Wesfarmers chief executive Richard Goyder believes intervening to save failing companies stifles innovation and discourages creativity.

Mr Goyder says it is inappropriate for regulations to protect firms from going under.

Rather, regulations should be transparent, encourage growth and allow companies to operate in a positive environment where “markets work”.

“By markets being able to work I mean that companies have to be able to bear risk and succeed and they also have to be able to bear risk and fail,” Mr Goyder told the 2013 stockbrokers conference in Sydney on Thursday.

“What I would hate to see in a market is regulation that stops those things because we want regulations that encourage innovation, that encourage start-ups, encourage creativity, encourage appropriate risk taking that leads to rewards through capital growth and dividends.”

Mr Goyder said the tax and remuneration system designed to support publicly listed companies had to accept that “from time to time mistakes happen and that businesses will fail”.

He noted that Australia was among the world’s best in terms of the efficacy of corporate bonds, soundness of banks and intensity of local competition, according to a World Economic Forum report.

However, it was among the bottom-ranked nations for the burden of government regulation, extent and effect of taxation, and flexibility of wage determination.

“What I don’t ever want to see is regulations that are designed to protect companies from failure,” Mr Goyder said.

“We obviously need to have some protections for shareholders but those regulations I think are more than embraced in the ASX corporate governance requirements.

“I think propping up failing companies through regulation or cash generations undermines the trust that were put in public companies, but also is a really inappropriate way for governments to spend money.”