The Australian Securities Exchange (ASX) Corporate Governance Council is currently considering a proposed third edition of the Corporate Governance Principles and Recommendations. Listed companies are required to report against the Principles and Recommendations on an ‘if not, why not’ basis. Many non-listed entities find the Principles and Recommendations useful guidance on good governance with appropriate adaptation to their legal and ownership structure.
The proposed changes maintain the same number of principles (eight) and recommendations (30) although some matters previously covered in the commentary are proposed for inclusion in the recommendations.
Substantive proposed changes of note include:
- giving greater flexibility to listed entities to make their governance disclosures on their website rather than in their annual report
- adding alternative approaches within a recommendation to recognise that smaller listed entities may legitimately have different governance practices to larger entities, thereby allowing them to report that they comply with a recommendation rather than having to explain why they do not comply
- adding to the defining characteristics of an independent director, a reference to whether the director has been a director of the entity for more than 9 years
- introducing new and strengthened recommendations in relation to risk (principle 7)
- elevating some of the commentary in the current edition into recommendations in the third edition, reflecting the fact that they now represent contemporary governance standards against which entities should be required to report rather than mere guidance
- amending the diversity recommendations to give listed entities the option to report their “Gender Equality Indicators” under the Workplace Gender Equality Act 2012 instead of reporting the respective proportions of men and women on the board, in senior executive positions and across the whole organisation, and
- strengthening the commentary on the meaning of “measurable objectives” in the diversity recommendations and on the steps a listed entity can take to measure its achievements against the diversity objectives set by its board, in support of greater representation of women in management and on boards.
A separate consultation paper was also released regarding changes required to the ASX Listing Rules to give effect to the proposed reforms.
The Corporate Governance Council is currently considering feedback on the proposed changes. Non-confidential submissions can be accessed here: http://www.asx.com.au/regulation/corporate-governance-council/review-and-submissions.htm