ASX Corporate Governance Principles

Annual report disclosures are required to indicate if they comply with ASX Corporate Governance Council’s Principles and Recommendations (ASX CGP&R), and if not, why not. Proposals are in train to change these  for the proposed fifth edition of the ASX CGP&R. Some of the changes pertain to director and executive remuneration.

While the eight core principles have been retained with some changes to expression, the Council proposes to decrease the number of general recommendations to 33 from the 35 in the 4th edition. There are additionally 7 recommendations that apply in limited cases. Recommendations have been removed where there is significant regulation or duplication by Australian law and is instead incorporated within commentary.

The recommendations removed for regulatory overlap are as follows:

  • Disclosure of whistle-blower policy (3.3)
  • Disclosure of anti-bribery and corruption policy (3.4)
  • CEO and CFO declaration for financial statements (4.2)
  • Substantive security holder resolutions on a poll (6.4)
  • Offering electronic communications to security holders (6.5)
  • Separate disclosure of remuneration policies for non-executive directors, other directors, and senior executives (8.2)
  • Policy on hedging of equity-based remuneration (8.3)

In particular, the Council encourages feedback on the proposed deletion of recommendation 3.3, due to the adequacy of whistle-blower policies also being a matter of focus by ASIC.

Notable changes have occurred to encourage companies towards greater disclosure and push for stakeholder engagement, reflecting the evolving expectations of corporate governance in Australia.

Stakeholder Engagement

Significantly, under new recommendation 3.3, “entities should have regard to the interests of stakeholders, including having processes for the entity to engage with them and report material issues to the board”. The commentary asks entities to regularly review key stakeholders and have appropriate board reporting processes, where a developed understanding of stakeholder perspectives is expected to result in informed decision-making that is consistent with the long-term interests of security holders. This recommendation recognises the importance of an entity’s relationship with stakeholders to effective governance structures and will increase pressure for engagement around AGMs in response to protest votes.

The disclosure of board skills matrices under Principle 2 has been amended, with the consultation draft proposing that entities disclose a board skill matrix of skills the board currently has, and is looking to have, in addition to disclosing the process for assessing the relevant skills and experience held by directors. While this amendment is a step towards greater transparency, there is no prescribed format for a board skills matrix and entities can exclude commercially sensitive information. Hence, the large variation in transparency and disclosure between entities is expected to continue despite the amendment.


Following research conducted on behalf of the Council, it was discovered that there were low-quality disclosures of the 4th edition’s audit practices recommendations regarding verification of reports not audited by an external auditor. Common issues included entities not specifying who verified the integrity of corporate reports that were not audited or reviewed by an external auditor, and the process in which verifications were undertaken. To emphasize audit quality, the Council has revised recommendation 4.2 to expand the level of disclosure to all periodic corporate reports and added proposed recommendation 4.3 in which a listed entity is to disclose:

  • the tenure of the audit firm and audit engagement partner
  • when the appointment of the external auditor was last comprehensively reviewed the outcomes of the review

Under revised recommendation 3.2, in addition to ensuring that the board or board committee is informed of any material breaches of the code of conduct, listed entities are to disclose the outcomes during the last reporting period of actions taken in response to material breaches of the code of conduct. Disclosures should be on a de-identified basis and will need to account for obligations under applicable law, with an example being confidentiality under whistleblower regime.

Proposed recommendation 7.4 revises existing reporting practices and management of risk, where rather than identifying specific risks for all entities to disclose against, a listed entity would identify and disclose material risks. Under this revision, it is no longer a requirement to report against the ESG categories individually and instead focuses on governance risk, with climate and sustainability reporting as an option to assisting entities in considering their risks.


The Council has further committed to achieving diversity with measurable objectives, with proposed recommendation 2.3 requiring a gender diverse board with a target of at least 40% women and men, and up to 20% of any gender while disclosing the progress in achieving this target. This is a step up from the 30% of directors of each gender required in the 4th edition and is in recognition of how this objective was exceeded, with women holding approximately 35% of all S&P/ASX300 directorships.

The Council has also taken steps for diversity outside of gender, prompting entities to disclose other diversity characteristics to be considered for board membership such as ethnicity.

Director Independence

The consultation draft now clarifies factors relevant to assessing the independence of directors, replacing the references to “substantial holder” with proposed “10% holder” (box 2.4). While substantial holder broadly related to a security holding interest of 5% or more, this amendment reflects the existing significant regulation relating to conflicts of interest and gives a concrete baseline for what is now considered a “substantial holder”.


For listed entities included in the S&P/ASX 300 at the beginning of the year, remuneration committees are now to be comprised solely of non-executive directors for the entire duration of the financial year. This is intended to promote board independence and good governance.

Recommendation 8.3(a) would require remuneration structures with clawback or otherwise limited performance-based remuneration of senior executives after award. Recommendation 8.3(b)  requires disclose of the use of those provisions during the reporting period on a de-identified basis. The Consultation Draft commentary recognises that an entity may exclude disclosure of outcomes to the extent that actions are not finalised or cannot be appropriately de-identified.

Recommendation 8.3(b) probably needs some more work to clarify what needs to be disclosed. It is difficult to de-identify when there are just 3 to 5 executive KMP disclosed in each annual reporting period.

The Council is calling for submissions on the proposed changes of the consultation draft by 6 May 2024. It is anticipated to take effect for financial years commencing 1 July 2025.

See the consultation materials for the proposed 5th edition of Principles and Recommendations HERE.

See our previous article on the 4th edition HERE.

© Guerdon Associates 2024
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