Are you planning to early adopt the new Corporate Governance Principles?
For most Australian listed companies (the bulk of listed companies have a 30 June balance date) reporting season is upon them again. The ASX Corporate Governance Council released the fourth edition of the Corporate Governance Principles and Recommendations in February 2019 with an effective date of the first full financial year starting on or after 1 January 2020. This means companies with a 31 December balance date will be expected to measure their governance practices against the recommendations in the fourth edition commencing with the financial year ended 31 December 2020. Entities with a 30 June balance date will be expected to measure their governance practices against the recommendations in the fourth edition commencing with the financial year ended 30 June 2021. When releasing the fourth edition, the Council encouraged listed entities to adopt the new edition earlier, if they wish.
Governance Institute of Australia thought it might be helpful for members to find out whether many companies are planning to adopt the new edition early. We carried out an informal survey of some of our Policy Committee members and asked which edition they were planning to use for their reporting for the most recent financial year. The result was a mixture of yes and no, with some members responding that they would adopt what they could immediately, and work towards adopting the other principles and recommendations for the following financial year.
Whether they were planning to adopt early or not, almost all members reported that they had started considering what impact the new edition will have on their existing practices. Several members also mentioned they were using the release of the fourth edition to do a ‘stock-take’ or mapping exercise of their current practices.
Some of the areas members highlighted were:
- The measurable objective for achieving gender diversity in board composition for S&P/ASX 300 companies of 30 per cent was mentioned as one recommendation to adopt early given it is forward-looking
- Where companies were planning to early adopt and report on as much as possible against the 4th edition, they are planning to include introductory statements to this effect in this year’s Corporate Governance Statement
- Companies planning to early adopt and report on as much as possible this financial year commented they would use the current Appendix 4G for this year’s Report and move to the new Appendix 4G for the next reporting season.
The new Corporate Governance Principles and Recommendations is a vital document for governance professionals reporting on key issues, such as culture and ethics, workplace diversity, and environment/sustainability risk. It is an excellent ‘best practice’ guidebook for any organisation to develop, measure and reinforce good governance reporting principles, whether listed or not.
Our Insight on the Corporate Governance Principles and Recommendations outlines the key changes and some suggested actions.
Governance Institute is a founding member of the ASX Corporate Governance Council and was a member of the Drafting Committee for the fourth edition.
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