The Australian Council of Superannuation Investors (ACSI) has released its two-yearly update of its Governance Guidelines, which articulate the expectations of long-term investors on material governance and sustainability issues at listed companies.
While the public attention on governance and company performance peaks around reporting and annual meetings calendars, the ACSI Governance Guidelines underpin and promote good corporate governance in Australian listed companies year-round. They provide a long-term investor view on a range of issues and will underpin voting recommendations in the years ahead.
The new edition has been revised and updated to address contemporary issues across the market. It incorporates feedback from diverse market participants and ACSI stakeholders, and includes insights gained from the hundreds of company engagements ACSI conducts each year. The format has also been distilled to streamline the structure and clarify expectations of the board’s activities and disclosures.
“Efficient and vibrant markets are essential to Australia’s economic success, and good governance, transparency and investor protections are the foundations of confidence in listed markets,” ACSI CEO Louise Davidson said.
“Good governance is a competitive advantage underpinning investor confidence and most companies in Australia understand that. The Guidelines provide a clear articulation of investor expectations. ACSI builds on this foundation through regular, constructive engagement with companies to understand their specific approach and circumstances.”
Rather than adding new standards, this 12th edition of the Governance Guidelines has refined existing principles to highlight the importance of succession planning, the governance of Artificial Intelligence, culture, workforce and diversity and strengthening the ties between board skills and experience, succession and election.
“AI is expected to be a huge boost to the global economy, but it needs to be managed properly within good governance guardrails, because it also carries significant risks. Investors want to know that company boards have governance structures in place reflecting the scale of the risks and opportunities associated with AI and other forms of digitalisation,” Ms Davidson said.
“While AI is a newer area of focus and interest, ACSI’s guidelines in this area are consistent with our principles-based approach centred on governance standards as enablers of growth, not obstacles to it.”
ACSI avoids a proscriptive or ‘check the box’ approach and focuses on financially material issues in listed companies, recognising that not all issues will be financially material for all companies.
“Managing these material risks well leads to long-term value creation for investors, including millions of superannuation fund members. Company boards must assess which issues are material for their company and then monitor, report on and incentivise effective management of those issues,” Ms Davidson said.
ACSI’s paper on materiality research outlines some of the factors that may be material for companies.
The Guidelines are principles-based and, while non-binding, provide a useful reference point for companies and ACSI members.