Australia continues to push the boundary on corporate governance best practice
The new ASX Corporate Governance Council's principles and recommendations uphold Australia's global standing at the forefront of corporate governance best practice.
The guidelines, produced by the Council in conjunction with leading Australian business, professional and stakeholder groups, significantly strengthen the corporate governance and reporting framework in which Australian public companies are directed and managed, and aim to promote investor confidence through integrity and efficiency.
Principles and recommendations
The Council's guidelines are organised around 10 principles, derived from the Organisation for Economic Cooperation and Development's (OECD's) core principles of good corporate governance. Each principle is accompanied by a series of best practice recommendations in addition to specific guidance on disclosure.
Broadly, the principles cover the roles of the board and management; integrity and ethical decision-making; company reporting and disclosure; shareholder rights; internal control and risk management; remuneration policy; and stakeholder interests.
While the recommendations are not mandatory, companies are obliged to report with close reference to them. The ASX Listing Rules stipulate that companies must include in their annual report a statement disclosing the extent to which the recommendations have been followed during the relevant reporting period. If any recommendations have not been followed, companies must identify which recommendations these are and give reasons for the departure.
Flexibility
There is no single model for good corporate governance, and as such the Council has provided for flexibility by allowing for differences in size, complexity and operations of different companies. The Council also recognises that there are differences in how organisations create environments for innovation and reasonable risk taking, while also providing effective accountability. In this sense, while the "if not, why not" reporting requirement must be borne in mind, the recommendations are exactly that - recommendations, not rigid prescriptions.
