The ASX Corporate Governance Council’s fourth edition of its Corporate Governance Principles and Recommendations has been released. Seven new recommendations and updates to the previous 28 recommendations are aimed at increasing the focus on corporate culture and values and represent a broader set of governance considerations and meeting community expectations.
All listed entities will be required to measure their governance practices against the recommendations from 1 January 2020.
One of the most notable changes is the emphasis on the importance of culture, values and the need to move away from the short term pursuit of profits to a focus on delivering long term benefits and meeting community expectations. This echoes the overarching findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The recommendations state that an entity should articulate and disclose its values; the connection between remuneration practices and company culture is also called out.
The Board is expected to set the tone from the top – defining the entity’s purpose and approving its values statement and code of conduct.
Boards should have an appropriate number of independent directors, ensure that there is an effective framework for management reporting to the board and hold management to account.
Directors should receive copies of material market announcements promptly so that they are properly informed.
Listed entities need to review their Governance Frameworks to ensure that the relevant charters and policies are updated and adopted to meet the revised recommendations. These include:
The Council encourages early adoption, and whilst listed organisations are not obliged to adopt the principles and recommendations, companies need to report on any principles and recommendations that they decide not to adopt and outline why they have not been adopted.
Please contact Mertons if you would like advice or support in meeting the recommendations.
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