The Corporate Governance Review: Australia

Overview of governance regime

Listed companies in Australia are subject to a corporate governance regime comprising various statutory instruments and regulatory guidelines, including the Corporations Act 2001 (Cth) (the Corporations Act), the Australian Securities Exchange (ASX) Listing Rules (the Listing Rules), the Market Integrity Rules (Securities Markets) 2017 (the Market Integrity Rules) of the Australian Securities and Investments Commission (ASIC), the ASX Corporate Governance Principles and Recommendations (CGPR) (4th Edition), the accounting standards of the Australian Accounting Standards Board (AASB) and ASIC's regulatory guides.

The Corporations Act regulates, among other things, corporate governance duties and standards for both private and public listed and non-listed companies. It also applies to both local companies and foreign companies that are registered in Australia. As the primary legislation in this area, the Corporations Act provides a comprehensive road map for company officers. It contains both mandatory provisions that attract penalties for contravention and optional replaceable rules that can be excluded, modified or replaced by an alternative provision in a company's constitution.

The ASX, Australia's primary securities exchange and one of the world's top 10 listed exchange groups by value,2 has many objectives, including:

  1. supervising compliance by listed entities with the Listing Rules and enforcing any contraventions;
  2. highlighting the importance of good corporate governance to ASX-listed entities in Australia; and
  3. educating unsophisticated retail investors that are considering investment opportunities.

The Listing Rules govern admission to the official list, continuous disclosure and general standards of behaviour. Contraventions of the Listing Rules can be enforced against listed entities by virtue of the Corporations Act.

ASIC is empowered by Part 7.2A of the Corporations Act to create the Market Integrity Rules, which govern domestic licensed financial markets and participants in those markets.

Established in August 2002, the ASX Corporate Governance Council (the Council) allows stakeholders to share insights on topical corporate governance issues. The Council was responsible for developing the CGPR, the first edition of which was published in 2003. The Council released the fourth edition of the CGPR on 27 February 2019, which applies to ASX-listed entities for financial years commencing from 1 January 2020 onwards. This latest edition was prompted by growing concerns about common issues regarding corporate governance and risk culture.

Listed entities must take an 'if not, why not' approach to the CGPR. That is, although the board of a listed entity is entitled to not adopt certain recommendations that it considers inappropriate in the circumstances, it must explain its reasons for forming this view.3

Although the AASB operates under the Australian Securities and Investments Commission Act 2001 (Cth), the accounting standards developed by the AASB are empowered by the Corporations Act. The preparation and disclosure of financial statements that meet these standards ensures accountability at the management level.


The ASX is responsible for regulating compliance by listed entities with the Listing Rules and the ASX Settlement Operating Rules. It has certain limited powers, including suspension, delisting, ordering rectification and referral of matters and investigations to ASIC.

The Corporations Act restricts the ASX's powers to some extent, by requiring it to defer to the authority of ASIC in certain circumstances, such as investigation of breaches of the Corporations Act. However, the ASX and ASIC often collaborate to ensure that listed entities are subject to an appropriate degree of supervision.


As the chief corporate regulator, ASIC serves a variety of important functions, including:

  1. identifying breaches of the Market Integrity Rules;
  2. overseeing financial markets and their participants, and trading on domestic licensed financial markets, such as the ASX;
  3. enforcing compliance with corporate governance standards and subjecting breaches to disciplinary action; and
  4. governing the administration of the Corporations Act.

For breaches of the Market Integrity Rules, ASIC can require enforceable undertakings and issue infringement notices.

In August 2021, ASIC released its Corporate Plan 2021–25.4 The updated plan represents a shift in focus away from the 'why not litigate' strategy of previous years to align with the Australian government's focus on economic recovery.5 Specifically, ASIC will focus on the following external strategic priorities:

  1. promoting economic recovery;
  2. reducing risk of harm to consumers;
  3. supporting enhanced cyber resilience and cyber security; and
  4. driving industry readiness and compliance with standards set by law reform initiatives.

iii Australian Prudential Regulatory Authority

As Australia's independent prudential authority in the banking, insurance and superannuation (pension) industries, the Australian Prudential Regulatory Authority (APRA) creates standards for the entities that it regulates on risk management, corporate governance and financial security.

In response to a potential breach by a regulated entity of prudential standards, APRA generally takes a cooperative approach, by focusing on negotiated outcomes directly with the entity's directors and management. However, APRA will exercise its enforcement powers if a regulated entity or its officers resist APRA's more cooperative endeavours.

APRA released an updated 2021–2025 Corporate Plan in August 2021, which amended priorities and timelines in response to the altered financial and economic realities of covid-19 while also acknowledging that there are many other factors that are influencing the financial system.6 APRA will focus on the following key priorities (among others):

  1. targeting regulatory activities in a risk-based manner;
  2. modernising the prudential architecture to ensure it remains fit for purpose;
  3. continuing to drive greater data-driven decision-making;
  4. dedicating regulatory attention to the evolving financial landscape in Australia;
  5. helping find solutions to important challenges (including superannuation retirement income products and insurance accessibility and affordability for Australians); and
  6. ensuring it continues to adopt the latest regulatory tools, techniques and practices.

iv Australian Competition and Consumer Commission

The Australian Competition and Consumer Commission (ACCC) is the regulator of federal laws relating to competition, fair trading and consumer protection and it is responsible for enforcing various sections of the Competition and Consumer Act 2010 (Cth), such as those relating to consumer protection, product safety, industry codes and anti-competitive corporate practices. In the ACCC and Australian Energy Regulator Corporate Plan: 2021–22,7 the ACCC indicated that it would continue to monitor competition and consumer issues arising from the effects of covid-19, as well as focus on the following strategic priorities:

  1. address anti-competitive conduct and promote competition;
  2. prevent anti-competitive mergers;
  3. improve market outcomes by reducing information asymmetries through the Consumer Data Right;
  4. protect consumers from misleading and deceptive conduct and promote fair trading;
  5. protect consumers from unsafe products; and
  6. regulate monopoly infrastructure and monitor concentrated markets in the long-term interests of consumers.

Recent developments

ASIC's institutional supervision programme (previously known as the Close and Continuous Monitoring (CCM) Program), established in October 2018 to place ASIC employees in significant financial services institutions (i.e., AMP Bank, Australia and New Zealand Banking Group, Commonwealth Bank of Australia (CBA), National Australia Bank and Westpac Banking Corporation) to undertake surveillance, was disrupted by the shift to remote working caused by the regulatory response to the covid-19 pandemic. Although this programme appears to have been scaled back as a result of ASIC's focus on economic recovery, ASIC will continue to conduct dedicated supervision of the financial institutions that have the greatest impact on consumers and markets in order to seek continuous improvement in consumer outcomes.8

In October 2021, the Australian government introduced bills to establish the Financial Accountability Regime (FAR), which will replace the existing Banking Executive Accountability Regime.9 The FAR is intended to respond to a number of recommendations coming out of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Banking Royal Commission).10 The FAR will extend strengthened but broadly similar accountability measures to other APRA-regulated entities and their executives (the existing regime applies only to authorised deposit-taking institutions and their executives). The FAR will also be jointly administered by APRA and ASIC. The bills that will establish the FAR were introduced and read in the Australian Parliament's House of Representatives on 28 October 2021.11 A report by the Senate Economics Legislation Committee on the bills was due on 15 February 2022.12

General trends

Corporate governance has been significantly affected by three relatively recent events: the APRA inquiry into the CBA, the Banking Royal Commission and the regulatory response to the covid-19 pandemic.

The final CBA report produced by APRA was published on 1 May 2018 and the Banking Royal Commission commenced at the beginning of 2018. Andrew Clarke, Professor at the College of Law and Justice, described this period in 2018 as 'the perfect corporate storm'.13 These events invited public scrutiny and awareness of poor corporate cultures and the alleged dishonesty and hubris14 of large financial institutions and their management.

The Honourable Kenneth Hayne AC QC was appointed as Commissioner to oversee the Banking Royal Commission. He released his interim report on 28 September 2018 and his final report on 1 February 2019 (the Final Report). Three key themes arose from Commissioner Hayne's statements following the release of the findings from the Banking Royal Commission:

  1. the law must be clear so that businesses understand their legal obligations (i.e., substantive amendments to the law to simplify it);
  2. businesses must obey the law and invest in a culture that values compliance; and
  3. regulators must enforce the law and act on contraventions, asking themselves 'why not litigate' rather than 'why litigate'.

APRA's report identified four problematic behaviours that could be found at various levels of the CBA:

  1. institutional complacency;
  2. a reactive rather than proactive approach to risks;
  3. an insular culture and an inability to learn from past mistakes; and
  4. preoccupation with obtaining consensus.15

On 17 July 2020, in response to the inquiries that had taken place and the reports being published, Westpac released its Culture, Governance and Accountability Reassessment Report, which introduced its Customer Outcomes and Risk Excellence programme, described as a 'comprehensive group-wide transformation program' to understand and manage non-financial risk across Westpac.16

ASIC has also maintained its commitment to climate risk disclosure and governance in 2020–2021. The regulator intends to:

  1. monitor listed companies for appropriate governance frameworks for identification, management and disclosure of climate risks;
  2. understand the challenges encountered by companies on this topic;
  3. protect consumers by monitoring product issuers for greenwashing conduct; and
  4. represent Australia on task forces and working groups set up by the International Organisation of Securities Commissions.17

Corporate leadership

In his Final Report, Commissioner Hayne noted: 'Culture, governance and remuneration march together. Improvements in one area will reinforce improvements in others; inaction in one area will undermine progress in others.'18 The following organisations have published best practice principles:

  1. the Australian Council of Superannuation Investors (ACSI);19
  2. the Council;
  3. the Australian Institute of Company Directors (AICD);20 and
  1. the Investor Group on Climate Change.

i Board structure and practices

Public companies are required to have a minimum of three directors (of which at least two ordinarily reside in Australia).21 In Australia, a board is structured as a single tier with one chair and executive and non-executive directors.

For listed entities, compliance with the CGPR constitutes a reporting requirement.22 The CGPR recommends, among other things, that listed companies establish and disclose board charters,23 diversity policies,24 performance evaluations (for the board, committees, directors and senior executives)25 and separate board committees.26 Gender diversity is also a key recommendation, with listed entities included in the S&P/ASX300 Index expressly required to have a target of no less than 30 per cent of directors of each gender holding board positions.27 ASX200 companies achieved this objective, in aggregate, in November 2019.28 Female representation on ASX200 boards has now increased to approximately 34 per cent and, as at November 2021, females comprised approximately 42 per cent of all new appointments to ASX200 boards for the calendar year. More broadly, ASX300 companies have now achieved, in aggregate, female board representation of approximately 33 per cent.

In response to the covid-19 pandemic, the AICD and the Governance Institute of Australia released a report on board practices observing the impact of virtual meetings on directors.29 The survey revealed that 41 per cent of respondents held more frequent board meetings, while 43 per cent disclosed that the security and stability of virtual platforms presented cybersecurity challenges for board governance.30 The key recommendations include, among others, implementing a virtual meeting protocol, proactive engagement with key stakeholders, preparing contingency plans and stress-testing to achieve critical organisational resilience.31

ii Board and chair

The board must ensure that proper accountability systems and mechanisms are in place and that shareholders are kept informed in accordance with the entity's continuous disclosure obligations. The chair's role is to ensure that appropriate board structures and procedures are in place. The general view in Australia is that the roles of chief executive officer (CEO) and chair should remain separate.32

Listed company boards should comprise a majority of independent non-executive directors33 and must maintain oversight of the CEO and senior management.

iii Delegation

Subject to the company's constitution, directors may delegate their powers and are responsible for a delegate's exercise of power unless he or she reasonably believes, in good faith and after proper inquiry, that the delegate would at all times comply with the director's duties and is reliable and competent in relation to the delegated power.34

In circumstances where a market announcement was 'a key statement in relation to a highly significant restructure' and where management has brought the matter to the board, none of the directors is entitled to 'abdicate responsibility by delegating his or her duty to a fellow director'.35 In this regard, non-executive directors also cannot avoid liability by pleading reliance on management or expert advisers.

There is a core, irreducible requirement for directors to take all reasonable steps to be in a position to guide and monitor the company.36

Board committees perform a critical role in determining matters where executive directors are faced with a conflict of interest37 and assist directors to obtain the information required to discharge their duties, including to challenge information or senior management, or both. As noted in the Final Report: 'The task of the board is overall superintendence of the company, not its day-to-day management.'38 It is a requirement for listed entities to have nomination,39 audit,40 risk41 and remuneration committees.42

During takeover transactions, committees should only comprise directors not associated with the counterparty to the takeover and the establishment of an independent takeover committee may be required.43

iv Remuneration

It is expected that listed entities will remunerate fairly and responsibly.44 ACSI notes that non-executive directors should generally only be remunerated by way of reasonable fixed fees or shares, and there should not be any variable remuneration (which may include short-term (i.e., annual payment in cash or securities) and long-term (i.e., options or securities-based) incentives), which may be more appropriate for executive directors.45

For listed companies, remuneration reports are required to be adopted by shareholders at every annual general meeting (AGM).46 Voting on the resolutions to the report and the operation of the 'two strikes' rule is a mechanism for shareholders to hold the board accountable for excessive remuneration if at least 25 per cent of the votes cast by shareholders at the AGM are against remuneration reports in consecutive years.47 If this occurs, shareholders must then be asked to vote on a spill motion.48 Shareholders can also use this mechanism to express dissatisfaction with other governance and performance issues.

v Directors

There are federal and state laws that impose liability on directors and senior managers for corporate breaches of laws other than the Corporations Act, including environmental, health and workplace safety laws and securities and competition laws. Directors must:

  1. exercise their powers and discharge their duties with a reasonable degree of care and diligence;49
  2. act in good faith in the best interests of the company or for a proper purpose;50
  3. not misuse their position or improperly use information obtained from their position as director to obtain an advantage for themselves or a third party or to cause detriment to the company;51 and
  4. prevent the company from trading while insolvent.52

Companies often create a conflicts of interest policy as a best-practice defence.53 Directors' duties must be observed carefully, as the consequences of breaching duties can be severe. There are legal protections available to directors in certain circumstances, including:

  1. the business judgement rule: when directors are making a business judgement and in doing so:
    • are acting in good faith and for a proper purpose;
    • do not have a material personal interest subject matter of the judgement;
    • inform themselves about the subject matter of the judgement to the extent they reasonably believe to be appropriate; and
    • rationally believe that the judgement is in the best interests of the company;
  2. meeting the requirement of exercising due care and diligence both under the Corporations Act and the common law; and
  3. reliance on information and advice: directors are entitled to rely on information or professional or expert advice from a competent employee, professional adviser or expert, another director or officer, or a board committee, provided the reliance was made in good faith, and after the director has made an independent assessment of the information or advice.

The purpose of the business judgement rule is to recognise that directors are expected to take advantage of business opportunities and engage in responsible risk taking. In practice, the rule has fallen short of this goal as it has not alleviated directors' concerns about liability. The ability to rely on information and advice has been diluted by courts postulating 'core irreducible duties' in certain areas. The Centro case54 requires directors to personally be financially literate and to understand the AASB accounting standards.

Other protections, such as constitutional indemnities and insurances, including directors and officers liability insurance, are also commonly relied on. Additional duties may arise for directors of responsible entities, directors of life companies,55 superannuation trustees and authorised deposit-taking institutions (ADIs). In addition to these duties, the Listing Rules impose continuous disclosure obligations on listed entities. A company's obligation to continuously disclose market sensitive information is considered by the ASX to be critical to the market staying informed. Accordingly, directors should give due consideration to the company's communications strategy and market announcements or otherwise risk personal liability. This is reflected by the breach of directors' duties found by the High Court of Australia in the case of James Hardie Industries Limited.56

The role of an audit committee is to assist the board to discharge its duties in respect of the entity's financial performance, reporting and management.57 The Centro case raised the bar; directors must apply their own minds to, and review carefully, the financial statements and directors' report.58 Directors must ensure that the CEO and chief financial officer provide a declaration stating that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements give a true and fair view and of the entity's financial performance comply with accounting standards.59

New legislation recently introduced in Australia requires that all persons who are appointed as directors and alternate directors of certain Australian entities must apply for a Director Identification Number within prescribed time frames. A Director Identification Number is a unique 15-digit number that will be assigned to each eligible director (upon a one-off application by the director) as proof of his or her identity. Directors will keep the same Director Identification Number regardless of whether they change companies or their name, cease to be a director, or move interstate or overseas. This regime, introduced as part of the Australian government's Modernising Business Registers Program, is aimed at preventing fraudulent or other unlawful activity in a corporate context.60

vi Appointment, nomination, term of office and succession

The CGPR stipulate a detailed process for the nomination and election of directors to the board of a listed entity. Candidates must have the requisite skills, capacity and experience to ensure that their duties can be discharged and that they can provide effective leadership to act in the best interests of the company. Nomination committees should be formed to provide recommendations to the board based on objective criteria, such as the CGPR.61

Generally, a company's constitution outlines the appointment process for directors. However, Listing Rule 14.4 provides that a director of a listed company must not hold the position of director without re-election past the longer term of the third AGM following appointment or three years appointment.62 Although some bodies call for annual re-election of directors,63 staggered board re-election is commonly adopted in Australia. If a director serves for 10 years or more, the director's independence may need to be considered.64

Board succession processes ensure that board composition reflects an appropriate balance of skill, experience and subject matter expertise. This is often overseen by the nomination committee.65


Public companies are subject to a range of periodic reporting and continuous disclosure obligations, as well as disclosure rules for specific one-off events, mandated by the Corporations Act and Listing Rules. Circumstances in which the disclosure of information is mandated under the Corporations Act and Listing Rules include:

  1. periodic financial reporting;
  2. specific disclosures with respect to changes to fundraising and corporate control transactions and other changes to a company's capital structure; and
  3. timely or continuous disclosure of price-sensitive information in relation to a company's securities.66

In particular, persons who, with their associates, have relevant interests in voting shares representing 5 per cent or more of the votes in a listed company, body or listed registered managed investment scheme must disclose details of their relevant interest. If a person's relevant interest changes to below 5 per cent, the person ceases to have a substantial holding. If the person makes a takeover bid, disclosure must also be made.67

The Corporations Act also requires a director of a listed public company to provide the ASX with details of his or her relevant interests in any securities of the company or a related body corporate within 14 days of being appointed (other than reappointment at the same meeting), the company's listing and any change in the director's interests.68 A listed entity must provide the same information to the ASX within five business days of these events, and when a director ceases to be a director.69

These disclosure obligations are supported by prohibitions on market misconduct, including insider trading, misleading and deceptive conduct, and other forms of market manipulation. In addition, shareholders are entitled to particular information when a general meeting is convened for certain purposes (e.g., to obtain shareholder approval for a related party transaction).

Listed companies are required to satisfy half-yearly and annual financial reporting obligations, each requiring preparation and lodgement of the following:

  1. a financial report, comprising audited financial statements and notes to those statements, prepared in accordance with Australian accounting standards;
  2. a directors' report, which must include, among a range of other things, specific commentary regarding the company's operations and business, as well as a remuneration report detailing the remuneration of directors and key management personnel; and
  3. an auditor's report, obtained from the company's independent auditor. More frequent financial reporting is required for certain types of listed companies, such as mining and mining exploration companies (which are subject to quarterly reporting), and certain investment entities (which are required to report monthly net tangible assets).70

Annual financial information is typically provided in the form of an annual report, which listed companies must provide to shareholders each financial year by the earlier of 21 days before the company's AGM (where the reports must be laid before the meeting) or four months after the end of the financial year (noting that extensions to the reporting deadlines for listed and unlisted companies granted during 2020 and 2021 as a result of the covid-19 pandemic have largely expired (other than a one-month extension for unlisted companies with balance dates between 24 December 2021 and 7 January 2022 (both inclusive)).71 As at 11 January 2022, there is no indication that further extensions of time will be granted.72

Complementing periodic reporting, the continuous disclosure regime imposed by the Listing Rules requires a listed entity to immediately disclose to the ASX, once an entity becomes aware of 'any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities' – commonly referred to as price-sensitive or material information.73 The Listing Rules contain an exception to the continuous disclosure obligation where one or more of the following five situations applies:

  1. it would be a breach of a law to disclose the information;
  2. the information concerns an incomplete proposal or negotiation;
  3. the information comprises matters of supposition or is insufficiently definite to warrant disclosure;
  4. the information is generated for the internal management purposes of the entity; or
  5. the information is a trade secret.74

In addition, to rely on the carve-out:

  1. the information must be confidential and the ASX must not have formed the view that the information has ceased to be confidential; and
  2. a reasonable person would not expect the information to be disclosed.

The continuous disclosure obligation is reinforced under the Corporations Act, which prescribes an offence for a listed company that fails to comply with its continuous disclosure obligations when the information in question is both market sensitive and not generally available. To assist with satisfying its continuous disclosure obligations, a listed company will usually adopt a continuous disclosure policy, as encouraged by the CGPR. In practice, most securities class actions in Australia are pursued against listed entities for a breach of their continuous disclosure obligations.

In August 2021, making permanent the temporary measures introduced in response to the covid-19 pandemic, the Australian government modified the operation of the continuous disclosure laws, such that the test for whether a breach of continuous disclosure provisions has occurred is now a subjective (rather than objective) one. The new test, which applies to civil proceedings only, requires non-public information to be disclosed only if the entity knows or is reckless or negligent with respect to whether that information would have a material effect on the price or value of the entity's securities.75 The effect of the change is to impose a higher bar, or require a higher degree of certainty, that information would have the necessary market effect, before it is required to be disclosed in an effort to combat the upward trend of opportunistic shareholder class actions and to put downward pressure on premiums for directors and officers' insurance.76

Corporate social responsibility / ESG

In recent years, there has been unprecedented change to the landscape of corporate responsibility in the midst of the covid-19 pandemic, the wake of the Banking Royal Commission, the introduction of laws and regulations affecting the internal culture and values of an organisation, and heightened public scrutiny of corporate ethics.

In response to this, Australian boards have had to adapt and adopt significant internal changes to promote proper corporate responsibility.

APRA conducted a review from December 2019 to February 2020 of the implementation of the Banking Executive Accountability Regime (BEAR) and released its information paper on 11 December 2020. Commencing on 1 July 2018 (for large ADIs) and 1 July 2019 (for small and medium ADIs), BEAR has contributed to transparency at the level of individual accountability and good governance outcomes in ADIs more broadly. This information paper identified key thematic areas and better practice recommendations for developing and maintaining clearer accountability structures.

The Banking Royal Commission also made recommendations to extend the BEAR to other financial services entities, which will be implemented through the Financial Accountability Regime (FAR).77 FAR required applicable entities to register a person with APRA or ASIC as an 'accountable person'. This person faces financial repercussions if there is a breakdown of accountability arrangements at their place of employment.

i Embedding the appropriate culture

Traditionally, legislation and standards regulated companies' behaviour and external transactions. Australian lawmakers and regulators are increasingly seeking to regulate the 'interior' of Australian organisations by seeking to influence organisational culture, values and intentions.78 In addition to requirements to publicly report environmental and social risks in their business, including climate risks and modern slavery practices, companies are also now subject to comprehensive whistle-blowing protection legislation as a further safeguard for corporate ethics.79 As noted in a recent ASIC Media Release: 'whistle-blowers are an essential part of an organisation's ability to detect misconduct and identify, escalate and address issues'.80 The media release, issued by ASIC in October 2021, revealed that ASIC had conducted a review of a select sample of whistle-blower policies and formed the view that the majority of such policies were not legally compliant.81 Consequently, ASIC issued a letter to CEOs of public companies, large proprietary companies and trustees of registrable superannuation entities requesting them to review their existing whistle-blower policies.82

To address this evolving legislative environment and to meet rising community expectations of corporate behaviour, boards must continually assess organisational culture. Corporate responsibility is as much about policing conduct as it is facilitating a culture of ethical behaviour and decision-making. Reporting to boards must be as comprehensive as possible in relation to organisational conduct and culture.

Boards should encourage a culture that positively affects the interests of multiple stakeholders, including customers, employees, regulators and the community. Metrics should not be confined to financial targets; both qualitative and quantitative data sources need to be accessed to provide a holistic picture of how the organisation affects all stakeholders.83

Boards must seek views from all organisational levels. Management behaviour must mirror the 'tone at the top', created by the board, for consistency of values and intentions throughout the organisation.

To operate effectively, Australian companies are recommended, as often as is reasonably possible, to:

  1. assess their culture and governance;
  2. identify any problems with that culture and governance;
  3. deal with those problems; and
  4. determine whether any changes made have been effective.84

ii Listed entities

Entities listed on the ASX should instil and continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly.85 The ASX encourages boards to approve the organisation's statement of values and to hold senior executives accountable for imparting those values across the organisation.86 Listed entities are also recommended to have and disclose a code of conduct for directors, senior executives and employees and ensure that the board or a committee of the board is informed of any material breaches of that code.87

The latest edition of the CGPR recommends that the board of a listed entity should, when identifying and managing risk, consider non-financial risks such as 'social risks', which relate to the risks of negative consequences to a listed entity where the entity or its activities adversely affect society. 88

ASX-listed entities must report against these recommendations and, to the extent that they have not adopted or implemented any recommendation, they must provide a detailed explanation as to the reasons that they have not.89

Although these recommendations and obligations apply only to listed entities, it has a cascading effect on corporate Australia and reflects the ASX's view of the critical relationship that ethical and responsible culture has with good governance.

iii Management and reporting of non-financial risk

A heightened focus on corporate responsibility brings a commensurate need to properly address broad categories of risk. Historically, companies have focused on risks that directly affect financial performance, deprioritising other categories and sources of risk, including legal non-compliance, dishonest and misleading conduct, and unfair customer treatment.

Boards need to increase attention to managing these non-financial risks. This often requires an uplift in capability, frameworks and supporting systems.

In particular, Australian stakeholders, including institutional investors, credit ratings agencies and prudential regulators, now regard climate change as a significant economic and financial risk in both the long term and shorter term.90 These risks arise not only from the physical or ecological effects of climate change, but associated economic transition risks and litigation exposures from both regulators and private parties.91 Proper reporting on these risks for listed entities has become a major focus of Australian corporate regulators.92 Notwithstanding the covid-19 pandemic, regulatory and investor expectations on climate change risk management has not significantly diminished in recent years. In fact, covid-19 was an economic 'black swan' event that compelled companies to realise the importance of stress-testing and scenario planning in managing climate change risks and financial reporting, as well as supply chain and other issues more directly related to the pandemic.

iv Remuneration and incentives

Australian companies must align the remuneration of their officers and employees to encourage the management of non-financial risks and to promote a compliance culture within the organisation. As noted in the Final Report, culture, governance and remuneration reinforce each other, 93 for better or worse. APRA published a revised prudential standard on remuneration (CPS 511) in November 2020. 94 It is intended that this prudential standard complements BEAR and FAR to regulate incentive plans. Significant financial institutions are required to establish an incentive arrangement from the second quarter of 2021.

v Corporate responsibility and directors' duties

It is accepted that the duty on directors to discharge their duties and exercise their powers in good faith in the best interests of the corporation95 is not confined solely to the pursuit of maximising short-term financial returns for shareholders. The standard of care expected of a reasonable director has been elevated as a result of recent developments. Directors of all Australian companies need to give heightened consideration to non-financial risks in decision-making and the effects of a company's activities having regard to a broader range of stakeholders.

On the basis that the interests of all stakeholders associated with the corporation are more likely to converge in the longer term, boards are expected to focus on achieving long-term financial advantage.96 A company is more likely to obtain long-term financial advantage 'if the entity conducts its business according to proper standards, treats its employees well and seeks to provide financial results to shareholders that, in the long run, are better than other investments of broadly similar risk'.97


i Shareholder rights and powers

The Corporations Act grants powers to shareholders of listed companies to influence a board in a number of ways, particularly by granting shareholders the power to call or require the calling of shareholders meetings and propose members' resolutions.

In most instances, the shares held in Australian listed companies are all of the same share class (usually ordinary class shares) and generally the only difference between shareholders is the number of shares held. Therefore, the powers and rights of each shareholder largely derive from the number of shares held.

The right of shareholders to require or call meetings is enshrined in Sections 249D and 249F of the Corporations Act. Shareholders who hold at least 5 per cent of the votes that may be cast at the general meeting can request the directors of a company to call and hold a general meeting of shareholders.98 The Corporations Act imposes a number of requirements on the form of this request. Directors must call the meeting within 21 days of the request being given to the company and the meeting must be held no later than two months after the request is given to the company. Additionally, shareholders who hold at least 5 per cent of the votes that may be cast at a general meeting may directly call and arrange to hold a general meeting.99 As shareholder activism gains favour in Australia, use of this right to call a meeting by shareholders is becoming more prevalent.

Shareholders with at least 5 per cent of the votes that may be cast on the resolution or at least 100 members who are entitled to vote at a general meeting may also give a company notice of a resolution that they propose to move at a general meeting.100 The Corporations Act sets out various requirements relating to the form of notice and to whom the notice must be directed. If a company has been given notice of a resolution under Section 249N of the Corporations Act, the resolution is to be considered at the next general meeting that occurs more than two months after the notice is given.

Shareholders also have a variety of other rights and powers. To change or repeal its constitution, a company must pass a special resolution, which requires at least 75 per cent of the votes cast by shareholders at a general meeting to be in favour.101 Companies may also reduce their share capital by way of a share capital reduction or a share buy-back. A selective buy-back scheme, in which identical offers are not made to every shareholder, must first be permitted by a special resolution, which requires at least 75 per cent shareholder approval by votes cast.102 A selective reduction of capital must also be approved by a special resolution.103

ii Shareholder duties and responsibilities

Shareholders are not subject to the duties outlined in the corporate governance regulatory framework. Rather, shareholders, regardless of share class or number, may exercise certain rights and powers afforded to them by the Corporations Act, within the bounds of the company's constitution. However, shareholders cannot act in an unfettered manner.

iii Shareholder activism

Shareholder activism has evolved during the past decade from an occasional disruption to a real risk to be anticipated and managed by the board. Activist shareholders are typically institutional shareholders, including superannuation funds, hedge funds, private equity investors and, increasingly, specialist activist funds (e.g., Manikay Partners' intervention in the MYOB Group scheme of arrangement (2019), Mittleman Brothers' intervention in the Village Roadshow Limited scheme of arrangement (2020) and Andrew Forrest's intervention in the Huan Aquaculture scheme of arrangement (2021)).

Shareholder activism can generally be classified under the following categories (or some combination thereof):

  1. M&A activism – persuading the board to respond positively or negatively to a takeover proposal or other control transactions or to spin-off divisions to unlock hidden value, divest non-core businesses to eliminate a perceived conglomerate discount or initiate a process to sell the company or put it into play;
  2. balance sheet or financial engineering activism – persuading the board to increase the gearing of the company to what is perceived to be a more optimal ratio, return excess capital to shareholders, reduce costs and focus on maximising return on invested capital; and
  3. governance activism – highlighting corporate governance lapses or invoking corporate governance best practices. Sometimes this may be with a view to changing the composition of the board so that the new directors nominated by the activist can pursue M&A activism or balance sheet activism.

Shareholder activists may initially try to engage privately with boards to effect change. If this fails, they may seek to take public action. Australia is a relatively friendly jurisdiction for shareholder activists owing to a large number of shareholder protections enshrined in the Corporations Act and the risks and potential liabilities faced by directors. The techniques that can be used by shareholder activists include:

  1. putting forward proposed shareholder resolutions – shareholders of Australian listed companies who either alone or with other shareholders hold 5 per cent or more of the shares on issue can put forward shareholder resolutions for consideration at forthcoming AGMs;
  2. calling an extraordinary general meeting to spill the board – shareholders who meet the 5 per cent threshold described above can request the company to call a meeting to consider and vote on a board spill resolution. Alternatively, these shareholders may call and arrange to hold the meeting themselves; however, they are then responsible for the associated expenses;
  3. voting down remuneration reports at two consecutive AGMs – if 25 per cent of shareholders of an Australian listed company vote down the remuneration report at two consecutive AGMs, a board spill resolution is triggered and the shareholders will vote on the spill resolution at that second AGM; and
  4. applying pressure in the lead-up to voting a resolution by:
    • buying further shares;
    • lobbying shareholders to vote in favour of (or against) a resolution;
    • applying to a court for an order to inspect company books and records; or
    • requesting access to details of proxy votes in advance of the meeting.

iv Takeover defences

Change of control in public and listed companies in Australia is primarily affected by takeovers and schemes of arrangement. A scheme of arrangement is a court-based process that requires the support of the target company board to implement. Accordingly, the only practical way for a hostile bidder to obtain control of a public company is by way of a takeover bid.

In a takeover bid, a target company has 15 days from when the bidder's statement is sent to shareholders to send a target's statement to shareholders. However, practically there may be more time to prepare a target's statement as a bidder may take up to two months from a proposed off-market bid to send its bidder's statement to shareholders.

In managing hostile takeovers, boards can employ pre-emptive and reactive strategies. Pre-emptive strategies that might be used include:

  1. monitoring the company's share register;
  2. maintaining current internal valuations so a board can objectively assess the merit of any takeover approach;
  3. maintaining template market announcements, shareholder communications and target statements that can be quickly adapted and released; and
  4. using convertible securities to create entrenched capital structure.

Reactive strategies employed by boards include:

  1. persuading target company shareholders to reject the hostile bid;
  2. persuading the hostile bidder to improve its offer to a price at which the target's board is prepared to recommend the offer to shareholders;
  3. seeking a better offer from a third party, either by engaging with a 'white knight' competing bidder, or creating an auction for control between the two independent bidders; and
  4. making an application to the Takeovers Panel, the primary forum for disputes relating to takeover bids in Australia until a bid period is ended.

The Takeovers Panel has broad powers, the primary of these being to declare unacceptable circumstances in the context of a takeover bid. If the Takeovers Panel has made such a declaration, it can make remedial orders to rectify the circumstances.

v Contact with shareholders

Shareholder communications are an integral part of the corporate governance framework in Australia as they not only enable boards and officers to gauge the shareholders but also provide a channel of communication with the broader shareholder base.

For public companies (listed or unlisted), these communications are typically facilitated through the forum of the AGM. Listed public companies are required under the CGPR to typically have an investor relations programme that is designed to facilitate effective two-way communication with the shareholders, involving scheduled and ad hoc interactions with institutional investors, retail investor groups, sell-side and buy-side analysts, proxy advisers and the financial media.104 In response to the covid-19 pandemic, temporary modifications were made to the Corporations Act to facilitate the holding of meetings (including AGMs) via technology that allows members to participate remotely by online or other electronic means (virtual technology).105 These modifications extend to relief from dispatching hard copy notices of meetings and other shareholders materials to shareholders that have not otherwise elected to receive hard copy materials. In addition, given the potential for continued uncertainty posed by covid-19 or other extraordinary circumstances, ASIC has been granted a permanent power to permit entities (or classes of entities) to hold a wholly virtual meeting in circumstances where it would be unreasonable to hold a physical meeting.


The Banking Royal Commission and the APRA inquiry into the CBA have prompted a move towards improved accountability by companies and greater public awareness of the significance of corporate governance and non-financial risk culture. Regulators are also more likely than ever to exercise their enforcement powers. In recent years, there has been a marked trend towards regular and consistent internal and external monitoring of large financial services institutions. However, ASIC's corporate plan for 2021–2025 indicates a move away from this position and particularly stepping back from the 'why not litigate' approach recommended by the Banking Royal Commission in favour of a focus on economic recovery from the covid-19 pandemic.106

Through measures such as the institutional supervision programme ASIC is developing greater insight into how risk culture and corporate values influence the actions of directors and other officers, particularly in large financial institutions. APRA's 2019 review of industry self-assessments into governance, culture and accountability noted that the 'industry is grappling to manage non-financial risks, such as culture and accountability'107 and 'risk culture is not well understood'.108

The inquiries, reports and increased public scrutiny of the topic has invited positive change and greater accountability in the risk cultures of many organisations. For example, in its Culture, Governance and Accountability Reassessment Report, Westpac acknowledged having a reactive non-financial risk culture and committed itself to a variety of initiatives, including the introduction of a new executive role for financial crime, compliance and conduct and implementation of a new operating structure that would assist in clarifying responsibilities and improving accountability.

In addition, the Financial Regulator Assessment Authority (FRAA) was established on 29 June 2021 in response to recommendations of the Banking Royal Commission.109 Broadly, the FRAA will assess and report on the effectiveness and capability of ASIC and APRA. The FRAA will undertake a targeted review of ASIC in 2022 that focuses on ASIC's strategic prioritisation, planning and decision-making, as well as its surveillance and licensing functions.110 The outcome of this review is likely to further affect the approach ASIC takes to enforcement and regulatory action.

In the post-pandemic landscape, remote working and other permanent shifts in work practices will affect the risk culture of Australian organisations. The unprecedented nature of these changes means the true extent of these effects is not yet known. To respond to the adjustments that workplaces have undertaken and will continue to undertake post-pandemic, companies need to be proactive in maintaining an appropriate risk culture. This can be achieved by:

  1. encouraging leaderships to over-communicate and adopt new methods of communication;
  2. creating an environment in which staff can air grievances, particularly virtually;
  3. maintaining a balance between accountability and collaboration;
  4. reflecting on institutional mistakes; and
  5. investing in the three lines of defence (a widely accepted risk management framework).


1 Jeremy Blackshaw, Kate Koidl and Bart Oude-Vrielink are partners and Oliver Deane is a lawyer at MinterEllison.

2 Australian Securities Exchange (ASX), 'Corporate overview', ASX online

3 Corporate Governance Principles and Recommendations, ASX Corporate Governance Council (4th ed., 2019).

4 ASIC Corporate Plan 2021–25: Focus 2021–22 (Report, 2021).

6 Australia Prudential Regulatory Authority [APRA], Corporate Plan 2021–25 (Report, August 2021).

7 Australian Competition and Consumer Commission and Australian Energy Regulator, ACCC and AER Corporate Plan: 2021–2022 (Report, August 2021).

8 ASIC Corporate Plan 2021–25: Focus 2021–22 (Report, 2021).

9 Financial Accountability Regime Bill 2021 (Cth); Financial Sector Reform (Hayne Royal Commissions Response No. 3) Bill 2021 (Cth).

10 Financial Accountability Regime Bill 2021 (Cth), Financial Sector Reform (Hayne Royal Commissions Response No. 3) Bill 2021 (Cth), Financial Services Compensation Scheme of Last Resort Levy Bill 2021 (Cth) and Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2021 (Cth) Explanatory Memorandum, 3.

11 Commonwealth of Australia House of Representatives Hansard (28 October 2021), 4.

12 Financial Sector Reform (Hayne Royal Commissions Response No. 3) Bill 2021 (Cth), Parliament of Australia Online,

13 Andrew Clarke, 'The Corporation and Corporate Culture: A New Paradigm?' (2019) Vol. 36, No. 8 C&SLJ, 596.

14 ibid., at 603.

15 ibid.

16 APRA, Information Paper: Self-assessments of governance, accountability and culture (Report, 22 May 2019).

17 ASIC Corporate Plan 2020–24: Focus 2020–21 (Report, 2020).

18 The Hon Justice Kenneth Hayne AC QC, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019) Vol. 1, 412.

19 Australian Council of Superannuation Investors (ACSI), ACSI Governance Guidelines: A guide to investor expectations of listed Australian companies (December 2021).

20 Australian Institute of Company Directors (AICD), 'Find out more about who we are and what we do', AICD online

21 Corporations Act 2001 (Cth) Section 201A(2).

22 ASX Listing Rules (as at 23 December 2021) r 4.10.3.

23 Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019) Recommendation 1.1.

24 ibid., Recommendation 1.5.

25 ibid., Recommendations 1.6 and 1.7.

26 ibid., Recommendations 2.1, 4.1, 7.1 and 8.1.

27 ibid., Recommendation 1.5.

28 'ASX 200 hits 30% women on boards', AICD online (19 December 2019)

29 AICD and Governance Institute of Australia, 'Governance through a crisis: Learning from Covid-19 – Lessons for now and beyond' (Report, 11 September 2020), 5.

30 ibid., at 10.

31 ibid., at 7.

32 Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019) Recommendation 2.5.

33 ibid., at Recommendation 2.4.

34 Corporations Act 2001 (Cth) Section 198D.

35 Australian Securities and Investments Commission v. Macdonald (No. 11) (2009) 256 ALR 199 [260].

36 Australian Securities and Investments Commission (ASIC) v. Healey (2011) 196 FCR 291.

37 ACSI Governance Guidelines: A guide to investor expectations of listed Australian Companies (ACSI, December 2021), 15.

38 The Hon Justice Kenneth Hayne AC QC, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019) Vol. 1, 412.

39 Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019) Recommendation 2.1.

40 ibid., at Recommendation 4.1.

41 ibid., at Recommendation 7.1.

42 ibid., at Recommendation 8.1.

43 ACSI Governance Guidelines: A guide to investor expectations of listed Australian Companies (ACSI, December 2021), 15 and 41.

44 Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019), Principle 8.

45 ACSI Governance Guidelines: A guide to investor expectations of listed Australian Companies (ACSI, December 2021), 21.

46 Corporations Act 2001 (Cth), Section 300A.

47 ibid., at Section 250U.

48 ibid., at Section 250V.

49 ibid., at Sections 180 (in the case of a listed company) and 601FD(1)(b) (in the case of a listed trust).

50 ibid., at Section 181.

51 ibid., at Sections 182 and 183.

52 ibid., at Section 588G.

53 James Dunn, 'Managing conflicts of interest' (1 August 2017) Company Director magazine.

54 Australian Securities and Investments Commission (ASIC) v. Healey & Ors (2011) FCA 717.

55 Australian Securities and Investments Commission (ASIC) v. Hellicar (2012) 247 CLR 345.

56 Australian Securities and Investments Commission (ASIC) v. Healey (2011) 196 FCR 291.

57 Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019), Recommendation 4.1; ACSI Governance Guidelines: A guide to investor expectations of listed Australian Companies (ACSI, December 2021), 37.

58 Australian Securities and Investments Commission (ASIC) v. Healey (2011) 196 FCR 291.

59 Corporations Act 2001 (Cth) Section 295A; Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019), Recommendation 4.2.

60 ibid.

61 Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019), Recommendation 2.1.

62 ASX Listing Rules (as at 22 January 2020), Rule 14.4.

63 ACSI Governance Guidelines: A guide to investor expectations of listed Australian companies (ACSI, October 2019), 7.

64 ibid., at 15; Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019), Recommendation 2.3.

65 Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019), Recommendation 2.1.

66 Mark Blair and Ian Ramsay, 'Mandatory Corporate Disclosure Rules and Securities Regulation' in Gordon Walker, Brent Fisse and Ian Ramsay (eds), Securities Regulation in Australia and New Zealand (LBC Information Services, 2nd ed., 1998) 55 to 56.

67 Corporations Act 2001 (Cth), pt 6A.1.

68 ibid., at Sections 205F, 205G, 300(11) and (12).

69 ASX Listing Rules (as at 11 January 2022), Rule 3.19A.

70 Corporations Act 2001 (Cth) ch 2M.

71 ASIC Corporations (Extended Reporting and Lodgment Deadlines—Unlisted Entities) Instrument 2020/395 and ASIC Corporations (Extended Reporting and Lodgment Deadlines—Unlisted Entities) Instrument 2020/451, as extended by ASIC Corporations (Amendment) Instrument 2021/976.

72 'ASIC to extend deadlines for 31 December 2021 unlisted entity financial reports', ASIC online (30 November 2021)

73 ASX Listing Rules (as at 11 January 2022), Rule 3.1.

74 ASX Listing Rules (as at 11 January 2022), Rule 3.1A.

75 Corporations Act 2001 (Cth), Sections 674A(2)(d) and 675A(2)(b) and Treasury Laws Amendment (2021 Measures No. 1) Act 2021.

76 Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Cth) Explanatory Memorandum, Supplementary Analysis, 44.

77 The Treasury, Implementing Royal Commission Recommendations 3.9, 4.12, 6.6, 6.7 and 6.8: Financial Accountability Regime (Proposal Paper, 22 January 2020).

78 'A social licence: the future of business', Transforming business with MinterEllison: ideas and challenges that are shaping our future (MinterEllison, 19 August 2019).

79 Modern Slavery Act 2018 (Cth); Treasury Laws Amendment (Enhancing Whistleblower Projections) Act 2019 (Cth).

81 ibid.

82 ibid.

83 Rahoul Chowdry and Mark Standen, 'Delivering sustainable stakeholder value in a post Hayne Royal Commission world', MinterEllison Insight (17 December 2019)

84 Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019) Recommendation 5.6; The Hon Justice Kenneth Hayne AC QC, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019).

85 Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019) Principle 3.

86 ibid., at Recommendation 3.1.

87 ibid., at Recommendation 3.2.

88 Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019).

89 ASX Listing Rules (as at 11 January 2021), Rule 4.10.3.

90 MinterEllison, 'Are your finance & governance teams ready? Responding to heightened expectations on climate risk assurance & disclosure' (August 2019).

91 ibid.

92 See, e.g., update to ASIC Regulatory Guide 247 (Effective disclosure in an operating and financial review) to incorporate the types of climate change risk developed by the G20 Financial Stability Board's Taskforce on Climate Related Financial Disclosures.

93 The Hon Justice Kenneth Hayne AC QC, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019), 412.

94 APRA, Revised Prudential Standard CPS 511 (Prudential Standard, 12 November 2020).

95 Corporations Act 2001 (Cth), Section 181(1).

96 The Hon Justice Kenneth Hayne AC QC, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019), 403.

97 ibid.

98 Corporations Act 2001 (Cth), Section 249D.

99 ibid., at Section 249F.

100 ibid., at Section 249N.

101 ibid., at Section 136.

102 ibid., at Section 257D.

103 ibid., at Section 256B.

104 Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed., 2019) Recommendation 6.2.

105 Treasury Laws Amendment (2021 Measures No. 1) Act 2021.

107 APRA deputy chair John Lonsdale regarding APRA, Information Paper: Self-assessments of governance, accountability and culture (Report, 22 May 2019).

108 APRA, Information Paper: Self-assessments of governance, accountability and culture (Report, 22 May 2019), 4.

109 Financial Regulator Assessment Authority Act 2021 (Cth).

110 Financial Regulator Assessment Authority, Scope of assessment of the Australian Securities and Investment Commission (undated).

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