ASX’s supervision subsidiary, ASX Markets Supervision (ASXMS), reviewed the FY08 annual reports of 1,510 listed entities that reported with a 30 June year end date, representing approximately 72% of all listed entities.
Overall reporting levels – the aggregate of adoption of recommended practices and of ‘if not, why not’ reporting – rose to 96.3% in 2008, up from 90.5% last year. This is the highest level since ASX began the annual review in 2004. The overall reporting level for the top-500 listed entities also increased, rising to 97.6% in 2008, up from 94% in 2007.
The number of Recommendations with overall reporting levels greater than 90% (ie over 90% of listed entities adopted the recommended practice or provided an ‘if not, why not’ explanation) increased to 25 out of 28 Recommendations (17 out of 28 in 2007). Among top-500 listed entities, 27 out of 28 Recommendations achieved reporting levels of at least 90% (24 out of 28 in 2007).
Eric Mayne, Chair of the ASX Corporate Council and Chief Supervision Officer of ASX, said: “Overall corporate governance reporting levels have risen over five successive years, highlighting the desirability of Australia’s flexible, principles-based approach to corporate governance. Investors are more informed than ever before about the corporate governance practices of listed entities, and entities themselves know the importance of being transparent about their governance arrangements.
“Good corporate governance is not restricted to a mandatory adoption of the Recommendations. It can also exist where entities use ‘if not why not’ reporting; that is, where entities identify the Recommendations they have not followed, disclose why they have not followed them, and explain how their practices accord with the spirit of the relevant Principle. This is encompassed in the ASX Listing Rule.
“The ‘if not why not’ mechanism enables entities to explain to the market the governance practices they consider appropriate to their circumstances. This flexibility has contributed to the continued improvement in overall reporting levels, as have the increased awareness of good corporate governance generated by ASXMS’s annual reviews and the public consultation by the ASX Corporate Governance Council prior to the publication of the revised Corporate Governance Principles and Recommendations in August 2007. The revised Principles, which took effect from 1 January 2008, will be the subject of ASXMS’s future reviews.”