19 Aug 2010

The ASX Corporate Governance changes at a glance

by Charles Rosedale, Alison Groves

All listed entities must have Securities Trading Policies from 1 January 2011, and report on their gender diversity targets and progress, and the composition of their Remuneration Committee (if any) from 2011.

Are you keeping track of all the ASX's new Listing Rule and corporate governance changes? Here's our concise guide.

Securities Trading Policies

Securities trading policies are currently covered by ASX's non-mandatory corporate governance Recommendations. However, from 1 January 2011, all listed entities will need to have a Securities Trading Policy which complies with minimum content requirements imposed by ASX. ASX has also released a detailed Guidance Note to supplement these new Listing Rules.

The most significant requirement is that Securities Trading Policies must contain blackout periods for key management personnel. Those blackout periods are not mandated by ASX - companies can determine what is appropriate in their circumstances. In addition, through both the Listing Rules and the Guidance Note, ASX is imposing a framework for permitted trading during blackout periods (eg. participation in rights issues) and exceptional circumstances authorisations to allow trading during a blackout period (eg. severe financial hardship).

Each Securities Trading Policy will also need to be formally released to the market (rather than being placed on the company website as per the current corporate governance Recommendations).

  Action required

 (1) All listed entities should review their current Securities Trading Policy, to determine whether it
  needs to be amended before 1 January.

 (2) If a new or amended Policy is to be implemented, consideration should be given to Board approval
  processes and internal education before the "go-live" date of 1 January 2011

Diversity Policies

All listed entities will have to address diversity issues in their corporate governance reports for financial years beginning on or after 1 January 2011. Early transition is "encouraged".

Under the new corporate governance Recommendations:

  • Diversity Policy - Listed entities should establish a Diversity Policy. Diversity includes gender, age, ethnicity and cultural background.
  • Establish and assess objectives - The Policy should require the Board to establish measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity's progress in achieving them.
  • Annual reporting on objectives - Listed entities should disclose in each annual report the measurable objectives for achieving gender diversity which have been established, as well as the entity's progress in achieving them.
  • Annual reporting on gender diversity - Listed entities should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the Board.

Under the "if not, why not" rule, companies which don't adopt the new Recommendations in full must explain why they have not done so.

  Action required

 (1) Each listed entity should consider whether to adopt these new Recommendations.

 (2) If the Recommendations are adopted, the entity should start the process of preparing a
  Diversity Policy and setting appropriate objectives for achieving gender diversity. Establishing a
  workable and meaningful Diversity Policy which is tailored for each entity's circumstances, as well as
  sensible objectives which the entity is committed to achieving, will not be a "tick the box" exercise.

Remuneration Committees

Two changes here - one affecting all listed entities, the other only affecting entities in the S&P/ASX 300.

Every listed entity will need to report on whether its Remuneration Committee (if it has one) has at least three members, is composed of a majority of independent directors and is chaired by an independent director. This will form part of all corporate governance reports for financial years beginning on and after 1 January 2011.

In addition all listed entities in the S&P/ASX 300 index will be required to have a Remuneration Committee from 1 July 2011. That Remuneration Committee must be comprised solely of non-executive directors. Any entity in the S&P/ASX 300 index at the start of its financial year must comply with this requirement for the entire financial year, even if it is removed from the index during the course of that financial year.

  Action required

 (1) Listed entities, especially those in the S&P/ASX 300, need to consider the composition of their
  Remuneration Committees.

 (2) S&P/ASX 300 companies need to pay particular attention to the different "tests" under the Listing
  Rules and the Recommendations - an independent director will be a non-executive director, but a non-
  executive director will not necessarily be an independent director


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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.