The amended Principles will apply to listed entities on an “if not, why not,” basis for financial years
commencing on or after 1 January 2020.
Recommendation 1.1 has been amended to be consistent with the recommendations of the Financial Services Royal Commission.
It specifically identifies issues that the board of a listed entity should be responsible for under its charter including:
- demonstrating leadership;
- defining the entity’s purpose and setting its strategic objectives;
- approving the entity’s statement of values and code of conduct to underpin the desired culture within the entity;
- satisfying itself that the entity has in place an appropriate risk management framework (for both financial and non-financial risks) and setting the risk appetite within which the board expects management to operate;
- satisfying itself that an appropriate framework exists for relevant information to be reported by management to the board.
Acting lawfully, ethically and responsibly
Principle 3 has been amended to “Instil a culture of acting lawfully, ethically and responsibly”.
Revised or new recommendations to give effect to Principle 3 include requiring entities to:
- articulate and disclose their ‘values’ (3.1);
- disclose material breaches of codes of conduct to the board or a board committee (3.2);
- have and disclose a whistleblower policy with material breaches to be reported to the board or a board committee (3.3); and
- have and disclose an anti-bribery policy with material breaches to be reported to the board or a board committee (3.4).
The concept of a “social licence to operate” is not included in the final version of the Principles which instead refer to “reputation” and “standing in the community”.
The revised Principles also contain a range of other changes including:
- requiring policies to be disclosed in full, not in summary form;
- Amending commentary under indicators of ‘independence’ (Recommendation 2.3) to broaden personal ties to ‘family, friendship or other social or business connections’;
- Increasing expectations on director professional development and induction processes (Recommendation 2.6);
- Requiring all material ASX announcements to be sent to directors promptly after they have been made (new Recommendation 5.2);
- Specifying that all substantive resolutions at a meeting of security holders should be decided by a poll rather than a show of hands (new Recommendation 6.4); and
- Amending commentary on remuneration (Recommendation 8.1) to reference the need for listed entities to ensure that incentives encourage senior executives to pursue the growth and success of the entity without rewarding conduct that is contrary to the entity’s values or risk appetite, and to consider the implications for its reputation and standing in the community if it is seen to pay