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ASX Corporate Governance Principles to be updated

The ASX Corporate Governance Council has released a communiqué on its recent work programme and it proposal to make changes to the ASX Corporate Governance Principles and Recommendations (‘the ASX Code’) with an expected implementation date from 1 July 2010.

Following the publication of the Corporations and Markets Advisory Committee (CAMAC) earlier in 2009 of a report on board diversity, there will be a number of new recommendations included in the ASX Code:

  • Each listed entity recommended to establish a diversity policy that includes measurable objectives relating to gender as set by the board of the entity, with the policy to be disclosed in full or in summary;
  • Each listed entity recommended to disclose in its annual report its achievement against the gender objectives set by the board of the entity.
  • Each listed entity recommended to disclose in its annual report the proportion of women employees in the whole organisation, in senior management and on the board.

There are also amendments proposed to two existing recommendations.

In light of CAMAC’s report of June 2009, ‘Aspects of Market Integrity’, the implications for the ASX Coden the issue of trading by company directors in ‘blackout’ periods will be assessed after the ASX’s proposed listing rule changes are finalised.

Box 6.1 under Principle 6 will be amended in relation to the disclosure of topics discussed at corporate briefings to analysts.

As discussed here previously, in October the Productivity Commission released a detailed discussion document outlining a series of reforms which it hopes will  improve board accountability, remove conflicts of interest and enhance shareholder engagement on remuneration.

It is proposed to amend the ASX Code for all companies so that the existing suggestion that majority of the remuneration committee should be independent and that the committee should be chaired by an independent director, will be elevated to an ‘if not, why not’ recommendation. The ASX Listing Rules will be amended so that companies in the top 300 will be required to adopt a remuneration committee on the same basis as the recommendation for all companies.

The ultimate changes to the ASX Code on remuneration will depend on the final recommendations of the Productivity Commission and the extent to which they are adopted by the Australian Government.

An exposure draft of the proposed changes to the ASX Code is expected to be released for public consultation in early 2010.

Further Reading

CAMAC: ‘Diversity on Board of Directors’

CAMAC: ‘Aspects of Market Integrity’

Productivity Commission: ‘Executive Remuneration in Australia’

ASX Corporate Governance Council Communiqué

What do you think?