The ASX Corporate Governance Council has released its Corporate Governance Principles and Recommendations (Third Edition) which takes effect for a listed entity’s first full financial year commencing on or after 1 July 2014.

Whilst they do not bind unlisted entities the Principles are regarded as good practice.

The changes include:

• Recommendation 1.4 provides that “the company secretary of an entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board”.
• Recommendation 2.3 states that director independence is to be assessed by considering whether the director has served for “such a period that his or her independence may have been compromised.” There is no fixed term of tenure for independent directors. The categories of relationships that may indicate that a director may not be independent include a person with “close family ties” with a shareholder, director or senior employee, a professional adviser or consultant, a material supplier or customer.
• New recommendation 7.1 provides that if the board of an entity does not have a risk committee or committees it should disclose that fact and the processes it employees for overseeing the entity’s risk management framework.
• Recommendation 7.4 is that an entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks.

The ASX Listing Rules will be amended to enable entities to publish their corporate governance statements on their websites rather than in their annual reports.