A system of practices, rules and processes, which are used by the companies for being directed and controlled, is the best manner of defining corporate governance. Corporate governance helps in balancing of the stakeholder interests and this is not just for a single stakeholder group, but for all the stakeholder groups, which include customers, suppliers, shareholders, government and the like (Calder, 2008). The Australian Stock Exchange in the nation presents the corporate governance principles and also certain recommendations, which provide guidance on the matter of corporate governance. In order to keep up with the changing times, the corporate governance principles are regularly updated (ASX Corporate Governance Council, 2007). This briefing paper is focused on providing an explanation on the different aspects of corporate governance. In this context, the role of ASX, the effectiveness of the activities which are undertaken by them, for giving forth the corporate governance principles, which are for the listed company, and the guide in case of unlisted corporate users is detailed. In doing so, the historical background of ASX in terms of the corporate governance principles is also discussed. The discussion would end with certain recommendations for the adoption of these compliances on the non-listed public companies as well.
In Australia, the ASX is the stock exchange and it takes timely initiatives for following the corporate governance. In order to upload the corporate governance theme, the ASX brings forth the corporate governance statements regularly. The ASX presents certain key compliances which have been set by the corporate governance council and which have to be properly adhered to regarding the recommendations and principles (ASX, 2018a). The Corporate Governance Council of the ASX was created back in August 2002. There are a number of businesses, industry groups and shareholders which are brought together through the council. Each of these provides different perspectives and also individual insights in the matters surrounding governance. The Charter which was adopted in November 2012 is the document under which the council conducts its operations (ASX, 2018b).
The ASX plays a crucial role in the development and in the issuance of the governance principles which are based on certain recommendation. These relate to the corporate governance practices which the listed companies, in the ASX, have to adopt. These recommendations make an attempt of promoting the confidence in the investors and also for helping the listed entities in fulfilling the expectations which the stakeholders have regarding the governance of the companies (ASX, 2018b). Difference governance measures have been listed by ASX through which the board committees, the boards, and the companies are regulated. The leading examples of these are the board charter and the constitution. There is also a need to adopt a range of procedures and also the policies which the ASX implements for supporting the commitment towards the company business. This commitment predominantly revolves around behaving in an ethical manner, in a manner which can be deemed as accountable and which is open for the shareholders and the marketplace (ASX, 2018a).
A key point which needs to be noted down is that the recommendations of the ASX corporate governance council are not obligatory and these cannot stop or prevent the making of poor corporate decision making. The decision making of the companies and the manner in which they conduct their operations, along with the managing of companies, is governed by the Charter. The members have certain requirements which have to be followed when the meetings are conducted. This includes the disclosure of the fact that recommendations are followed. There is also a requirement of number of members in the different committees of the companies, including the independent requirements (ASX, 2014). The duties, through different recommendations, are also imposed on the directors and officers of the company. These are in turn aligned with the ones covered under the Corporations Act, 2001 (Cth), particularly in its part 2D.1 like good faith and best interest (Cassidy, 2006). These principles are also linked with the listing rules of the ASX. This is done on various grounds, and one of the examples of this is the inclusion of corporate governance statement in annual report or presenting on the website of the company, where this statement can be located (ASX, 2014).
Before going any further with this discussion, there is a need to shed some light on the history and on the evolution of the corporate governance principles given by the ASX. In the recent history, three major evolutionary steps have been covered for the corporate governance principles of ASX and these were in 2003, 2010 and 2014. Different recommendations led to these changes being brought forth and the key aims behind these were to improve the weak points, which have been identified. In 2003, the very first set of corporate governance principles were brought out and these transformed the corporate governance as a principle based approach (Tricker, 2015). For this purpose, over twenty groups from varied business backgrounds were culminated. The main goal of ASX was to put forth a corporate governance framework which was practical and could be made use for the different listed companies. The majority of these regulations lacked proper structuring and this basically became more like a rough draft on the guide of corporate governance. Through this, the basic corporate governance needs were presented and these had to be satisfied. The changes encompassing business environment resulted in the changes in these guidance and periodically evolved based on the council’s amendments (Plessis, Hargovan and Bagaric, 2010).
In 2010, the second version of corporate governance principles and recommendations were brought forth. These were majorly impacted by the global financial crisis. At this time, the goal was to ensure that based on the situations present at that time, these principles and recommendations were valid. Ultimately, a number of modifications were brought forth. This was coupled with the up-gradation of the corporate governance codes (Groot, 2009). There was a requirement put on the companies where the disclosures regarding corporate governance had to be placed on the company’s website in place of the annual report. This was done with the purpose of allowing the shareholders to gain an easy access to the company information. There was also the addition of recommendations on trading policies, remuneration committee composition, briefings and diversity added during this period (Chong, 2010).
Come 2014, there was an enhancement of corporate governance on a global scale and with this came the ASX incorporate governance P&R. This third edition provided flexibility for the listed companies and at the same time focused on disclosures regarding internal governance (Mallin, 2016). With this edition, there was introduction of evaluating the independence of the directors, establishment of risk committee for the listed companies, and gender diversification. There were also recommendations in this edition regarding the risk element (Shine Wing, 2015). There was an inclusion of the listed entity for the disclosure of function of internal audit, allowing listed companies to adopt and report the alternative practices regarding the corporate governance, and the increased focus over the environmental sustainability, social and economic risks. These recommendations basically brought the expectations in the stakeholders for proving the evidence for effective management in the financial risks and also in the other non financial business risks which were material in nature (Deloitte, 2015).
Amongst the key concepts which were adopted by the ASX corporate governance committee was the “if not, why not” approach. This resembles the approach adopted by the London Stock Exchange for the listed companies by the UK Combined Code. The listed companies on ASX have the alternative of not following the recommendations which have been given by the ASX corporate governance council. Though, where there is a not adherence to these recommendations, there is a need to state the reasons for not doing the same. The key objective behind this guideline is based on the proverb of one size does not fit all. Accordingly, these single set of guidelines could not be applicable on all the companies which are present in the Australian market. The perspective approach, which is present in the Sarbanes Oxley Act, 2002 of United States, was rejected. For the “if not, why not” to be effective, and for the predicted benefits to be attained, there was a need for the entire commercial community of the nation to be engaged in this (Farrell, Harding and Spilsbury, 2018).
The listed companies and the officers of such companies are required to play a proactive role in reviewing the corporate governance practices and there is a need to be transparent where the approach adopted by them is explained, particularly when the same differs from the ASX corporate governance council’s recommendations (KPMG, 2014). The concept of “if not, why not” attempts to encourage the officers and for the companies to take the practices of corporate governance a second thought, and allows for such an approach to be adopted which is moulded as per the individual circumstances. The dependence regarding the effectiveness of “if not, why not” is on the need for the Australian investors to invest in the efforts of reviewing the corporate governance statements of the Australian listed companies. Simply following a tick box approach could result in substantial damage to the company, to the investment fund value, and also to the flexibility of the system of nation (Farrell, Harding and Spilsbury, 2018).
The principles of ASX help in improving the compliances and listing of the public companies. The recommendations and principles of the council help in attaining good corporate governance rules and also help in fulfilling the reasonable expectations which the majority of investors have. The approach discussed in previous segment makes certain that the companies get an option of fulfilling the guidelines or for adopting their unique approach, best suited for their business by simply giving the reasons for adopting a different approach (Wilkins, 2012). This helps in monitoring the implementation of the governance principles, and also makes the disclosures by the listed companies a crucial task. This approach helps in fulfilling the key theme behind the corporate governance principles.
The structure framework for the recommendations and principles further ensures compliance. This structure presents a very strong foundation for managing and for oversight of companies. A value is added to the board through the structure, which also allows them to act ethically and responsibly for the purpose of securing the corporate reporting’s integrity. This structure allows for timely and balanced disclosure, recognition and management of risks, remuneration given responsibly and fairly, and respecting of the security holders (ASX, 2014).
Presently, these principles are not applicable on the non listed public companies. Where these principles are made to be applicable on the non-listed companies, the compliance by these companies can be ensured. This would also result in value of these principles being enhanced. Again, the “if not, why not” approach would allow such non-listed companies to deter from the principles by simply giving the reasons for it, and adopt such principles which best suit them, and by making proper disclosures regarding the same. The investor confidence is not per se needed in such companies, but it can anyway contribute to the concepts like corporate governance and corporate social responsibility (CSR). Ethics and CSR are concepts where the law is not only followed in letter but also in spirit. In case of ASX principle, CSR is not an area which is monitored as of now. However, where CSR is included in the principles of ASX, along with corporate governance, the adherence of CSR can be ensured. This would further enhance the scope of law, along with getting benefits to the different stakeholder groups.
Thus, in the previous segments, the different aspects covering the principles and recommendations of corporate governance, as presented by the corporate governance council of ASX were highlighted. In this regard, the history of the editions of these principles was traced back. Further, the concept of “if not, why not” approach was also detailed, which shows the flexibility which these principles provide and which allow the companies to follow the theme of corporate governance.
References
ASX Corporate Governance Council. (2007) Corporate Governance Principles and Recommendations. 2nd ed. Sydney: Australian Securities Exchange.
ASX. (2014) Corporate Governance Principles and Recommendations. [Online] ASX. Available from: https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf [Accessed on: 26/01/18]
ASX. (2018a) ASX corporate governance. [Online] ASX. Available from: https://www.asx.com.au/about/corporate-governance.htm [Accessed on: 26/01/18]
ASX. (2018b) Corporate Governance Council. [Online] ASX. Available from: https://www.asx.com.au/regulation/corporate-governance-council.htm [Accessed on: 26/01/18]
Calder, A. (2008) Corporate Governance: A Practical Guide to the Legal Frameworks and International Codes of Practice. London: Kogan Page Publishers.
Cassidy, J. (2006) Concise Corporations Law. 5th ed. NSW: The Federation Press.
Chong, T. (2010) Changes to the ASX Corporate Governance Council’s Principles – how this will impact on your corporate governance and policies. [Online] Lavan. Available from: https://www.lavan.com.au/advice/corporate_services/changes_to_the_asx_corporate_governance_councils_principles_how_this_will_i [Accessed on: 26/01/18]
Deloitte. (2015) ASX Corporate Governance Council Principle 7 Recognise and manage risk. [Online] Deloitte. Available from: https://www2.deloitte.com/content/dam/Deloitte/au/Documents/risk/deloitte-au-risk-g100-asx-principle-7-guide-260215.pdf [Accessed on: 26/01/18]
Farrell, K., Harding, D., and Spilsbury, S. (2018) ASX Corporate Governance Council releases its Principles of Good Corporate Governance and Best Practice Recommendations. [Online] Find Law. Available from: https://www.findlaw.com.au/articles/1531/asx-corporate-governance-council-releases-its-prin.aspx [Accessed on: 26/01/18]
Groot, C. (2009) Corporate Governance as a Limited Legal Concept. The Netherlands: Kluwer Law International.
KPMG. (2014) ASX Corporate Governance Principles and Recommendations (Third Edition). [Online] KPMG. Available from: https://assets.kpmg.com/content/dam/kpmg/pdf/2014/06/asx-corporate-governance-principles-recommendations-third-edition.pdf [Accessed on: 26/01/18]
Mallin, C. (2016) Corporate Governance. 5th ed. Oxford: Oxford University Press.
Plessis, J.J., Hargovan, A., and Bagaric, H. (2010) Principles of Contemporary Corporate Governance. 2nd ed. Victoria: Cambridge University Press.
Shine Wing. (2015) ASX Corporate Governance Principles and Recommendations. [Online] Shine Wing. Available from: https://www.shinewing.com.au/thinkbig/read/asx-corporate-governance-principles-and-recommendations/ [Accessed on: 26/01/18]
Tricker, B. (2015) Corporate Governance: Principles, Policies, and Practices. 3rd ed. Oxford: Oxford University Press.
Wilkins, G. (2012) What is the ‘two-strikes’ rule?. [Online] The Sydney Morning Herald. Available from: https://www.smh.com.au/business/agm-season/what-is-the-twostrikes-rule-20121008-278us.html [Accessed on: 26/01/18]
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download