New ASX Corporate Governance rules apply to 31 December 2020 financial statements of listed entities

ASX Listing Rule 4.10.3 requires all ASX listed entities (including foreign entities), to include in their annual report, either a Corporate Governance Statement, or a URL of the page on its web site where a Corporate Governance Statement can be found. The Corporate Governance Statement (wherever situated) must disclose the extent to which the entity has followed the recommendations of the ASX Corporate Governance Council during the reporting period on an ‘if not, why not’ basis.

The ASX Corporate Governance Council’s Fourth Edition of its Corporate Governance Principles and Recommendations (Fourth Edition) applies to listed entities from 1 January 2020.  Directors and boards should therefore be aware that listed entities with 31 December 2020 reporting dates have to measure their governance practices against the Fourth Edition recommendations.

Key changes

The key changes introduced in the Fourth Edition include:



Included in Fourth Edition

Gender diversity (all entities)

Clarifies that the measurable objectives for achieving gender diversity is to specifically focus on the entire entity, i.e. the board, senior executives, and the workforce generally.

Recommendation 1.5(b)

The board may wish to consider setting KPI targets for senior executives on gender participation in their areas of responsibility, and linking part of their remuneration to the achievement of these KPIs.

Commentary to Recommendation 1.5

Gender diversity (S&P/ASX 300 Index at the beginning of the reporting period)

The measurable objective for achieving gender diversity in the board composition should be a target of not less than 30% of directors of each gender to be achieved within a specified period.

Commentary to Recommendation 1.5

Other aspects of diversity

Boards should consider facets of diversity besides gender when considering the composition of the board, including having directors of different ages, ethnicities and from different backgrounds to provide different perspectives and avoid ‘groupthink’.

Commentary to Recommendation 1.5

Desired culture

Listed entities should instil and continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly.

Principle 3 previously only required the entity to act ethically and responsibly

New recommendation for the entity to articulate and disclose its values.

Recommendation 3.1 added

New recommendation for the entity to have and disclose a ‘whistle blower policy’ and to ensure the board or a committee of the board is informed of any material incidents reported under that policy.

Recommendation 3.3 added

New recommendation for the entity to have and disclose an ‘anti-bribery and corruption policy’ and to ensure the board or a committee of the board is informed of any material breaches of that policy.

Recommendation 3.4  added

Verify market releases

New recommendation for the entity to disclose its process to verify the integrity of any periodic corporate report it releases to the market that is not audited or reviewed by the external auditor.

Recommendation 4.3  added

Make timely and balanced disclosure

New recommendation for the entity to ensure the board receives copies of all material market announcements promptly after they have been made.

Recommendation 5.2  added

New recommendation that if a listed entity gives a new and substantial investor or analyst presentation, it should release a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation.

Recommendation 5.3  added

Rights of security holders

New recommendation that the entity should ensure that all substantive resolutions at shareholder meetings are decided by a poll rather than a show of hands.

Recommendation 6.4  added

Environmental risk includes climate change risks

Recommendation 7.4 dealing with disclosure of environmental and social risks:

  • Commentary added to highlight climate change as a particular source of environmental risk, and
  • Entities encouraged to consider whether they have a material exposure to climate change by reference to the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), and if so, consider making disclosures recommended by the TCFD.

Commentary to Recommendation 7.4

Proposed changes not included in the Fourth Edition

The May 2018 Consultation Paper that led to changes recommendations in this Fourth Edition included the following contentious proposals which were not included in the final version:

  • Listed entities need a social licence to operate i.e. be good corporate citizens and act in a socially responsible manner
  • Boards members should come from different cultural or socio-economic backgrounds to order to bring different perspectives and experience and to avoid ‘group think’
  • Entities should not engage in aggressive tax minimisation schemes, and
  • Entities only enter into consultancy arrangements with directors or senior executives (or their related parties) for work that is outside the scope of that person’s duties as a director or senior executive if certain conditions have been met.

Additional recommendations that only apply in certain cases

The following additional recommendations have also been added in the Fourth Edition, but these only apply in certain circumstances (extracted from the Fourth Edition):



Recommendation 9.1

A listed entity with a director who does not speak the language in which board or security holder meetings are held or key corporate documents are written should disclose the processes it has in place to ensure the director understands and can contribute to the discussions at those meetings and understands and can discharge their obligations in relation to those documents.

Recommendation 9.2

A listed entity established outside Australia should ensure that meetings of security holders are held at a reasonable place and time.

Recommendation 9.3

A listed entity established outside Australia, and an externally managed listed entity that has an AGM, should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit.

More information

Please refer to the Fourth Edition for a complete source of the ASX’s Corporate Governance requirements.

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