Welcome to this morning's event. My name is Lucinda McCann and I'm the Group Executive of ASX Supervision. And it's my pleasure to welcome you all here today, and I'll be your MC for this session. So great to have you all here for our Corporate Governance Principles roadshow here in Sydney. I'd like to begin by acknowledging the traditional custodians of the land on which we're meeting here today in Sydney's Martin Place, the Gadigal people of the Eora nation. And I pay my respects to elders past and present. We recognise their enduring connection and culture, their connections to lands, seas, and communities. And we extend that respect to all Aboriginal and Torres Strait Islander peoples who are here with us today. Now, for some housekeeping matters before we get onto the agenda for this morning. First of all, I'd just like to point out the fire exits. So they're over that way, in the unlikely event that we need to evacuate you all. And also just a gentle reminder about mobile devices: if you haven't already, please put them on mute.
So for today's agenda, we have a few aspects to the session. First of all, I'll be briefly introducing our interim CEO, Darren Yip, the ASX interim CEO who will say some opening words. Then we'll move on to our fireside chat panel discussion featuring two members of our Corporate Governance Advisory Group, Dr. Phil Lowe and Mark Delaney, and convened by Gavin Skene, my colleague here at ASX. And then we'll open it up to a Q&A session. And I've been given some questions in advance, but I really want you all to take the chance to ask some questions of our Advisory Group members while you've got them here in the room. So first of all, I'm going to invite to the stage Darren Yip, interim CEO of ASX.
Thanks, Lucinda. Good morning, everyone. I'm just going to have a few remarks before sort of getting into the meat of discussion. So I'll just kick off now. Trust is the foundation of every investment decision. Strong governance builds and preserves that trust by ensuring transparency, oversight, and accountability. In doing so, it enables capital formation, supports economic growth, and delivers long-term value to shareholders and the broader community. Welcome to the first public forum supporting the draft fifth edition of the ASX Corporate Governance Principles and Recommendations.
Before I begin, I would like to acknowledge Dr. Phil Lowe, Chair of the Advisory Group, Mark Delaney, Advisory Group member, and my ASX colleague, Gavin Skene. Thank you for your leadership, the expertise, and contribution to this work. I'd also like to thank the entire Advisory Group for its leadership and contribution also to the fifth edition. I won't delve into the details of the principles today. Instead, I'll focus on why they matter. Governance is fundamental to the strength and reputation of Australia's public markets. As an operator and steward of these markets, ASX plays a critical role in maintaining trust and confidence. The principles set clear expectations for good governance while reflecting the diversity of Australia's listed market.
Strong governance is not about compliance; it's about earning investor trust, attracting capital, and enabling growth. That is the lens through which the draft has been developed. The principles were established in 2003 at a time when investor confidence had been shaken by a series of high-profile corporate failures. They've since become an important part of Australia's capital markets framework, helping support trust and confidence in listed entities. This fifth edition is an evolution of that framework, not a departure from it. This edition evolves rather than expands the framework, retaining what works, removing duplication, and updating for changes since 2019.
The outcome is a simplified, more practical framework grounded in the core belief that there is no single model of good governance. Transparency is the cornerstone of ASX's 'if not, why not' approach, and listed entities have the flexibility in how they apply the principles. They're expected to explain where they take a different approach. This consultation is about testing that balance and ensuring Australia's governance framework remains fit for purpose. Strong markets depend on strong governance. I encourage you to review the draft and have your say. Your feedback will help shape the next chapter of governance in Australia's public markets. Thank you.
Thank you very much, Darren. So now moving to our fireside chat session, I'd like to invite up to the stage Gavin Skene, Mark Delaney, and Dr. Phil Lowe. Please come on up and I'll introduce each of you. So starting with Gavin, who's going to moderate our fireside chat: Gavin is ASX's Acting Group Executive Listings. Gavin joined ASX at the start of this year after a long career in global capital markets, including senior leadership roles at Morgan Stanley as Chief Operating Officer and Chief Risk Officer for global capital markets in Asia Pacific. Gavin brings more than 25 years' experience across equity and debt capital markets with roles spanning Australia, Asia Pacific, and the United States. Today, Gavin will be our facilitator in our discussion with Dr. Philip Lowe and Mark Delaney on the important role of good governance supporting strong, trusted public markets.
Turning now to Mark Delaney: Mark is a member of ASX's Advisory Group on Corporate Governance and one of Australia's most experienced institutional investors. Mark spent more than two decades at AustralianSuper, including as Deputy Chief Executive and Chief Investment Officer, helping guide the fund through a period of incredibly significant growth from around 20 billion to more than 400 billion in retirement savings under management. Mark brings a long-term investor perspective to the Advisory Group with deep experience in stewardship, governance, capital allocation, and market confidence.
And I'd also like to introduce Dr. Philip Lowe. Dr. Lowe is the Inaugural Chair of the ASX Advisory Group on Corporate Governance. He's one of Australia's most respected economists, having spent more than four decades at the Reserve Bank of Australia, including as Governor from 2016 to 2023. His career has been defined by deep technical excellence, steady leadership, and a strong commitment to public service and financial system stability. Since leaving the RBA, Dr. Lowe has taken on a number of board and advisory roles, including Chair of Future Generation Australia and Independent Non-Executive Director of Magellan Financial Group, and a director of the Victor Chang Cardiac Research Institute. He brings the Advisory Group a broad perspective on markets, governance, trust, and long-term value creation. Welcome to our panelists.
Thanks very much, Lucinda. Unfortunately, the lectern's covering half of you, but hopefully you can hear me well. Welcome, everyone. Really delighted that everyone could join us today. Governance is one of the things inside the company that's invisible when it works and unforgettable when it fails, and we've all seen both. This morning, it's about the practices to stop the failure making the headlines. So, Phil, let's start with you. You spent four decades at the Reserve Bank, and you didn't really need to take on this role, did you? Why did you take it on? And once you had, how did you make sure the group's advice remained independent?
Thanks, Gavin, and welcome, everybody, and thank you for coming along this morning. In my previous role, I got a very strong sense that internationally, Australia was regarded as a very well-governed country. You have good financial regulators, good public policy institutions, a political system that basically works okay, and Australian companies are considered well-managed. There are problems every now and again, but the problems surface and they're fixed. And that reputation for being a well-governed country is important. It allows the country to access capital more cheaply than otherwise, and it gives investors confidence that if you invest in the public markets, your money and finances will be managed as well as they could be. So, that reputation's worth a lot, and I think it's something the country should be proud of.
In terms of these principles, they form part of that infrastructure that supports being a well-governed country. I had been a bit concerned that the previous process of updating the principles had taken a long time. Many of you were probably involved in that process. It had taken a long time, and when the opportunity came from the ASX to be part of the process of bringing that process to a conclusion, hopefully bringing common sense to the principles and trying to come up with something that reinforces our reputation for being a well-governed country and having well-governed public capital markets. The committee has eight people on it. None of us are representatives of industry organisations. We bring our own independence and expertise, and our job is to recommend to the ASX board ultimately a set of revised principles, and I can assure you the discussions are robust, but they're independent. It's not the ASX—the ASX is providing the secretariat services to my committee, but the committee itself is drafting the principles, and we will provide advice to the ASX hopefully by the end of this year. Thanks.
Mark, you've invested other people's retirement savings for over 25 years. When you looked at a company in your former role, how much did its governance decide whether you'd put money in?
Yeah, governance is really important. It's not just important for value creation, but it's also important for risk management. If you think about stocks which have cratered over the last two years, for example, list any names, all of them have had really poor governance failures: inability to operate consistent with community standards, inability to make decisions in a balanced way, and it's ended up with massive amount of losses for shareholders. And so having an environment whereby governance is front and center to how they operate really puts a solid foundation underpinning new investment. I think about Warren Buffett, and he likes to make the complicated simple, and one of his first principles he has when he invests in a company and management, he says is, "Can I trust them?" And this is what we want to do: build a foundation for trust, as Phil said, at about the national level and the corporate level, and then use that as a basis to create value for shareholders and community impact.
Thanks. So then they matter. They matter for people who are investing. So, Phil, you've had two decades of principles to work with. What were you trying to fix, and what did you deliberately leave alone?
You'd all know that there was this previous process of updating the principles with the previous council. There were over 100 submissions to that process, and it was a very thorough process, and a lot of good ideas came out of it. So when our committee first met, first of all, we decided we wanted to get this done within a year. The thing had gone on for too long, so that was our first objective. But we also wanted to build on what was broadly agreed was working well. And a couple of things I would point out there is the eight principles. What I heard is people buy into the principles, they're sensible, and they're widely accepted.
The other thing that was widely accepted is the 'if not, why not' approach. There are nearly, I think, 1,900 entities listed on the ASX, and the principles are relevant to everyone, but the actual practices and recommendations can vary. We wanted to reinforce the idea that this was an 'if not, why not' world. If you don't want to follow the particular recommendations because they're not suitable for your company, our mindset is that's fine, but you tell your story. You tell why you're not following it, you provide the rationale, and provide what extra governance arrangements you've put in place. So we wanted to keep the principles and the 'if not, why not'.
We wanted to simplify the document. In truth, at least in my view, it had become way too complicated. There was a lack of clarity. Sometimes we ended up with principle, recommendations, and the guidance, so we tried to kind of simplify all that. The language in part had become overly complicated, and occasionally our committee meetings would say, 'What does actually this mean?' And you shouldn't be asking that. So we wanted to have clear language, and we wanted to remove a lot of duplication with existing laws. Since 2019, the parliament has been legislating a lot, and so a lot of things that were originally covered in the principles are now covered by legislation: climate reporting, AML, whistleblowing, kind of some attestations from the CFO. So these things are now kind of covered by legislation, and we didn't see the need for these principles to repeat things that were already in legislation. So simplify it and remove regulatory duplication and get it done within this year.
So just building on the 'if not, why not' as sort of a bedrock, Mark, and wearing sort of your investor hat: when you think about the market across different sectors, different capitalisation, why not just make good governance mandatory? Why not just be done with it?
Yeah, I'd like to make good governance mandatory, and I think that should be our aspiration. But seriously, as Phil said, the principles are things which I've never seen anybody disagree with. And so in some sort of way, you want them to be mandatory. You want them to be what people set out to achieve. So these are the objectives of good governance. The recommendations are really the practice to get to the objectives, but there's no point unless you've delivered on the objective, which is good governance, a trustworthy basis to which to invest.
Now, I go back in history. I remember doing, when I first started in superannuation back in 2000, 2001, I did a series of Corporate Governance principles. And I was attracted to the idea of principles rather than practice, because with a complicated board and different stakeholders, how people go about delivering practice varies. And with the ASX, you've got small companies, you've got mining companies, you've got technology companies, you've got global institutions, and they've all got different abilities to do things and different practice guidelines. So we want to allow them to have what we think is the simplest way to do things, which is the recommendations. But if that doesn't suit their circumstances, they can deliver on those principles by going about it differently. So we're not going to prescribe practice. We'll give guidance as we think is the best way to do it, on balance in general. But not if what is going to fit into those circumstances. So having flexibility allows you to get the outcome, which is what's the most important thing, rather than having a series of practice arrangements which won't deliver the outcome.
So let's get into a couple of aspects that have actually changed. One that the directors are talking about is independence. So, Phil, you've dropped the fixed three-year look back. Doesn't it make it easier to call a director independent, not harder?
I would say so, but let me just take a step back. Why is independence so important? At least from my perspective, in a modern corporation, having independent board directors helps solve the fundamental principal-agent problem. Now, the managers manage the firm on behalf of the shareholders to create long-term shareholder value. So there is a principal-agent problem, and one role of the board is to help solve that by monitoring and guiding management. If you're going to do that, you need to have some independence from management and from the firm. So from my perspective, it's fundamental to solving the principal-agent problem to have some independent directors.
So the question is, how do you make the assessment of whether the director is independent? You would know the current version has this box with a whole list of characteristics, and it's almost like, yes or no, do you meet these characteristics? And what is this three-year requirement? In our discussions at the committee, I said, 'Why do we do that? Is two years and 11 months bad? Three years and one month good? Why?' So consistent with the idea, we want to go back to first principles and ask the directors of companies to make judgments about whether people are independent. Go back to the principle. So we've removed this box and we're saying to the directors of the company, you as directors make a judgment as to whether you're independent. These are some things you could consider, but we're not going to set black-and-white lines. You make a judgment and then you explain to your shareholders your judgment. And the shareholders can question that and pressure you, but independence doesn't come from kind of crossing over a particular threshold in terms of length of connection with the firm or size of shareholding. It's got to be a holistic assessment and then you explain that to the shareholders.
Staying with you, Phil, one of the other changes that's drawn a fair degree of attention is diversity. So you've held it at at least 30% of each gender. You haven't moved it to different formulations of 40% or 40/40/20. It hasn't expanded to the broader ASX population outside the 300. So why did you hold it there?
There are a few considerations. The first is that we wanted to broaden out the concept of diversity. We know diverse boards over time will give better results. But see, you don't want 10 men, you don't want 10 women, 10 people from the same law school, 10 private schools in Sydney and Melbourne, or the same people from the same industry. So you want people from different backgrounds. So our first objective is to broaden out the concept of diversity. Gender is obviously a very important element, but there are other elements: diversity of backgrounds, life experience, cognitive diversity. These are really important aspects of having a well-functioning board that can hold management to account. So that was our first objective.
We had a long discussion about the gender target because it's obviously very important. We've kept the current objective. Our first consideration here was that it has worked. When this objective was brought into place, I think only 35% of the companies in the ASX 300 had more than 30% of women on the board—so roughly a third. Today it's roughly three-quarters. And I think this target has played a critical role in doing so. It's actually worked, so we wanted to keep that.
The other aspect of our discussion was that this target is at least—I'm going to repeat this—at least 30% women and 30% men. So it's not saying that you should be targeting 30%. If you're in the ASX 300, you should have at least 30% women, 30% men. Many companies have 40 and some have 50, so that's good. But we didn't feel the need to now move it up to at least 40, partly because there's still 25% of the ASX 300 that don't get there. So our hope is that over time, more of those companies will get to the 30% and that over time companies outside the ASX 300 will also move in that direction. So our thinking was, let's get more of the companies up to at least 30%. If companies want to go beyond that, fantastic. If they don't, that's okay. But this has worked, and let's keep building on the success we've had so far, and then we can reconsider this in four years' time when we review the principles again.
So taking it beyond diversity, investors, Mark, talked a lot about the mix of skills on the board. What does this draft do to help boards get the right experience around the table?
Yeah, well, I think it puts it front and center that that's what you need to be successful as a board. If you think about companies and the marketplace today, what skills do you need to be successful over the next 10 years? Do you need technology skills? Do you need AI skills? Do you need international relations skills, etc.? Do you need regulatory and management skills? A lot of these things are quite dynamic and changing. And so I think having the right skill mix is critical to the job. Realistically, when you hire anybody, if they haven't got the skills, they can't do the job. And that's the case of the boards as well. When shareholders hire directors in effect, they've got to have the skills to do the job. But you need a mix of skills on the board, enough in total to be able to do the job. And the world's changing quickly. There's lots of structural change, and I think the skill mix needs to evolve and reflect the changing world, not be caught behind. So it's really important for value creation and also for oversight. If they don't have the skills, how can they effectively oversight a business which is taking place, or look after shareholder interests? So I think it's really absolutely critical. If they don't have the skills, they can't do the job. And if you don't do the job, you get poor investor outcomes.
And just following up: when you think about how those skills are represented and evaluated by the boards, what sort of role do you think the skills matrix plays in that? Is it a useful tool? Is it one of many tools?
I don't know how much I can go off the record here. Look, I'm personally not a big fan of the skills matrix because I think it's too prescriptive in terms of what you're getting. You get a series of specialist skills rather than overwriting the skill mix, but you'll need some method to assess your skills. So the skills matrix is a tool to assess whether you have the right amount and mix of skills. That's only a tool; it's not the outcome. The outcome has to be that you have the right mix of skills to deliver on the job. So you'll need a way to do that assessment. The matrix is one way of doing it, but it can't be the only way, I think.
So, Phil, you've added something new on culture and stakeholders. Why should a board have to show how it engages beyond its shareholders? What problem is that trying to solve?
You'll have noticed that Principle 3 is kind of being the one that's been most rewritten as part of this. Again, in our discussions, we kind of started from ground zero. And so what are we trying to achieve here? First of all, we want a board to set the values of the firm and to articulate those. Second, we want the board to oversee how management is managing the culture of the firm. So we want a strong culture that's aligned with the objectives and we're doing the right things. So the board has an important role in monitoring how management is managing the culture of the firm: set the values and then monitor management. And the third thing is to look at how management is dealing with the relationship with all your stakeholders, because the firm can't create sustainable long-term value if it's not managing its stakeholders well. So there would be the staff, the suppliers, the regulators—for different firms, it's going to be different things, but there are key stakeholders for every firm. And we think it's important that the board explain to the shareholders how they're managing those key relationships, what they think the key relationships are, and how they're managing them. And that should be the culture of a strongly functioning firm, a strongly functioning board: to maintain these strong relationships with the stakeholders and then to explain to the owners of the firm how they're managing those processes. So that's our general thinking.
Set the values, monitor culture, and then deal with your stakeholders well, and explain to the shareholders how you're doing it. So that was at a high level what we're trying to do, and the recommendations in Principle 3 now give effect to that. And we'd be interested in people's views on, have we got that right? Because we know that many of the problems that beset firms, partly or govern, is partly because of poor culture. And the culture has drifted away from where the board or the management originally wanted it to be, and the firms end up with problems. So it's really important to long-term value creation that firms have a strong culture of doing the right thing, acting consistent with their strategic objectives, and acting ethically and responsibly. So that's where we're coming from.
So look, as we try to land the Q&A, Phil, starting with you, if the draft goes through as much as it stands, so taking sort of one side of the prism, like what actually changes for the board and its directors? What's your sort of key takeaway?
Well, the eight principles stay the same. So if you're acting consistent with the principles, at a high level, nothing changes. But what I hope people who are using the document will find is it's a simpler document. There's less compliance mentality. We want people to actually use the principles to decide how they're going to operate the board rather than get caught up in complying with particular requirements. So hopefully you'll find a simpler document with less overlap and more useful to running your company effectively.
And Mark, for you, so with people whose money's at stake, what changes for investors?
There's less pages to read, which is really great. The second thing is that the principles are the most important thing here. And my fear was that the practice was becoming more important than the principles. And if you have a look at how good governance is, well, you could judge it by the scoreboard: how many governance failures do you have in Australia over a one or two-year period? And I don't think we had enough focus on the actual principles. And by slimming it down, make it easy to read, sharper to look at, less repetition and less detail, and stressing the flexibility, it's all about getting the focus back on the principles and back on the outcomes. And for investors, that's what matters.
