For the first time since 2007, the ASX Corporate Governance Principles are significantly shorter, aiming to restore Australia’s distinctive “if not, why not” governance philosophy. This approach, requiring boards to explain any departure from principles, was introduced in March 2003 following corporate collapses like HIH and One.Tel. The Australian Securities Exchange (ASX) operates the nation’s primary stock exchange, setting governance standards for listed entities. This unique model offered a contrast to more prescriptive international rules.
Over two decades, successive editions of the principles gradually drifted. Commentary expanded, guidance hardened, and recommendations became de facto requirements. This transformed governance statements into box-ticking exercises, often drafted by advisers for proxy advisers, rather than genuine explanations from boards to their owners. The market also contributed, treating any departure as a red flag regardless of explanation quality, encouraging conformity over thoughtful judgement.
The 2024 draft responds to stakeholder concerns about the framework’s increasing prescriptiveness. It strips away complexity by cleanly separating principles, recommendations, and explanatory material, with the latter expressly excluded from reporting obligations. Each principle will begin with a statement of purpose. Recommendations duplicating existing legal requirements under the Corporations Act, gender equality legislation, and the Criminal Code have been removed, enhancing the voluntary framework’s coherence.
Ultimately, this reform’s success will hinge on boards utilising their recovered discretion and investors, alongside proxy advisers, accepting well-explained departures. The administrative burden, including governance statements and Appendix 4G duplication, is under review. The true measure of this fifth edition will not be compliance rates, but the market’s reception the first time a board genuinely says, “No. Here is what we do instead,” and that explanation is honoured.
