The ASX Corporate Governance Council has recently released a package of consultation materials for a proposed fifth edition of its Corporate Governance Council Principles and Recommendations. Since its inception, the document aspires to represent a leading standard on corporate governance, and addresses important issues such as corporate conduct, culture, diversity, risk management, reporting, and remuneration.
The significant proposed changes are as follows:
- Proposed Recommendation 3.3 emphasises consideration of key stakeholders’ interests, requiring engagement processes and reporting of material issues to the board. Stakeholder relevance is integrated into governance structures, highlighted in commentary on board roles. Enhanced stakeholder engagement extends to AGMs, advocating for hybrid meetings and addressing significant ‘against’ votes.
- Proposed Recommendation 2.2 mandates disclosure of a board skills matrix, detailing current and desired skills.
- Proposed Recommendation 2.2 now mandates disclosure of the process for assessing directors’ skills and experience. Best practice involves explaining the assessment methodology, clarifying skill definitions in the board skills matrix, and outlining criteria for directors to possess those skills.
- Proposed Recommendation 2.3 mandates disclosure of a measurable objective and timeframe for achieving gender diversity on the board. Additionally, it requires disclosure of other diversity considerations like age and ethnicity, with a new inclusion of a timeframe for achieving diversity goals.
- Proposed Recommendation 2.3 for S&P/ASX 300 Index companies shifts from a minimum requirement of 30% gender representation to aiming for a ‘gender-balanced board’ with at least 40% representation of each gender or up to 20% for any gender.
- Proposed Recommendation 3.2 mandates disclosure of outcomes from actions taken by a listed entity in response to material breaches of the code of conduct, presented on a de-identified basis.
- Proposed Recommendation 8.3 mandates listed entities to implement remuneration structures allowing clawback or performance-based remuneration limitations for senior executives. Additionally, it requires disclosure of the use of these provisions during the reporting period, presented on a de-identified basis.
- Proposed Recommendation 7.4 would require a listed entity to disclose its material risks (including its material environmental, social and governance risks).
- A number of minor changes appear to align with the upcoming mandatory climate reporting requirements.
As part of the process, the Council is seeking feedback from those who want to express their opinion(s) on these important matters. All interested parties can review the relevant documentation and access the online submission form at the ASX Corporate Governance Council’s webpage. The Council is seeking submissions by Monday 6 May 2024.
GRT Lawyers encourage all listed entities to access the materials and participate in the consultation process.
