ASX and APRA are each undertaking significant governance reform processes, with ASX consulting on a draft fifth edition of the ASX Corporate Governance Principles and Recommendations and APRA consulting on draft Prudential Standard CPS 510 Governance. Mallesons made submissions on both processes, supporting stronger and more contemporary governance while emphasising flexibility, proportionality, reduced duplication and practical workability. The two processes should be considered together because many listed financial institutions will need to navigate both the ASX governance framework and APRA’s prudential standards and both raise common issues.
A significant governance reform moment
The ASX Corporate Governance Principles and Recommendations have been a central feature of Australia’s listed market governance framework for more than two decades. ASX has described the draft fifth edition as an evolution, not a redesign, retaining the eight high-level Principles and reinforcing the “if not, why not” approach. That approach recognises that there is no single model of good governance for every listed entity, and it allows boards to adopt governance practices suited to their circumstances if they explain their approach to the market. The proposed fifth edition also seeks to remove duplication with law, draw a clearer distinction between Principles, Recommendations and Explanatory Material and reflect contemporary governance practice. ASX has proposed that entities commence reporting against the new Principles from financial years commencing 1 July 2027.
APRA’s governance review is directed at a different, but overlapping, part of the governance landscape. Draft CPS 510 would consolidate five existing prudential standards covering governance, fit and proper and conflicts of interest into a single cross-industry governance standard. APRA has said the proposed changes are intended to strengthen and modernise board governance, improve organisational efficiency and remove duplicative fit and proper reporting now that the Financial Accountability Regime is in place. APRA expects final CPS 510 and related guidance to be released in late 2026, with the new requirements expected to take effect from early 2028.
Our submission on the draft ASX Corporate Governance Principles
We submitted that the ASX Advisory Group should retain the eight Principles and the “if not, why not” reporting model. We also submitted in favour of the sharper distinction between Principles, Recommendations and Explanatory Material, because clearer architecture would assist preparers and readers of corporate governance statements. We welcomed the proposed movement of prescriptive policy detail into ASX resources rather than embedding it in the Recommendations, because practical guidance could then be updated more readily and would be less likely to be treated as a quasi-legal standard. More broadly, we submitted that the Advisory Group should preserve the principles-based character of the regime and avoid reforms that encourage a “tick the box” compliance culture.
A central theme of our ASX submission was the need to reduce regulatory overlap. We submitted that material duplicating the Corporations Act, ASIC regulatory guides and ASX Listing Rules should be removed or relocated. We noted that restating legal obligations can create uncertainty about whether compliance with the underlying law is sufficient or whether a Recommendation imposes a separate, higher standard. We also submitted that the Appendix 4G should be removed, because it can encourage a box-ticking approach inconsistent with “if not, why not” reporting and is out of step with peer jurisdictions.
We encouraged moving away from a prescriptive Recommendation on a board skills matrix. This is because boards are best placed to determine the balance of skills, knowledge and experience they need and to disclose the outcome of that assessment in the form most useful to investors. We submitted that a skills matrix should remain available as an optional explanatory tool, but should not be mandated as the preferred form of disclosure. We also argued in favour of a more flexible approach to director independence, including replacing the bright-line “last three years” test with a concept of “recent” association and recognising that directors associated with 5% to 10% shareholders may be independent depending on the circumstances.
Our submission supported the draft fifth edition’s more balanced approach to diversity, culture, risk and remuneration. We supported the decision not to require numerical targets or individual director disclosure for broader diversity characteristics, given the practical and privacy issues such disclosure may raise. On remuneration, we submitted that the proposed downward-adjustment Recommendation was an improvement on the more prescriptive clawback proposal in the 2024 exposure draft, while recommending explicit recognition that existing malus triggers suffice, including where aligned with CPS 511 and the Financial Accountability Regime.
Our submission on APRA’s governance review
We welcomed APRA’s revisions to its original governance proposals and were generally supportive of the outcomes. We nevertheless identified areas where draft CPS 510 should be clarified or refined so the standard is workable in practice. That emphasis was important because APRA’s draft CPS 510 would impose mandatory prudential obligations, rather than “if not, why not” expectations. Our submission therefore supported stronger governance while emphasising proportionality, clarity and reduced duplication.
On skills and capability, we submitted that boards should have a view of the skills directors should have collectively, not individually. We recommended clarification to ensure the standard does not require each individual director to have their own mix of skills. We also suggested that APRA consider permitting regulated entities to address required board skills by means other than a skills matrix, along the lines proposed by ASX.
On independence, we welcomed APRA’s removal of the requirement that directors sit on only one group board. We recommended that APRA’s adoption of independence criteria from the fourth edition of the ASX Corporate Governance Principles be updated to reflect the outcome of the current ASX consultation. We also noted that APRA had taken criteria used in an “if not, why not” framework and applied them as mandatory criteria and submitted that some flexibility in application would be appropriate.
The APRA submission also raised drafting and operational concerns. We recommended replacing repeated references to “effective” because an outcome-based test may only be measurable in hindsight and could create ongoing compliance and operational risks. We recommended reverting to the current definition of “responsible person” rather than leveraging Financial Accountability Regime concepts in a way that could create uncertainty or obligations in respect of persons beyond a regulated entity’s practical control. We also submitted that the proposed definition of “interest” was too broad for an operational conflicts management regime because it may capture benefits to employees or associates across a corporate group.
Our APRA submission was particularly focused on implementation. We recommended clarifying delegation rules, recognising that appointing an agent is a form of delegation not contemplated in the draft and explaining unclear concepts such as “risk-based” delegation. We also recommended an automatic mechanism to allow time to fill casual and unplanned board vacancies without immediate breach, such as where a director dies. On fit and proper, we submitted that failure of an assessment has significant consequences and that untested allegations of misconduct should not automatically result in failure. We also submitted that boards should adopt artificial intelligence governance policies and procedures, particularly given risks associated with confidentiality, legal professional privilege and reliance on artificial intelligence outputs without rigorous human verification.
Common themes
The submissions shared a consistent policy position: governance regulation should promote sound judgement, accountability and transparency, not mechanical compliance. In the ASX context, that means preserving the “if not, why not” model and avoiding a checklist-style framework. In the APRA context, it means ensuring that mandatory prudential requirements are clear, proportionate and workable.
A second common theme was the need to reduce duplication and align governance reforms with existing regulatory regimes. This is consistent with the broader official policy context for financial-sector regulatory co-ordination, including Treasury’s focus on reducing unnecessary duplication and improving sequencing of linked initiatives. APRA’s CPS 220, CPS 511 and CPS 230 already contain important requirements on risk management, remuneration and operational risk, and our submissions advocated reform settings that work with those regimes rather than duplicating or complicating them.
Practical implications
Boards should treat the ASX and APRA reforms as an integrated governance workstream rather than as isolated consultations. Listed entities should map the draft fifth edition against their corporate governance statement, board and committee charters, governance policies and annual reporting timetable. APRA-regulated entities should separately map draft CPS 510 against their governance framework, delegations, conflicts framework, fit and proper processes, board skills documentation and renewal planning. Entities should ensure that flexible ASX expectations are not converted into mandatory internal rules unless that is a deliberate board decision.
Board and committee charters should be reviewed early. For ASX-listed entities, the review should test whether the charter reflects the board’s role in stakeholder engagement, culture oversight, risk oversight, reporting integrity and remuneration governance under the proposed fifth edition. For APRA-regulated entities, the review should focus on core board responsibilities, documented delegations, committee composition, decision-making processes and information flows to the board.
Governance frameworks, conflicts policies, fit and proper processes, remuneration policies and incentive plans should also be reviewed. In-house counsel should identify which documents are board-approved, which are management-owned and which can be updated through ordinary policy review cycles once the final reform settings settle. Boards should pay particular attention to the appropriateness of malus triggers, downward-adjustment discretions, how board skills assessments are disclosed and diversity incorporated in succession planning, whether directors have any interests, positions or relationships that could raise questions about independence, the mechanisms in place to monitor culture and its approach to non-executive director ownership of securities.
Companies should not wait for final rules before beginning implementation planning. Much of this work is “low-regret” because it involves clarifying roles, improving governance documentation, ensuring appropriate discretions in incentive plans, refreshing skills and renewal planning, strengthening conflicts management and improving the quality of board information. Longer lead-time items are likely to include external review cycles, tenure and succession planning. In-house counsel may find it helpful to prepare a regulatory change plan that identifies the various documents and processes that will need to be updated to reflect the final reforms, and associated timelines.
Conclusion
The ASX and APRA governance reform processes are different in legal effect, but they point to the same strategic priority: governance frameworks must be clear, contemporary and capable of supporting real board oversight. Mallesons’ submissions supported that objective while urging regulators to preserve flexibility, proportionality, clarity, reduced duplication and respect for board judgement.
Mallesons will continue to engage closely with these developments and assist boards, governance professionals and in-house counsel to prepare for the next phase of Australian governance reform.
