Last week, ASIC released its roadmap to promote strong, efficient, and globally competitive capital markets in Australia. The Roadmap had its genesis in the February 2025 ASIC discussion paper examining the shifting dynamics between public and private markets in Australia. It highlighted issues such as declining public listings, rapid growth in investment capital allocated to private markets, and the growing significance of superannuation funds.

This aligns with similar observations elsewhere in the world, including the UK with its Capital Markets Industry Taskforce (CMIT).

To an extent, the divergence of global capital; to private markets and even between public markets appears, appears to stem in large part from governance arbitrage. Simply put, the governance and regulatory standards between private and public capital and between public markets in different geographies are so significant that, even on a risk adjusted basis, investors are willing to put aside the protection, liquidity, and assurance of public markets for the opacity, illiquidity, and uncertainty of private markets, including the sometimes cowboy antics tolerated by less rigorous public markets.

Executive pay raised concerns in the 2023 UK review as having increasingly prescriptive corporate governance requirements, and was cited as a driver for loss of listings. See the 3 summary reports each with very simple and direct questioning of executive remuneration governance standards, issued from The CMIT Conference – Corporate Governance Workshop – Discussion Materials, HERE.

Comparable concerns have emerged in Australia. Alas, in a worrying sign that perhaps the regulator may be too remote from a nuanced understanding of some capital markets drivers, ASIC’s discussion paper did not directly consider how remuneration and governance expectations may affect listing decisions. It made up a bit of ground with its response released last week, when it addressed remuneration themes and questions raised by stakeholders. These are below with comments from us in italics as required.

Remuneration reporting

Australia’s reporting requirements are more prescriptive and broader in scope than comparable jurisdictions, and uniquely require the remuneration reports to be audited.

GA: Typically UK public companies report more, but for fewer positions (typically the CEO and CFO). The US reports for more positions, but reports less. While ASIC does contrast the disparate reporting requirements between private and public capital, it fails to acknowledge that executive pay effectively lacks any transparency in private markets. While some Australian superannuation funds may publicly disagree, we know their representatives on private capital boards oversee executive remuneration levels and structures that they do not tolerate when disclosed in public companies.

Stakeholders highlighted that current remuneration reporting rules can be overly burdensome for boards and management. This may affect the perceived cost-benefit balance of remaining listed for some organisations.

GA: Australia’s unique 2 strikes rule has had a galvanizing impact on public company board deliberations such that it preoccupies director time out of all proportion to its material impact. Further, this compliance requirement feeds into a self-perpetuating eco-system of in-house investor governance personnel, proxy adviser agencies, board advisers, management rewards personnel, and news media that, arguably, exacerbates the burden on Australian boards out of all proportion to other markets.

ASIC acknowledged that simplifying remuneration reporting would require legislative change, as the current requirements are embedded in the Corporations Act.

The two strike rule

Stakeholders raised several concerns regarding the two-strike rule, including:

• That the rule is not being used as intended, but instead, to express dissatisfaction with boards on a wider range of issues, rather than to have a say on executive pay
• Remuneration votes take up significant time and attention
• 25% threshold gives unproportional power to minority shareholders

GA: While most directors and investors would agree, we also observe that these other issues frequently become conflated with remuneration issues as well, as if to justify the “no” votes. Discerning what drives “no” votes and, in any event, trying to address all conceivable remuneration and non-remuneration issues, takes unnecessary time and resources.

The UK Investment Association has recently removed its 20% threshold for noting remuneration voting as “high”, in effect now having no threshold. This is probably the right way to go, given no such thing exists in private markets. The two strikes law in Australia, combined with its 25% threshold has uniquely seen Australian executive pay at the same levels as 2011, and still under 2009 levels, when the even the dissipating capital markets public company executives oversee, has doubled in value from A$1.4 trillion to $2.8 trillion. Further, Australian public capital markets remain concentrated in 2 sectors protected by unique Australian moats (financial services and resources), and dismally fail to nurture industries attracting global capital flows, such as technology, which pay more, and differently, to prevailing Australian standards.

Some stakeholders suggested that the rule may reduce the willingness of highly experienced candidates to serve on listed company boards. This may, in turn, influence board renewal and talent strategies.

GA: As an adviser to private and public boards, we observe this frequently. Moreover, we see the data. A PE portfolio company CEO can earn considerably more than their public sector counterpart, be laser focussed on delivering a 5 to 7 year end point return on invested capital, and not have to endure invasive media and personal scrutiny nor short termism arising from public pay and ESG disclosures.

ASIC stated that they support the policy intent behind the rule but acknowledged concerns about its application in its broader context. They noted that it is a complex policy matter for government consideration rather than regulatory adjustment.

Insider trading

ASIC acknowledged a change to Australia’s insider trading prohibition was previously recommended by the Corporations and Markets Advisory Committee in 2003 and by the Senate Select Committee on Financial Technology and Regulatory Technology in 2021. Trading plans – known as Rule 10b5-1 plans in the US – have a long history allowing executives and other insiders to establish pre-set trading plans that facilitate the orderly sell down of shares, even when they may otherwise be deemed to have ‘inside information’.

GA: Executive ownership is supposed to create shareholder alignment, but as insiders they lack the liquidity and ability to diversify enjoyed by other investors. We have long advocated for change and have made various submissions spanning 2 decades (for example, see HERE, HERE and HERE).

Overall

GA: The ASIC response does not sound promising. It suggests that most fixes require legislative change. This may not be just a case of changing the rules (and in this regard, do not forget that ASIC is a regulatory agency as well as enforcer). While the ASX has flagged it will do away with the ASX Corporate Governance Council and its remuneration guidelines (see HERE ), Australia has not yet had the equivalent of the UK Capital Markets Industry Taskforce (CMIT) to ginger up action from all stakeholders.

For the ASIC discussion paper published in February see HERE.

For the ASIC response – Advancing Australia’s evolving capital markets: Discussion paper response report – see HERE.

For the media release – A roadmap for capital markets to grow our economy – see HERE.

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