On 21 July 2026 the ASX released the 5^th Edition Consultation Draft for ASX Corporate Governance Principles and Recommendations seeking feedback. The draft 5^th Edition proposes changes to the existing Corporate Governance Principles and Recommendations that have been effective since 2019. Guerdon Associates summarised the proposed developments in a prior article.

Guerdon Associates has reviewed the proposed changes and made its submission to the ASX suggesting updates focussed on Principle 8: Remuneration as part of the consultation.

Key Takeaways

• Guerdon Associates does not support the proposed changes to Principle 8. The wording replaces what is objectively testable with ambiguity. Addressing conflicts of interest is also omitted despite its importance.
• Replace the recommendation that entities should have ability to adjust performance based executive remuneration downwards with the recommendation that “Remuneration vary with performance”. This would mean there is no need to prescribe adjustments or their direction.
• Guerdon Associates proposes recommending that remuneration frameworks include mechanisms for equity ownership for both directors and executives rather than restricting equity recommendations to directors.

What are the changes proposed to Principle 8: Remuneration in the 5^th Edition?

1. Wording of Recommendation 8.1 amended from “appropriate and not excessive” to “fair and reasonable”.
2. Introduced Recommendation 8.2 on Boards maintaining explicit board discretion to adjust performance-based remuneration outcomes of its senior executives downwards when appropriate.
3. Introduced Recommendation 8.3 about NEDs being remunerated strictly with fixed fees (cash, service-based equity, superannuation), and disclosure of policies in relation to NED share ownership.

What does Guerdon Associates think of the changes?

The consultation queries whether the proposed changes are supported or if there are any practical issues with implementation and/or unintended consequences.

In short, Guerdon Associates does not support the changes.

Principle 8 has always been problematic because of its framing for remuneration to be “fair”. Fair to whom? This was countered to some extent by the 4^th Edition text within the Principle that remuneration be sufficient to attract, retain and, as appropriate, motivate. But, this has now been deleted.

Unless “fairness” is more clearly specified it would be impossible to assess compliance for the “if not, why not” disclosure obligation. Guerdon Associates suggests either the word “fairly” be deleted or the words “sufficient to attract, retain and (for executives) motivate” be inserted.

Why is there nothing on addressing conflicts of interest? The reason for the importance of the Principle is missing its most important duty, that is, to address conflicts of interest.

To remedy these observations, Principle 8 could be re-headed and its description be amended to “align remuneration to company interests” along the following lines:

“Remunerate responsibly

 A listed entity should remunerate its directors and senior executives sufficiently to attract, retain and (for executives) motivate, and align with the Company’s interests.”

Aligning performance and equity

Guerdon Associates also suggests amendments to the Principle’s Recommendations to be less presumptive, less prescriptive, and more effective.

Principle 8.2 assumes that there is performance-based remuneration, infers that it should be further adjustable as if performance is an insufficient determinant, and that adjustments should be downwards only.

Guerdon Associates suggests replacing 8.2 wording with: “Recommendation 8.2: Remuneration to vary with performance”.

This prescribes pay varies with performance and, as such, there is no need to prescribe adjustments or their direction. It would be up to the company to ensure it has a method for this to happen before and/or after payment, and explain why not if it does not.

Guerdon Associates supports retaining Recommendation 8.3(a) as drafted but suggests deleting 8.3(b) as it fails to connect security holdings and requirements for executives – focussing only on directors. This could be replaced with:

“Recommendation 8.4: A listed entity incorporate methods for directors and executives to receive and own equity through their remuneration”

This drafting encompasses both executives and directors and recommends that remuneration facilitate equity ownership.

What comes next?

The consultation window closed on 14 September 2026. Next in the timeline is the Advisory Group’s review of feedback with a recommendation to the ASX Board in December. ASX is aiming for the financial year ending 30 June 2028 to be the first period for the 5^th Edition to be effective.

Guerdon Associates will closely monitor and continue to provide insights as updates are announced. Keep an eye out for changes.

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