ACSI Governance Guidelines Update 2024

Shortly after our last newsletter in December 2023 the Australian Council of Superannuation Investors (ACSI) released its 2024 Governance Guidelines, emphasising critical areas for investor focus.

ASCI made 8 changes involving:

  • Cyber Security and Nature and Biodiversity are 2 new guidelines.
  • Diversity, Safety, Climate Related Risks, the Circular Economy, and Director Elections were refined to better reflect ACSI’s expectations of an evolving corporate landscape.
  • A revamp of the Guideline Structure, designed to support ongoing relevance and usefulness.

Cyber Security

Boards are now expected to pay attention and exhibit proactive governance in cyber security. Companies are urged to use advanced defense strategies and transparently disclose their cyber resilience measures.

  1. Companies should detail how they intend to reduce social harm and protect stakeholders through privacy policies and an appropriate cyber strategy tailored to their risk exposure.  (See HERE).
  2. Board Oversight of cyber security, including notification procedures in the event of cyber security or data breach, should be clearly outlined.
  3. Information about digital security expertise of directors and the external expertise available to the board for advice and assurance is essential.
  4. The processes that management employs to identify, protect against and rectify cyber security risks, and the integration of these risks into the organisation’s overall risk management program, need to be specified.
  5. The ways in which an organisation promotes a culture of cyber security, including cyber security education and testing practices, should be detailed to demonstrate organisational resilience.
  6. The methods used by companies to manage and store data in accordance with their data privacy policies should be disclosed.
  7. Disclose if the company uses scenario testing within the risk management program and whether this includes independent third-party and ethical penetration testing. (See HERE).
  8. Companies should explain their strategies for responding to cyber security incidents, including the identification and notification processes for affected customers or stakeholders.

Nature and Biodiversity

A new section on nature-related financial disclosures encourages companies to align with the Taskforce on Nature-related Financial Disclosures (TNFD) framework, highlighting the financial impact of biodiversity risks. (SEE HERE).

Companies that significantly affect nature and biodiversity are increasingly at risk of legal and reputational damage as regulations in this area become tighter.

The path forward involves a proactive approach to risk management, where companies are expected to:

  1. Adopt the Taskforce on Nature-related Financial Disclosures (TNFD) framework, providing a clear timeline for its implementation.
  2. Integrate biodiversity and nature considerations into their corporate strategy and governance frameworks.
  3. Set and disclose nature or biodiversity science-based targets for various time horizons.
  4. Ensure alignment with the Global Biodiversity Framework, detailing actions to halt and reverse biodiversity loss.
  5. Assess deforestation risks within their operations or supply chains, aiming to eliminate deforestation impacts where applicable.

Risks associated with biodiversity are multifaceted:

  • Physical risks emerge from changes in biodiversity that affect the quality and availability of ecosystem services a company relies on, leading to potential productivity loss, raw material scarcity, and supply chain disruptions.
  • Transition risks are linked to evolving legal, societal, and economic expectations regarding a company’s environmental footprint.
  • Market-wide risks reflect the broader economic dependencies and impacts on nature from company operations that can destabilize critical natural systems or financial stability at a systemic level.

Workplace Safety

The Guidelines highlight the necessity of comprehensive reporting on workplace safety, extending to mental health considerations. Companies must disclose safety metrics and strategies comprehensively, showcasing their commitment to employee wellbeing.


ACSI advises that the Board should include a gender diversity benchmarks and consider on a range of diversity factors when selecting directors, including gender, ethnicity, and other factors. They maintain the 40% men, 40% women, and 20% unallocated guideline for board representation. ACSI also expects no less than 30% representation of any gender. This is unfortunate wording, given that there are now so many varying and debatable gender definitions that a minimum of 30% would not accommodate all of them under some frameworks. It may be best for ACSI to revert to the 2022 standard which suggested a maximum level of dominance for any one gender, rather than a minimum, as in this version.


ACSI notes that the inconsistency in safety reporting and emphasizes the inclusion of mental health within the safety disclosures of companies and the disclosure of serious incidents and ongoing support for workers.

Climate Related Risks

ACSI sets out its expectations for companies to address climate-related risks, including transition plans and policies on just transitions and the use of offsets.

Circular Economy

ACSI expects companies to disclose strategies on resource and waste management, acknowledging the advantages of circular economy practises.

Director Elections

ASCI recommends that each director voluntarily submit themselves for re-election on an annual basis.

Guerdon Associates comment: ACSI provides good arguments for annual director elections that are worthy of consideration. while not specifically mentioned, it would permit owners to act on unacceptable audit and risk outcomes. These committee activities to date have escaped much attention, particularly relative to remuneration committee outcomes. Yet the outcomes for these committees have a far more material impact for investors. Nevertheless, the emphasis in the UK experience still seems fixated mainly on remuneration matters, rather than the more material audit and risk matters.

ACSI advocacy coincides with recent research indicating that staggered elections may be better for longer term returns (see HERE) . 

Annual re-election for directors would allow shareholders to register their displeasure with short-term results (as is the case with remuneration report votes – see HERE), so place pressure on directors for more conservative lower growth policies, hindering R&D and other expensive activities that may add to long term value, but detract from short term profit.

Some may suggest that an annual vote on the re/election of every director could become the lightning rod for protest votes unrelated to an individual director’s performance much the same way that the remuneration report vote has been used in the past.

Another consideration is the impact on the two strikes law. Annual director elections would mute the power of the two strikes law. This law has been shown to get directors’ attention, and has increased the level of engagement between issuers and owners. Most stakeholders would agree that the 2 strikes law, for all its flaws, has worked to get better remuneration outcomes. In contrast, it is yet to be seen that annual director elections in the UK has had a similar impact, possibly due to the higher bar (i.e. more than 50% approval to reject a director, versus 25% for a remuneration report strike).

Currently only companies with a dual ASX and LSE listings provide for annual director elections. While it is early days, ACSI could easily step up its advocacy by deciding not to support director elections, perhaps initially for the chairman, or heads of board governance committees, if annual director elections are not held, then stepping up the pressure on all directors. While we do not expect such actions in the short term, we will have to wait and see how seriously ACSI will push for this over the next few years.

Submitting voluntary resolutions is a panel discussion at this year’s Forum (see HERE).


Key among these updates is the introduction of a voluntary binding vote on executive pay policies every three years, ensuring that shareholders have a direct say in compensation strategies.

Guerdon Associates commentThe level of engagement required to communicate the remuneration policy would challenge boards to communicate the ‘why’ of particular policies and practices, a key challenge which has not been fully addressed to date.

ACSI’s advocacy echoes UK practice. However there are some key differences between the UK and Australia which do not seem to have been fully considered:

  • The UK does not have the 2 strikes law, whereby two consecutive annual remuneration report votes of 25% or more provides shareholders with the option to spill the entire board on the 2nd strike. The UK could not do this because it has annual director elections already (refer above). Most investors and boards would agree that Australia’s 2 strikes law has been very effective at encouraging engagement, and arguably Australia has been more effective in this on remuneration matters than the UK.
  • In practice, the UK experience delivered policies with descriptions in enlarged UK remuneration reports that are very broad, and include enough discretion that the process itself has become meaningless.
  • The ACSI proposal also raises the question of the future of the annual non-binding vote and the 2 strikes law. If there are to be annual director elections as advocated by ACSI (see above), and a binding vote on remuneration policy, then the 2 strikes rule would become redundant.
  • Lastly, a binding vote on remuneration policy every 3 years will remove the “agility” and responsiveness to issues that the annual non-binding remuneration report vote better allows for.

Submitting voluntary resolutions is a panel discussion at this year’s Forum (see HERE).

To increase transparency, there is requirement for companies to disclose the pay ratio of CEO compensation to the median employee.

Guerdon Associates commentThe US has been reporting CEO pay ratios for 2 years. While within industry comparisons between companies are interesting, they have not been utilised in any discernible way by investors or proxy advisers (or remuneration consultants for that matter). As we have noted in earlier articles, the data could be utilised by both sides of the political spectrum (e.g. centre-left policies for equality, and centre-right policies for improved employee productivity and an increase in average wages on the other). So, at this stage it would appear that disclosures with the required accompanying commentary will take up more remuneration report space for little utility. We can see nothing particularly positive or negative in its disclosure.

Recognising the significant role that culture plays in corporate success, ACSI emphasizes a remuneration structure that is reflective of, and contributes positively to, the desired company culture. With a focus on consequence management, remuneration policies are expected to reflect the outcomes of not just successes but also failures.

ACSI continues to characterise pay above target only being considered genuinely at risk to avoid “undeserved bonuses”.

Guerdon Associates comment: As we have noted before, the ACSI guideline, if followed, will result in executive pay becoming less variable with results and capacity to pay. It also is contrary to over a century of behavioural science research that would require performance requirements to be achievable in order to get an employee’s attention and focus.

The guidelines suggest that variable remuneration should be weighted over a three-year period.

Non-Executive Director (NED) Minimum Shareholding Requirements (MSRs) are also addressed. No mention is made of executive MSR requirements.

ACSI advocates for integrating climate targets into the remuneration framework, linking executive pay with the company’s environmental performance and broader ESG goals.

The new Guidelines can be found HERE.

© Guerdon Associates 2024
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