Andrew Hay
Partner •
Brisbane
ASX and You Shall Receive: The ASX Corporate Governance Principles in a global context
On 21 July 2026, the ASX released the draft 5th edition of the Corporate Governance Principles and Recommendations for public consultation, with submissions closing on 14 September 2026. ASX’s Advisory Group on Corporate Governance (Advisory Group), chaired by Dr Philip Lowe is expected to recommend the final version to the ASX Board by December 2026, with reporting to commence for financial years beginning on or after 1 July 2027.
For further detail on the draft 5th edition and the consultation process, see our earlier article: ASX opens consultation on the draft 5th edition of its Corporate Governance Principles and Recommendations (Clayton Utz, August 2026), available here.
The draft 5th edition positions the ASX governance framework more closely with jurisdictions that prioritise flexibility, such as the UK and Japan, while maintaining its divergence from more prescriptive systems like those in the US and Germany. These differences highlight the ASX’s unique balance between flexibility and accountability, while also pointing to potential areas for reform to align with global best practices.
The table below compares some of the current 4th edition positions (released on 27 February 2019), the proposed 5th edition changes to those current positions, and their alignment with current international practice. The 5th edition consultation paper notes that ASX’s approach to requiring entities to lodge an Appendix 4G (which acts as a map or index to find specific governance details) alongside their corporate governance statement is “unique” compared to peer jurisdictions including Canada, the UK, Hong Kong and Singapore, where no equivalent dual-lodgement exists.
Area | Current ASX standard 4th edition | Proposed position Draft 5th edition | International practice |
|---|---|---|---|
Compliance Approach | Voluntary “if not, why not” model. Companies explain deviations from recommendations. | Retains the “if not, why not” approach but with refinements. Draws a clearer distinction between Principles (high-level), Recommendations (reportable) and Explanatory Material (non-reportable guidance). Removes embedded “if not” formulations from certain recommendations (e.g., Nomination Committee, Audit Committee, Risk Committee, internal audit function, Remuneration Committee) for greater clarity and consistency. Proposes to simplify or potentially retire Appendix 4G, which is unique to ASX compared to peer exchanges. | More aligned with the UK’s “comply or explain” model and Hong Kong’s similar approach. The clearer hierarchy of Principles/Recommendations/Explanatory Material mirrors the UK Corporate Governance Code structure. Remains significantly different from the US mandatory compliance regime. |
Board Elections | Directors are elected by shareholders and must stand for re-election at least every three years, with an election of directors held at each AGM (Listing Rules 14.4 and 14.5). No mandatory term limits. | No material change. The draft 5th edition moves board appointment recommendations (appropriate checks, materials for elections, written agreements) into a consolidated Recommendation 2.6. | Remains broadly aligned with the UK (where all directors stand for re-election each year) and Japan (flexible terms). Less aligned with the US mandatory compliance model and Germany’s fixed 5-year supervisory board terms. |
Board Independence | Majority independence recommended but not mandatory (“if not, why not”). | Retains majority independence recommendation. Removes the prescribed list of independence factors (former Box 2.3), allowing boards to focus on factors they consider material to judging independence, such as length of service, and the director's specific interests, positions and relationships. Aligns the substantial shareholder threshold to 10% (matching the Listing Rules “position of influence” test), up from 5%. Removes the prescriptive 3-year look-back period. | More aligned with international practice. The UK Corporate Governance Code and Hong Kong Exchange Listing Rules set out indicative circumstances that may compromise a director’s independence, while leaving the final assessment to the board. Hong Kong’s criteria are more prescriptive than the approach proposed by ASX. The proposed 10% threshold is higher than some international benchmarks. In Hong Kong, a director holding 5% or more of a listed company’s shares will not normally be regarded as independent, while the UK Corporate Governance Code refers to a “significant shareholder” without specifying a percentage |
Diversity | Diversity policy required and to be disclosed. Gender diversity encouraged through measurable objectives, including an objective of not less than 30% of each gender on the boards of S&P/ASX 300 entities (Recommendation 1.5); no mandatory quotas. Companies must disclose measurable objectives for gender diversity. | Clarifies “diversity” to be diversity of thought, experience and perspective relevant to the business of the entity. For gender diversity, retains the existing target of not less than 30% women and 30% men on boards of S&P/ASX 300 entities (now Recommendation 2.3). This is more conservative than the former Council’s rejected 2024 proposal of a 40/40/20 gender composition target. Broader diversity categories (age, heritage, disabilities) are not subject to numerical targets - entities have flexibility to determine how best to achieve diversity of thought. Workforce diversity reporting under Recommendation 1.5 is removed as a recommendation (now covered by the Workplace Gender Equality Act 2012) and moved to explanatory material under Principle 3. Introduces disclosure of how diversity is incorporated into board succession planning. | Less aligned with international practice. The UK’s FTSE Women Leaders Review targets 40% female representation on FTSE 350 boards. The EU Women on Boards Directive mandates 40% of non-executive directors (or 33% of all board members) by June 2026. Germany mandates 30% for supervisory boards. The proposed ASX 30% target sits at the lower end of international benchmarks and may attract criticism for lacking ambition, particularly given the former Council had proposed 40/40/20. |
Board Structure | Single-tier structure with committees. Requirement for a Board skills matrix setting out the mix of skills that the Board currently has. Audit and remuneration committees required for certain companies. | Retains single-tier structure with committees. Removes prescriptive suggested content for committee charters and policies (formerly in Commentary boxes). More flexible and less prescriptive – the Board is responsible for determining the capabilities it requires and ensuring they are maintained. The board skills matrix is only one tool to assist with this determination. Entities must disclose the process by which the board assesses the collective skills, knowledge and experience of its directors. Introduces new Recommendation 4.3 requiring disclosure of auditor appointment date and last comprehensive review. Establishes a clearer distinction between mandatory committee requirements (Listing Rules) and recommended practices (Principles). | More aligned with the UK model, which similarly uses a single-tier structure with committee requirements and non-prescriptive guidance. The auditor tenure disclosure aligns with UK practice under the FRC’s Corporate Governance Code. Remains distinct from Germany’s mandatory two-tier system, under which a Management Board is responsible for operations and a Supervisory Board is responsible for oversight. Employee representation is mandatory for larger companies. |
Risk Management - understand and manage risk | The Board must either establish a risk committee to oversee risk, or disclose that it does not have such a committee and explain the processes it employs to oversee the entity's risk management framework (Recommendation 7.1). Boards must establish a risk management framework and review it annually. Internal audit is not mandatory but must be explained if absent. | Retains risk committee and annual review requirement. Removes the specific recommendation to disclose material environmental or social risks (former Recommendation 7.4), on the basis that this is now addressed by Chapter 2M sustainability reporting requirements in the Corporations Act and ASIC’s Regulatory Guide 280 (2025). Replaces with a broader Recommendation 7.4 requiring disclosure of material risks generally and how the entity manages, or intends to manage, those risks, unless disclosure would be unreasonably prejudicial to the entity. Internal audit disclosure retained. | Neutral. Removal of specific ESG risk disclosure may appear less aligned with international trends toward mandatory climate and sustainability disclosure (for example, the EU Corporate Sustainability Reporting Directive and the UK’s climate-related financial disclosure requirements). However, the change reflects that Australia has now introduced mandatory sustainability reporting through legislation, and the Principles avoid duplicating legal requirements - consistent with the UK approach of separating governance codes from specific statutory reporting obligations. (US) Boards oversee risk management, often through audit committees. The US federal Sarbanes-Oxley Act imposes strict internal control requirements. (Japan) Risk management frameworks are recommended but not strictly mandated. |
Stakeholder Engagement | Focus on security holder engagement and two-way communications. (Principle 6) Companies must provide information and facilities for security holders to exercise their rights. | Principle 6 is retained, with the exception of Recommendations 6.4 (voting by poll) and 6.5 (electronic communications with security holders), both of which are now dealt with in the Corporations Act. New Recommendation 3.1 elevates the role of engaging with security holders and other stakeholders in instilling and reinforcing an entity’s culture. Entities are expected to identify their stakeholders, manage those relationships and disclose their processes for engaging with them. This reflects a shift from a primarily shareholder-focused model toward broader stakeholder awareness, while stopping short of mandating stakeholder engagement. | More aligned with the UK Corporate Governance Code (which requires boards to describe how they consider stakeholder interests under s172 Companies Act 2006) and broader international trends. However, remains less prescriptive than Germany’s co-determination laws mandating formal employee representation. (US) Shareholder engagement is prioritised, with some encouragement for broader stakeholder considerations. (Germany) Co-determination laws mandate employee representation on supervisory boards, ensuring formal consideration of employee interests. |
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Comparative analysis of international corporate governance principles
Exchange | Board Elections | Board Independence | Diversity | Compliance Approach | Board Structure | Risk Management | Stakeholder Engagement | Disclosure Framework |
|---|---|---|---|---|---|---|---|---|
ASX1 | Directors elected annually at AGMs for staggered terms. | Majority independent directors recommended. | Gender diversity encouraged; no quotas for other categories. | Voluntary (“if not, why not”). | Flexible; typically executive and non-executive directors. | Annual review of risk management frameworks required. | Encouraged but not mandated. | Continuous disclosure under ASX Listing Rule 3.1; statutory overlay in the Corporations Act with civil and criminal liability for breaches. |
NYSE2 | Directors elected annually or staggered. | Majority independent directors required. | No quotas; diversity disclosure encouraged. | Mandatory compliance with NYSE rules. | Audit, compensation, and nominating committees required, all independent. | Boards must oversee risk management, often through audit committees. | Disclosure of shareholder engagement practices required. | Exchange rules require prompt public disclosure of material information, aligned with SEC requirements. |
NASDAQ3 | Directors elected annually. | Majority independent directors required. | No current exchange requirement. Nasdaq’s board diversity disclosure rules were struck down by a United States federal appeals court in December 2024. | Mandatory compliance with NASDAQ rules. | Audit, compensation, and nominating committees required, all independent. | Boards must oversee risk management, often through audit committees. | Encouraged, particularly on governance and diversity issues. | Exchange rules require prompt disclosure of material information, aligned with SEC requirements. |
LSE4 | Directors elected annually. | At least half the board (excluding the chair) should be independent non-executive directors. | Gender diversity targets (40% female representation); ethnic diversity target (at least one director from a minority ethnic background).5 | Voluntary (“comply or explain”). | Executive and non-executive directors; audit, remuneration, and nomination committees required. | Boards must oversee risk management and internal controls. | Disclosure of stakeholder engagement practices required. | Inside information disclosure “as soon as possible” under UK MAR; FCA sanctions for failures. |
TSE6 | Directors elected by shareholders, often for two-year terms. | Independent directors should make up at least one-third of the board of a Prime Market company; other listed companies should have at least two independent directors. | Gender diversity encouraged; broader diversity rarely addressed. | Voluntary (“comply or explain”). | Flexible; boards often include executive directors and statutory auditors. | Boards are expected to oversee risk management, but practices vary widely. | Encouraged, particularly with employees and shareholders. | Requires listed companies to immediately disclose material information, such as financial results (quarterly/annual), material corporate decisions (mergers, capital changes), and significant events, via the TDnet system. |
HKEX7 | Directors stand for re-election every three years. | At least one-third of the board must be independent non-executive directors. | Diversity policy required to be disclosed in the Corporate Governance Report; single-gender boards prohibited; no numerical quotas. | Voluntary (“comply or explain”). | Executive and non-executive directors; audit, remuneration and nomination committees required. | Boards must oversee risk management and internal controls. | Disclosure of stakeholder engagement practices required, particularly on governance and sustainability. | Statutory “inside information” disclosure as soon as reasonably practicable under SFO Part XIVA; SEHK announcement obligations to avoid a false market. |
TSX8 | Directors elected annually. | A majority of independent directors is required, with disclosure of the board’s approach required. | Gender diversity disclosure required; broader diversity voluntary. | Comply or explain disclosure against Canadian corporate governance guideline; Mandatory compliance with TSX rules. | Audit committee required; other committees optional. | Boards must oversee risk management, often through audit committees. | Encouraged, particularly on governance and diversity issues. | Timely disclosure of “material change” via press release and Form 51-102F3; supplements NI 51-102. |
Euronext9 | Director terms vary by country; in France, for example, the corporate governance code recommends terms of no more than four years. | Independence requirements vary by country but align with EU standards. | Gender diversity quotas common (e.g., 40% female representation); broader diversity less common. | Voluntary (“comply or explain”). | Executive and non-executive directors; audit and remuneration committees required. | Boards must oversee risk management and internal controls. | Disclosure of stakeholder engagement practices required, particularly on governance and sustainability. | Listed companies must disclose inside information to the market as soon as possible under the EU Market Abuse Regulation, subject to limited circumstances in which disclosure may be delayed. |
Frankfurt10 | Supervisory Board members are elected by shareholders for terms of up to five years; the Supervisory Board in turn appoints the Management Board. | Majority independent directors recommended for supervisory boards. | Gender quotas for supervisory boards of large companies (30% female representation); broader diversity voluntary. | Voluntary (“comply or explain”). | Two-tier board system: management board and supervisory board. | Supervisory boards oversee risk management and internal controls. | Co-determination laws require consideration of employee interests. | Governed by various EU regulations, primarily focused on ad hoc disclosure; required to disclose inside information that could significantly impact the price of their securities. |
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[1] ASX Corporate Governance Principles and Recommendations (4th Edition) and the ASX Listing Rules. Back to article
[2] NYSE Listed Company Manual and SEC Regulations on Disclosure. Back to article
[3] NASDAQ Listing Rules and SEC Regulations on Disclosure. Back to article
[4] UK Corporate Governance Code; FCA Handbook; and the Hampton-Alexander Review. Back to article
[5] Refer to https://www.fca.org.uk/publication/policy/ps22-3.pdf Back to article
[6] TSE Corporate Governance Code and the Financial Instruments and Exchange Act for disclosure requirements. Back to article
[7] HKEX Corporate Governance Code and the SFO (Part XIVA). Back to article
[8] TSX Company Manual, National Instrument 58-101, and National Instrument 51-102 for disclosure requirements. Back to article
[9] EU Market Abuse Regulation, EU Corporate Sustainability Reporting Directive (CSRD) and country-specific governance codes (e.g., AFEP-MEDEF Code for France). Back to article
[10] German Corporate Governance Code (DCGK) and the German Stock Corporation Act (AktG). Back to article
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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.