Adam Brooks & Ebru Davidson

Spotlight on the ASX Corporate Governance Council’s Corporate Governance Principles & Recommendations – Fourth Edition

Adam Brooks & Ebru Davidson

13 August 2019

Capital Markets

On 27 February 2019, the ASX Corporate Governance Council (CGC) released the Fourth Edition of its Corporate Governance Principles and Recommendations (CGPR) following extensive industry-wide consultation.  A full copy of the Fourth Edition of the CGPR can be found here.


The Fourth Edition of the CGPR will apply to a listed entity’s first full financial year commencing on or after 1 January 2020.  Entities with a 31 December 2019 year end must report against the Fourth Edition for the financial year beginning 1 January 2020, whereas entities with a 30 June 2020 year end should report against the Fourth Edition for the financial year beginning 1 July 2020.


The structure of the latest CGPR remains the same as it did in the Third Edition, with eight core principles, supporting recommendations and guidance on how the recommendations should be implemented.  The disclosure of information remains flexible and non-mandatory, with the same expectation that the reporting of an entity’s compliance be on an “if not, why not” basis.

A significant development from the previous edition has been the CGC’s introduction of new recommendations and amendments to existing principles which underscore an entity’s need to ‘preserve and protect its reputation and standing in the community’.

There is a strong focus in the Fourth Edition on an entity’s values and culture.  New recommendations 3.1, 3.3 and 3.4 (as outlined below) underpin the enhanced principle 3 and emphasise a listed entity’s duty to ‘instil and continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly’.

The Fourth Edition contains the following new recommendations:

No. Recommendation
3.1 A listed entity should articulate and disclose its values.
3.3 A listed entity should have and disclose a whistleblower policy and ensure that the board or a committee of the board is informed of any material incidents reported under that policy.
3.4 A listed entity should have and disclose an anti-bribery and corruption policy and ensure that the board or a committee of the board is informed of any material breaches of that policy.
4.3 A listed entity should disclose its process to verify the integrity of any periodic corporate report it releases to the market that is not audited or reviewed by an external auditor.
5.2 A listed entity should ensure that its board receives copies of all material market announcements promptly after they have been made.
5.3 A listed entity that gives a new and substantive investor or analyst presentation should release a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation.
6.4 A listed entity should ensure that all substantive resolutions at a meeting of security holders are decided by a poll rather than by a show of hands. (In the ASX’s commentary, it notes the chair is responsible for ascertaining the true will of security holders, and in most situations this can only be achieved with certainty by conducting a poll.)
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 discussion at those meetings and understands and can discharge their obligations in relation to those documents.
9.2 A listed entity established outside Australia should ensure that meetings of security holders are held at a reasonable place and time.

It is expected that recommendations 9.1 and 9.2 will only apply to a small number of ASX-listed entities.

Amongst the changes, the Fourth Edition also contains various other enhancements to existing principles and recommendations, including the following noteworthy amendments:

  • Background checks: Before engaging senior executives and directors (or putting someone forward for election as a director), the Fourth Edition recommends that listed entities undertake appropriate checks on these personnel.
  • Gender diversity: The Fourth Edition recommends that an entity in the S&P/ASX 300 has at least 30% of directors from each gender on its board, as a measureable objective for achieving gender diversity in the composition of its board, senior executives and workforce generally.
  • Independence: The factors relevant to assessing a director’s independence (set out in Box 2.3) have been expanded in the Fourth Edition. Of note, a director’s independence may be compromised where that director receives performance-based remuneration (including options or performance rights) from the entity.  The ASX commentary notes that having close personal ties with someone who is not independent (arising from family, friendship or other social or business connections) may also bring a director’s independence into question.
  • Code of conduct: The Fourth Edition recommends that a board (or one of its committees) be informed of any material breaches of the entity’s code of conduct.
  • Risk appetite: The Fourth Edition recommends that a board should satisfy itself the company is operating with due regard to the risk appetite it has set out. Boards will also need to be mindful that remuneration and incentives do not reward conduct that is contrary to the entity’s values or risk appetite.
  • Environmental or social risks: The Fourth Edition recommends that a listed entity should disclose whether it has any material exposure to environmental or social risks, and if so, how it manages or intends to manage those risks. Entities need not publish an “integrated report” or a “sustainability report”, but the ASX encourages entities to benchmark their disclosures against those made by their peers.

It is worth noting that references to “social licence to operate” were not included in the final version of the Fourth Edition, despite being initially included in the draft version.  Given strong feedback received during the consultation process against including such wording, the Council has ultimately opted to replace references to “social licence to operate” with references to “reputation” and “standing in the community”.


Listed entities should consider what updates may be required to their corporate governance policies, processes and practices in order to comply with the Fourth Edition, ahead of its formal implementation in 2020.

Feel free to contact our team at Thomson Geer for further information or a discussion about how your entity should be preparing.

Written by: Adam Brooks, Ebru Davidson and Matt Persico.