The final version of the fourth edition of the ASX Corporate Governance Principles and Recommendations was released in February 2019. The following email provides further insight on the proposed changes and recommendations which will take effect for an entity’s first full financial year commencing on or after 1 January 2020.
Although these principles and recommendations are prepared for ASX listed entities, they also represent best practice for private companies and can be used as a starting point for such entities looking to achieve best practice.
This edition has the same structure, being eight core principles, supporting recommendations, and commentary with guidance on implementing the recommendations. The fourth edition also maintains the same flexible, non-mandatory ‘if not, why not’ approach to disclosure as in the prior edition.
The fourth edition has 35 recommendations of general application, seven of which are new, being:
Recommendation 3.1: A listed entity should articulate and disclose its values.
Recommendation 3.3: A listed entity should:
- have and disclose a whistleblower policy; and
- ensure that the board or a committee of the board is informed of any material incidents reported under that policy.
Recommendation 3.4: A listed entity should:
- have and disclose an anti-bribery and corruption policy; and
- ensure that the board or a committee of the board is informed of any material breaches of that policy.
Recommendation 4.3: A listed entity should disclose its process to verify the integrity of any periodic corporate report it releases to the market that is not audited or reviewed by an external auditor.
Recommendation 5.2: A listed entity should ensure that its board receives copies of all material market announcements promptly after they have been made.
Recommendation 5.3: A listed entity that gives a new and substantive investor or analyst presentation should release a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation.
Recommendation 6.4: A listed entity should ensure that all substantive resolutions at a meeting of security holders are decided by a poll rather than by a show of hands.
The two new recommendations that only apply to a small subset of listed entities are:
Recommendation 9.1: A listed entity with a director who does not speak the language in which board or security holder meetings are held or key corporate documents are written should disclose the processes it has in place to ensure the director understands and can contribute to the discussions at those meetings and understands and can discharge their obligations in relation to those documents.
Recommendation 9.2: A listed entity established outside Australia should ensure that meetings of security holders are held at a reasonable place and time.
Other key changes
The new edition also included key changes in relation to culture and values, and gender diversity.
Inclusion of these issues were considered vital to address the recent loss of trust in business, as a result of various commissions and enquires over the past years. The changes to principle 3 are intended to address culture and value, which now provides that a listed entity should ‘instil and continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly’.
The other key change concerned the expanding of recommendation 1.5 (diversity) to state that the board of a listed entity should set measurable objectives for achieving gender diversity, not only in the composition of its board but also in its senior executive ranks and its workforce generally.
We recommend that companies start to give consideration as to what changes need to be made to their policies and procedures. We would be pleased to assist with any review of existing policies and procedures, or proposed changes to them, ahead of their adoption and implementation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.