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Significant improvement in Corporate Governance Disclosures

The latest ASX review of compliance with the ASX Corporate Governance Council’s principles and recommendations has revealed listed companies are continuing to improve their corporate governance reporting. The review was released in Sydney on 22 May 2006.

Overall reporting levels – the aggregate of adoption of recommended practices and of ‘if not, why not’ exception reporting – were higher in 2005 than in the previous year.

Key improvements in corporate governance reporting in 2005 were as follows:

Overall reporting levels

  • The overall reporting level for all Recommendations (being the aggregate of actual adoption of the Recommendations and the ‘if not, why not’ exception reporting) increased to 88% from 84% in 2004.
  • 14 out of 28 Recommendations had reporting levels over 90%
  • An additional 9 out of 28 Recommendations had reporting levels over 80%
  • This compares with the 2004 review where 8 out of 28 Recommendations had reporting levels over 90% and an additional 9 out of 28
  • Recommendations had reporting levels over 80%
  • The overall reporting level increased at a faster rate among companies outside the Top 500

Adoption reporting levels 

  • The adoption reporting level for all Recommendations increased to 74% from 68% in 2004.

‘If not, why not’ exception reporting levels

There were continued high levels of ‘if not, why not’ exception reporting in relation to:

  • Recommendation 2.1 (A majority of the board should be independent directors) - 47% ‘if not, why not’ exception reporting 
  • Recommendation 2.4 (The board should establish a nomination committee) - 57% ‘if not, why not’ exception reporting 
  • Recommendation 9.2 (The board should establish a remuneration committee) - 38% ‘if not, why not’ exception reporting.

The findings emerged from ASX’s review of annual reports of 1162 companies that reported with a 30 June 2005 balance date. Listed trusts, not included in this review, will be the subject of a separate review which will also include stapled entities and listed managed investment schemes.

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