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ASX Corporate Governance Council revised Corporate Governance Principles

The ASX Corporate Governance Council ("Council") has released an exposure draft of proposals for revisions to the corporate governance Principles and Recommendations.

Council’s aim is to assist companies improve their disclosure of their corporate governance practices for the benefit of investors and other stakeholders. The review comes after two years of monitoring by ASX of company disclosures of corporate governance practices in annual reports. Council has suggested a number of changes, including removing areas of overlap with the Corporations Act and accounting standards.

Key changes of particular interest to smaller listed entities are:

  • The term "best practice" has been replaced by "good practice". Council considers the phrase “best practice” causes unnecessary confusion and concern and that making this change will encourage listed entities to focus more clearly on how they report on their practices against the Principles and on the quality of their disclosures.
  • The “definition of independence” has been amended to list a series of “indicators of independence”. The intention is to encourage listed entities to turn their minds to the issue of independence and to disclose their practices.
  • The revisions to the Principles recognise that smaller listed entities may use alternatives to board committees such as nomination, audit and remuneration committees, and encourage companies to explain these alternative practices. It is acceptable for listed entities to adopt effective governance practices that differ from the Principles, provided they make appropriate disclosure. 

Council has also released a separate Consultation Paper on the issue of corporate responsibility/sustainability. Stakeholder input is sought on whether the Principles should recommend the disclosure of corporate responsibility/sustainability risks that are material business (non-financial) risks.   

The current proposed start date is 1 July 2007 although the date of commencement will be announced following the review period. Listed entities will not be required to report against the revised Principles and Recommendations in 2007.

Council anticipates receiving feedback from a broad range of stakeholders. For this reason it is important that Council receives feedback on its proposal from listed entities.

Submissions on the proposed changes to the Principles and Recommendations are due by 9 February 2007.

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