The ASX Corporate Governance Council Corporate Governance Principles and Recommendations (4th ed, 2019) (Principles and Recommendations) describes corporate governance as ‘the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled within corporations. It encompasses the mechanisms by which companies, and those in control, are held to account.’ At the minimum, the concept centres on the need for rules to ensure accountability, transparency and oversight in decision making. At a basic level, corporate governance is all about ensuring that a company is running in the right direction and is being run well.
There are many additional key elements in sound governance practices, of which risk management and corporate culture has received recent prominence. In 2019, the fourth edition of the ASX Corporate Governance Principles and Recommendations was amended to highlight the role of corporate culture to now state that the corporation should ‘instil a culture of acting lawfully, ethically and responsibly.’ The role of the board is to lead by example and to set the tone from the top. However, we are also reminded by the Financial Services Royal Commission that a company must do more than not break the law; it must seek to do ‘the right thing.’1