ACSI welcomes the release of the Fourth Edition of the ASX Corporate Governance Council’s Principles and Recommendations

The Australian Council of Superannuation Investors (ACSI) today welcomes the release of the Fourth edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. ACSI is an active member of the ASX Corporate Governance Council.

One of the catalysts for this review of the Principles was the desire to address emerging concerns around corporate culture and trust. Since the review began in 2017, the importance of corporate culture, trust and the link to a company’s reputation and standing in the community has again been highlighted by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

ACSI strongly supports the new provisions introduced on corporate values and appropriate treatment of stakeholders, corporate culture, diversity, remuneration and risk. The new provisions ask entities to:

  • Articulate and disclose their corporate values,

with a focus on building long-term sustainable value that involves considering key stakeholders such as customers, employees, suppliers, creditors, law makers and regulators;

  • Support healthy corporate culture

by having and disclosing a code of conduct, a whistleblower policy and an anti-bribery and corruption policy;

  • Improve gender diversity on ASX300 boards

by setting the objective of having not less than 30 per cent of either gender on its board within a specified time;

  • Improve executive pay alignment

by taking into account the entity’s values and risk appetite, and considering the implications if pay is seen to be excessive; and

  • Improve climate and other risk disclosure

by focusing on their material environmental and social risks, including by reference to the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

ACSI CEO Louise Davidson said, “As long-term investors, our members believe that environmental, social and governance risks and opportunities can have a material impact on investment outcomes. Recent events have served to highlight the impact of poor management of ESG risks. We welcome the updates to the Principles and Recommendations, which are consistent with ACSI’s long-standing approach. Effective management of ESG risks supports a company’s ability to create long-term value for its security holders.

Davidson said “The Hayne Royal Commission suggested that the interests of shareholders and other stakeholders, such as customers and employees, will converge over the long term. As long-term investors, our members support the framework that is provided by the Principles and Recommendations for companies to consider how they manage ESG risks and opportunities. We are hopeful that the Fourth edition will drive the change necessary to improve corporate culture and practice and go some way to restoring community trust.”

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