ASX Corporate Governance Council Principles and Recommendations
By Fiona Balzer, Policy and Advocacy Manager, ASA
The Australian Shareholders’ Association (ASA) contributed to the 5th Edition of the ASX Corporate Governance Council Principles and Recommendations as an investor representative member of the working group. A consultation process was launched on 27 February, and members who wish to make individual submissions to the Council should do so using this link, contributions must be lodged by 6 May 2024. The final 5th Edition will likely be published in early 2025 and is expected to apply for financial years commencing on and after 1 July 2025.
The Council is chaired by Elizabeth Johnstone and is an independent body that brings together a wide range of business, shareholder and industry groups, each offering their individual insights and perspectives on governance issues. ASA has been a member of the Council and a member of the working groups since the creation of the First Edition.
The primary role of the Council is to develop and issue principles-based recommendations on the corporate governance practices to be adopted by ASX listed entities. The recommendations are intended to promote investor confidence and to assist listed entities to meet stakeholder expectations in relation to their governance.
Under Listing Rule 4.10.3, ASX listed entities are required to benchmark their corporate governance practices against the Council’s recommendations and, where they do not conform, to disclose that fact and the reasons why. The rule effectively encourages listed entities to adopt the Council’s recommended practices but does not force them to do so. It gives a listed entity the flexibility to adopt alternative corporate governance practices, if its board considers those to be more suitable to its particular circumstances, subject to the requirement for the board to explain its reasons for adopting those alternative practices.
The aim of the Consultation Draft is to reinforce entities’ frameworks, to better enable entities to respond to emerging issues and developing regulatory requirements. It is not intended to create parallel regulatory regimes.
The 8 Principles have been retained, with some proposed changes to expression. Several general Recommendations have been removed where there is significant regulation by, or duplication in, Australian law. There have been some enhancements to the layout and expression of the document, to improve readability and engagement with the content of the 5th Edition. Some existing commentary and expression has been reduced or simplified, with cross-references provided to other resources. Other commentary has been clarified, such as where there is evidence of limited disclosure quality or other market immaturity.
One recommendation we are strongly in favour of: Recommendation 4.3, the disclosure of tenure of the audit firm and the audit engagement partner and when the appointment of the external auditor was last comprehensively reviewed and the outcomes from that review.
There are a range of changes, and ASA will be making a submission to the consultation. Please share your thoughts on the consultation before 10 April 2024.
