why these disputes can sometimes succeed in mitigating environmental harm when complaints through administrative and judicial avenues fail.

Methodology

The project follows neo-Marxist theory that posits that environmental disputes are intrinsic to economic development, and rather than a phenomenon to be avoided, they possess the potential to transform the organisational systems that enable harmful environmental pollution. Using ethnographic methodological techniques, the project develops five case studies about environmental disputes from in-depth interviews conducted in northern, central and southern Vietnam. The interviewees were identified through a combination of purposive, niche, and snowball sampling methods.

Summary

This PhD project examines how behaviour change of water users can help to address global water crises. It seeks to understand motivations and constraints for adopting water stewardship by industry and agriculture.

Researcher

• Michael Spencer

Michael’s PhD thesis titled Managing the interface between humans and nature: a governance perspective has been recommended for award of degree by both examiners.  Michael’s work focuses upon the way in which access to and exploitation of ‘commons’ resources, such as forests and water, can be governed to protect sustainability in different social, economic and political contexts (Northern China, Southern China, Victoria).

Supervisors

• Alice de Jonge
• Janet Stanley
• Michael Duffy

Project background and aims

Engaging business in water management was identified almost three decades ago as an important part of the toolbox for addressing the world’s emerging water crises. During the 2000s, some larger multi-national companies began to engage and understand the risk water posed to their business strategies but the scale and depth of this engagement was limited. A report by the 2030 Water Resources Group in 2009 stressed that the globe’s water challenges could not be addressed unless businesses and farmers were engaged in changing attitudes and behaviour toward water. The need was further stressed by a UN-World Bank High-Level Panel on Water in 2018. But, as a report for the IUCN has highlighted, the rate of change and adoption of new approaches remains too slow.

Water stewardship emerged in the mid-2000s as a form of soft law to define good water management by industry, provide a global standard against which major water-users could be assessed and, a brand for recognising good water stewards. Adopting a multi-stakeholder governance model, the Alliance for Water Stewardship (AWS) was established to manage this system, engage water users in adopting the system and having their performance verified against the AWS Standard. While water stewardship has been embraced by a number of large multi-nationals whose brands are associated with water, to be effective it will have to engage a very large number of business and farmers in different parts of the world. This project is interested in what motivates and constrains participation and ultimately building a model for industry engagement.

Widespread adoption of water stewardship could meet the need for engaging business in water management and promoting behaviour change by industrial, agricultural and institutional water-users. To date this research has focused on water stewardship adoption in China, Australia and New Zealand with plans to extend the project to Indonesia in 2020. The project has received some funding from the Australian Government through the Australian Water Partnership and its partner the Alliance for Water Stewardship (Asia-Pacific).

Methodology

This project is based on quantitative and qualitative empirical research built from an analysis of literature on stewardship systems. Soft law approaches, by definition, do not rely on the enforcement power of the State and are dependent on willing, voluntary participation. Inevitably, to be successful these approaches depend on business taking action that they would not otherwise undertake. A key part of the methodology has been the development and implementation of a comprehensive questionnaire that is administered to water-users who have had some initial contact with the concept of water stewardship. Responses are tested against propositions derived from the literature to see which, if any of these propositions can be validated. This analysis is then used to develop a tentative model for engaging business in water stewardship.

Output

• Spencer, M (forthcoming 2020), ‘Attitudes, obstacles and incentives: why the culture of water needs to change to build participation and implement behaviour solutions to water crises’ in Sustainable Use of Water by Industry:  Perspectives, Incentives, and Tools, edited by Cheryl Davis and Erik Rosenblum (International Water Association)
• Spencer, M and Xu, Z (forthcoming 2020), ‘Water stewardship; engaging business, civil society and government in collaborative solutions to China’s freshwater challenges’ in Non-State Actors and Environmental Governance in China, edited by Oran Young, Yijia Jing and Dan Guttman (Palgrave Macmillan).

Summary

The research uncovers gaps in the regulatory framework which have contributed to theft of billions of dollars through 1MDB, a Malaysian state-owned corporation.

Researcher

• Dr Vivien Chen

Project Background and Aims

1MDB has been at the centre of money laundering investigations internationally. Hailed as one of the largest kleptocracy investigations in history, questions arise as to how scandals of such magnitude occurred despite a seemingly strong corporate regulatory framework.

The research measures the strength of Malaysian legal protections against fraud by corporate controllers and compares it with international benchmarks of good governance. It considers the manner and extent to which the effectiveness of these laws is impeded by the context in which it operates. The research explores the nexus between the state and business in Malaysia and its implications for corporate governance. It investigates the enforcement of corporate law in the context of Malaysia's political economy and the role of regulatory authorities in a developmental state with authoritarian leanings.

Methodology

The methodology used in the research involves both quantitative and qualitative empirical methods. The strength of Malaysian law is measured using the quantitative ‘leximetric' method, and compared with data from six other countries over 35 years. Legal analysis, descriptive statistics and a socio-legal approach are also used to complement the quantitative analysis.

Findings

The research demonstrates the manner and extent to which law modelled on Anglo-Australian regulations which reflect international standards are of limited effect in practice against expropriation of corporate assets by politically-connected corporate controllers. The research highlights the relevance of political economy and the rule of law for the effectiveness of laws. The findings challenge assumptions on which international organisations, such as the World Bank, have premised their reform policies for developing countries around the world. The research contributes to a more nuanced understanding of the relevant considerations for regulatory reforms for countries which have different corporate ownership structures, forms of political governance, and economic and socio-cultural contexts from Anglo models. Findings from the research have been featured by Monash Impact in the article ‘How Malaysian corporate laws can recover after corruption'.

Outputs

• 30 September 2021, Vivien Chen, 'Kleptocracy through weak governance at state-owned corporations', Columbia Law School Blue Sky Blog
• Vivien Chen, 'Enforcement of Directors' Duties in Malaysia and Australia: The Implications of Context' (2019) 19(1) Oxford University Commonwealth Law Journal 91 .
• Vivien Chen, 'Corporate Law and Political Economy in a Kleptocracy' American Journal of Comparative Law (forthcoming)
• Vivien Chen, ‘Law and Society in the Evolution of Malaysia's Islamic Capital Market Regulation' (2017) 4 Asian Journal of Law and Society 133.
• Vivien Chen, ‘The Statutory Derivative Action in Malaysia: Comparison with an Australian Judicial Approach' (2017) 12 Asian Journal of Comparative Law 281.
• Vivien Chen, ‘The Evolution of Malaysian Shareholder Protection: A Legal Origins Analysis' [2013] Singapore Journal of Legal Studies 100.

Summary

This project examines the ‘Formal and Informal Regulation of Collective Labour Disputes in Indonesia, the Philippines and Vietnam’. It is funded by an ARC Discovery Grant.

Researchers

• Professor Carolyn Sutherland
• Professor Richard Mitchell
• Dr Petra Mahy
• Dr Ingrid Landau
• Professor John Howe (University of Melbourne School of Government)
• Amanda Darshini Selvarajah
• Trang Thi Kieu TRAN (PhD candidate)
• Dr Wayne Palmer

Project Background and Aims

This project is funded by an Australian Research Council Discovery Grant (2019-2024) (#DP190100821).

The project will investigate the formal and informal mechanisms of collective labour dispute resolution in three Southeast Asian countries: Indonesia, the Philippines and Vietnam. The project is based on the important observation that formal (state-based) labour laws and institutions often play only a limited role in these countries. That is to say, Southeast Asian legal systems, and state-based labour law and industrial relations systems more specifically, are generally characterised by limited effectiveness, while non-state regulation and the activities of unofficial actors may complement, substitute or conflict with the law.

The project will address three sets of questions regarding collective dispute resolution in Indonesia, the Philippines and Vietnam:

1. How are collective labour disputes defined and regulated under the formal legal systems of each country?
2. How effectively do these systems operate in practice and what are the major conditions contributing to the relative success or failure of such systems?
3. What role is played by informal institutions and actors in dispute resolution and settlement in each country; how does such informal regulation interact with formal labour law; and what are the effects of such alternative mechanisms in practice?

Methodology

This project will use a combination of doctrinal legal analysis and empirical qualitative research methods. The project is also comparative and examines three country contexts in Indonesia, the Philippines and Vietnam, and will focus on the manufacturing sector in each country. The project will involve a systematic and sustained study of the laws and formal institutions that regulate collective labour disputes in conjunction with empirical interview-based research on actual dispute resolution and the identification of informal norms and processes also used by actors and institutions (i.e., how law interacts with other forms of regulation or normative ordering).

Publications Related to this Project

• Petra Mahy, Richard Mitchell, John Howe, Ingrid Landau and Carolyn Sutherland (forthcoming January 2024), ‘Qualitative Fieldwork’ in Cambridge Handbook of Comparative Law, edited by Mathias Siems and Po Jen Yap (CUP).
• Ingrid Landau, John Howe, Trang Thi Kieu Tran, Petra Mahy and Carolyn Sutherland, ‘Regulatory Pluralism and the Resolution of Collective Labour Disputes in Southeast Asia,’ Journal of Industrial Relations (published online 12 July 2023).
• Petra Mahy (2022), ‘Indonesia’s Omnibus Law on Job Creation: Legal Hierarchy and Responses to Judicial Review in the Labour Cluster of Amendments,’ Asian Journal of Comparative Law, 17(1)
• Petra Mahy (2021) 'Indonesia's Omnibus Law on Job Creation: Reducing Labour Protections in a Time of COVID-19', Labour Equality and Human Rights (LEAH) Research Group, Working Paper no. 23, Monash University.
• Petra Mahy (2020) 'COVID-19 and Labour Law: Indonesia', Italian Labour Law E-Journal, v. 13(1S)
• Petra Mahy, Richard Mitchell, John Howe and Maria Azzurra Tranfaglia, (2019) ‘What is Actually Regulating Work? A Study of Restaurants in Australia and Indonesia’ in Re-Imagining Labour Law for Development: Informal Work in the Global North and South, edited by Diamond Ashiagbor (Hart Publishing).
• Ingrid Landau and Fang Lee Cooke (2018) ‘Employment Regulation and Industrial Relations in Indonesia, Malaysia, the Philippines, Thailand and Vietnam’ in Routledge Handbook of Human Resource Management in Asia, edited by Fang Lee Cooke and Sunghoon Kim (Routledge).
• Petra Mahy, Richard Mitchell, Sean Cooney and John Howe (2017) The Plural Regulation of Work: A Pilot Study of Restaurant Workers in Yogyakarta Indonesia(Centre for Employment and Labour Relations Law, University of Melbourne).
• Petra Mahy (2016) ‘The Functional Approach in Comparative Socio-Legal Research: Reflections Based on a Study of Plural Work Regulation in Australia and Indonesia’, International Journal of Law in Context 12(4): 47-67.
• Ingrid Landau, Petra Mahy and Richard Mitchell (2015) ‘The Regulation of Non-Standard Forms of Employment in India, Indonesia and Viet Nam’ (ILO INWORK Working Paper no. 63).

Summary

This project focuses on how Malaysian laws (Companies Act 2016, the Capital Market and Services Act 2007 and the Financial Services Act 2013) deal with non-audit services.

Researcher

• Dr Loganathan Krishnan (Department of Business Law & Taxation, Monash Malaysia)

Project background and aims

Non-audit services are any services provided by auditors to a company other than audit namely, management consultancy, tax advice and human resources consultancy.

Enron, a Texas-based energy trading company is the first scandal which shook up the audit profession. Its auditors Arthur Andersen were receiving fees for audit and non-audit services. In the banking sector, 70% of the fees banks paid to auditors were for non-audit services. A study conducted in Australia showed, 27 out 58 of the top 100 companies, auditors are also offering non-audit services. Observably, auditors’ independence is questionable since the decision to engage auditors for non-audit services rests with the Board of Directors (BOD). If the auditors detected the BOD committed a wrongdoing and report the matter to the shareholders, they may not be re-engaged in future. Under common law, no duty is imposed on auditors to avoid non-audit services. Thus, this study focuses on how the Malaysian laws i.e. the Companies Act 2016, the Capital Market and Services Act 2007 and the Financial Services Act 2013 deal with non-audit services. Interviews will be conducted on audit practitioners, regulators i.e. Companies Commission of Malaysia, Securities Commission, Central Bank of Malaysia, professional bodies, academics and Minority Shareholder Watchdog Group (MSWG) to obtain their views on this issue.Finally, this project will draw conclusions as to the approach the Malaysian laws should take in addressing this issue.

Methodology

The methodology used are literary research which involves legislation, case law, books, journals and media news; analogical reasoning, jurisprudential analysis, historical review and comparative study of the laws in other jurisdictions. The project is based on traditional doctrinal legal analysis and empirical legal research. Media news published from 2004 until 2017 will be referred to. Additionally, interviews will be conducted on audit practitioners, officials from Companies Commission of Malaysia, Securities Commission and Central Bank of Malaysia, academics, representatives of Minority Shareholder Watchdog Group and professional bodies. The interviews will be semi-structured. It will be carried out in Federal Territory, Penang, Johor Bahru and Kuantan as these places are the main business hub of Peninsular Malaysia and to cover large and medium sized firms. This is to obtain a holistic picture of the subject matter.

Findings

It can be observed that there is no prohibition in the Companies Act 2016 which has replaced the Companies Act 1965, the Central Bank Guidelines on External Auditors 2015, Financial Services Act 2013, the Code of Corporate Governance 2017 and the By-Laws on non-audit services. Thus, auditors are free to provide non-audit services in addition to audit. Be that as it may, based on all the financial scandals, it is clear that non-audit services have the potential to affect the objectivity, independence and professionalism of the auditors. Ultimately, the ones affected are the stakeholders of the company as they relied on the auditors’ report to make key decisions. Thus, it is proposed that the Companies Act 2016 be amended to prohibit auditors from providing non-audit services. This is one of the ways to raise the standards of the auditors’ role, duties and integrity.

Output

Journal article

• Krishnan, L. (2019). “Examining the Threat to Auditors’ Independence: Malaysian And Australian Legal Perspective”, ICCLR, 30(2).

Conference proceedings

• Krishnan, L. (2018). "The Impact of the Companies Act 2016 on Auditors’ Independence", Corporate Law Teachers’ Association Conference, 11th – 13th February 2018, La Trobe University, Melbourne, Australia

Summary

Mandatory sustainable finance regulation took effect in January 2019 in Indonesia. This PhD project explores how bank employees interpret the key norms embedded in the sustainable finance regulation.

Researcher

• Sachiko Suzuki

Sachiko started her PhD at the Department of Business Law and Taxation after working in commercial as well as development financing in the Asia-Pacific region. Previously, she completed a Masters of Business Law at Monash University. Her final project dealt with the effectiveness of transnational private regulatory frameworks using a case of the Roundtable on Sustainable Palm Oil. Sachiko’s research interests lie in the roles and responsibility of investors as well as businesses in curbing environmental degradation and climate change through either mandatory or voluntary regulatory regimes.

Supervisors

• Professor John Gillespie
• Dr Petra Mahy

Project background and aims

Businesses are increasingly held responsible for environmental degradation. The financial sector, which does not directly cause this harm, has over the past decade been increasingly criticised for the conduct of their borrowers. A set of normative standards, known as ‘sustainable finance’, have evolved since 1980’s to ensure that financers align economic, environment and social performance. These standards have diffused into developing countries, such as Indonesia. This project will explore how different social groups in Indonesia, such as bankers, business persons, environmentalists and the state regulator to interpret and respond to global norms governing sustainable finance.

The working hypothesis is that fragmented interpretive positions of different social groups are likely to lead to uneven interpretations and responses to sustainable finance norms. It is posited that the uneven distribution of knowledge, which is pronounced in rapidly developing countries, is the main factor resulting in the fragmentation of interpretive positions. This investigation aims to generate predictive insights into possible responses to sustainable finance initiatives and the capacity of sustainable finance norms to change attitudes towards the environment in Indonesia.

Methodology

This is an empirical research project. It will use a social construction approach that identifies the epistemic assumptions used by the respondents to adopt, reject or re-interpret the sustainable finance norms incorporated into the mandatory Sustainable Finance Regulation. Data for investigating the working hypothesis will be collected from in-depth interviews conducted in urban centres in Indonesia and written sources.