The ASX Corporate Governance Council (ASX CGC), established in 2002 as an independent body and ultimately comprised of 19 industry groups, is now defunct.
Following the failure of the ASX CGC to agree on revisions to the current 4th edition of the ASX Corporate Governance Principles and Recommendations earlier this year, after a fruitless 2.5 year drafting and consultation process, the ASX took charge and convened an expert Panel chaired by governance doyen Quentin Digby to consider where to next for the governance of listed entities.
The Panel has made a series of recommendations, all of which the ASX has agreed to implement.
In summary
ASX will take responsibility for the Principles and Recommendations, rather than the independent ASX CGC. The ASX Board will make decisions concerning revisions to the Principles and Recommendations.
The 19-member ASX CGC will be replaced by an Advisory Group, comprising an independent chair and a total of 6 to 10 members, to advise the ASX Board. The members of the Advisory Group will participate in their individual capacity, and not as representatives of any industry or professional group. The concept of representation has been abandoned. The idea is that members of the Advisory Group will be comprised of people who “live” corporate governance.
The Principles and Recommendations will be reviewed on a fixed 4-year cycle. The reviews may involve a holistic reassessment of the form of the principles and recommendations (with an unstated acknowledgement that the document should be more concise).
The Advisory Group will be supported by an expert secretariat, funded by the ASX.
The Advisory Group will consult broadly on each review of the Principles and Recommendations.
The “if not, why not” approach will be retained.
Implementation of the new regime:
ASX has now appointed former RBA Governor Philip Lowe to chair the Advisory Group.
A charter and skills matrix has been developed, in accordance with good governance practice.
ASX has called for nominations for members of the Advisory Group – to comprise up to 10 members.
Comment
The new arrangements for the administration of the ASX Corporate Governance Principles and Recommendations are welcome: the ASX will control the new body, it will be smaller and more manageable that the ASX CGC, and the commitment to regular 4-year reviews provides a degree of certainty that the principles and recommendations will remain relatively current in an environment of constant change. The 4th edition was finalised in February 2019 – the governance world has been transformed since then.
The Advisory Group is expected to complete its first review of the Principles and Recommendations well within 4 years – hopefully by the end of 2026, and hopefully with a much more concise code than the 4th edition.
The author of this article, Tim Bednall, was the Law Council of Australia’s representative on the former ASX CGC.)
