ASX releases draft 5th edition Corporate Governance Principles & Recommendations

On 21 July 2026, the ASX released a consultation draft of the next edition of the ASX Corporate Governance Principles and Recommendations.

The draft 5th edition reduces prescription and regulatory overlap, while elevating governance issues including board composition, oversight of culture, stakeholder engagement, and audit oversight and transparency. 

Overview

Overall, the draft refines the existing Principles framework rather than redesigning it, having regard to the earlier consultation process undertaken in 2024-25 by the former ASX Corporate Governance Council (Council).  

A notable feature of the draft is its stronger focus on governance outcomes and principles-based guidance, framed by the express recognition that effective corporate governance enhances long-term value creation and, more broadly, contributes to the operation of a strong capital market in Australia. 

It retains the existing eight Principles and the ‘if not, why not’ reporting model, while seeking to simplify the framework and reduce duplication with legal and regulatory requirements.

It also provides greater clarity around the respective roles of the Principles, Recommendations and commentary (now described as ‘explanatory material’), making clear that the explanatory material is not prescriptive guidance and is not intended to be reported against.

Other notable changes include:

• The elevation of contemporary governance issues, with new or broader disclosures required in relation to key areas including board composition, organisational culture, stakeholder engagement, audit oversight and transparency, risk, and remuneration.
• The removal of a number of more prescriptive elements, including references to particular governance policies and specific categories of environmental and social risks.
• A drafting approach that seeks to support informed decision making by investors, while preserving board judgement to adopt governance practices that are proportionate.

The draft has been developed by ASX and its new Advisory Group on Corporate Governance, which was established in January 2026 as part of reforms to the process for developing and updating the Principles (see the AICD’s previous update).

Key proposed changes

Board composition  

The draft adopts a broader approach to board skills and composition, with a revised recommendation that boards determine the collective skills, knowledge and experience required and assess whether they are present. It also proposes that the process for this assessment and relevant outcome is disclosed.

While the disclosure of a board skills matrix is no longer required, the explanatory material notes that a matrix is a relevant governance tool.

This represents a move away from the earlier more contentious proposal in the Council-led consultation process regarding disclosure of individual director skills.

Diversity

The 30 per cent board gender diversity target for ASX 300 entities has been retained. This is a departure from a proposal in the Council-led process that contemplated a 40 per cent target.

While the draft does not propose disclosure of specific diversity characteristics at board level, entities would be expected to disclose how diversity in its composition is incorporated into board succession planning. This includes diversity of thought, experience, perspectives and gender.

In recognition that board diversity can support better decision-making, the explanatory material notes that having directors of different genders, ages, cultures, demographic backgrounds and personal circumstances can bring benefits through different perspectives and experiences.  

Director independence

The factors relevant to assessing director independence have been updated and included in the explanatory materials, allowing for additional flexibility.

Notably, the draft focuses the assessment on the impact that an 'interest, position or relationship’ has on director independence. This is in contrast to the prescriptive ‘three year’ time period in the current Principles.

It also aligns the threshold for considering whether a directors’ interest as a shareholder and/or position in an office of a shareholder could influence their independence with the concept in Chapter 10 of the ASX Listing Rules of a ‘person in a position of influence’, being a substantial (10%) shareholder. This is a move away from the Corporations Act definition of a substantial shareholder, being a lower 5% holding.

Culture and stakeholder engagement

A new recommendation provides that boards should have regard to security holders and other stakeholders when acting in the best interests of the entity and disclose its processes for engaging them.

The explanatory material notes that:

• The entity has discretion to identify its stakeholders and to manage those relationships.
• The creation of long-term value typically requires an entity to be valued, trusted and respected by its security holders and other stakeholders including employees, suppliers, customers, contractors and the communities in which it operates. The draft refers to the AICD’s practice statement Directors’ ‘best interests’ duty in practice, supported by the Bret Walker SC and Gerald Ng legal opinion.
• Disclosure of the processes for engagement with security holders and other stakeholders can assist in building trust and confidence in the culture of the entity.

The draft also incorporates a stronger focus on board oversight of organisational culture with a new recommendation that listed entities should ensure that the board is informed of any material breaches or trends in breaches of key policies supporting its culture (to the extent permitted by law); and disclose the mechanisms the board has in place to monitor the entity’s culture.  

Audit oversight and transparency

A new recommendation provides that a listed entity should disclose when the auditor was first appointed and when the engagement of the auditor was last comprehensively reviewed.

The explanatory material also encourages disclosure of the outcomes of those reviews.

Risk management and oversight

A number of changes have been implemented to incorporate a stronger focus on risk management and oversight.

Notably, the specific requirement to disclose social and environmental risks has been removed and replaced with a broader requirement for a listed entity to disclose its 'material risks’ and how it manages or intends to manage them.

Cross-references to other disclosures, including the operating and financial review in the directors’ report and climate-related financial disclosures under the Corporations Act are permitted.  

Remuneration

The draft introduces a recommendation that an entity should have the ability to adjust performance-based remuneration outcomes for its senior executives downwards when appropriate.

It also introduces a recommendation that a listed entity should remunerate its non-executive directors by way of only fixed fees (comprising cash and/or shares or units) and superannuation contributions; and disclose its approach to non-executive director ownership of securities.

The explanatory material recognises that in some circumstances, such as entities in an exploration, development, start-up or transformation phase with limited cash reserves, it will be appropriate for an entity to use alternatives to cash and/or shares or units to remunerate its non-executive directors for their time commitment and responsibilities.

It acknowledges that when adopting this approach to remuneration, an entity should carefully assess the risks that may be introduced under such an arrangement (e.g. the risk that it will undermine the distinction between the board and management or compromise a director’s objectivity and independence in overseeing management). Of course, an ‘if not why not’ explanation would need to be provided and security holder approvals obtained where required.  

Regulatory duplication – proposed Recommendations to be removed

The consultation paper sets out the recommendations proposed to be removed to reduce regulatory overlap (although some have been retained for entities established outside Australia). They include, for example, disclosure of specific policies (diversity, whistleblower, and anti-bribery and corruption); gender diversity disclosures relating to senior executives and the workforce; CEO and CFO declaration for financial statements; substantive security holder resolutions on a poll; electronic communications with security holders; disclosure of material exposure to environmental or social risks; separate remuneration policy disclosures; and hedging policy for equity-based remuneration.

Proposed timing

Consultation closes on 14 September 2026. Written submissions can be emailed to ListingsPolicy@asx.com.au.

The Advisory Group intends to recommend a final version of the Principles to the ASX board by December 2026.

In terms of implementation, reporting against the new Principles will commence with:

• entities with a 30 June year end expected to report against the 5th edition for the financial year ending 30 June 2028; and  
• entities with a 31 December year end expected to report against the 5th edition for the financial year ending 31 December 2028.  

AICD engagement

The AICD will be engaging closely with the consultation process and facilitating feedback from the director community.

We welcome feedback from members. Please contact us at policy@aicd.com.au.

We will be speaking to the Chair of ASX’s Advisory Group, Dr Philip Lowe, about the revised draft in an episode of the AICD’s Director Download podcast.