The following section highlights key features and practices of corporate governance for Australian listed companies.     

Corporate governance for listed companies in Australia is mostly principles based (as defined by the ASX Corporate Governance Council) with components of black letter law (Corporations Act 2001). 

The Corporate Governance Principles and Recommendations, issued by the ASX Corporate Governance Council, are eight core Principles accompanied with commentary on implementation in the form of Recommendations.  These Principles and Reccomendations are based on the belief that there is no one typical organisation or a single model for corporate governance.

Australian companies are allowed to follow alternative practices, provided their annual report explains why certain Recommendations have not been followed and how their alternative practices are in line with the spirit of the relevant Principle.

This practice is known as ‘If not, why not’ reporting. 

Boards of Directors

Boards combine both executive and, non-executive directors. The Recommendations under Principle 2: Structure the board to add value, states that the board’s composition should allow it to adequately discharge its responsibilities and duties. The focus of this principle is on relationships affecting independence, e.g. the chair and majority of the board should be independent directors, and the roles of chair and chief executive officer should not be held by the same individual.

Audit Committees

ASX listing rule 12.7 requires all companies included in the S&P All Ordinaries Index to have an audit committee. This rule also requires the top 300 companies of the Index to follow the Recommendations in relation to the composition, operation and responsibility of the audit committee as set out in Principle 4: Safeguard integrity in financial reporting.

These Recommendations state that audit committees should comprise at least three members. All members should be non-executive directors and the majority should be independent directors. The chair of the audit committee should be an independent director and should not be the chair of the board.

Risk Management

The second edition of the Corporate Governance Principles and Recommendations has made significant changes to the scope of Principle 7: Recognise and Manage Risk. Boards are expected to regularly review and approve the company’s risk management and oversight policies and ensure management has implemented a sound risk-management framework and sufficient internal controls. Boards also require a sign off by the CEO/CFO that the organisation is operating effectively in relation to financial reporting risks.


Principle 8: Remunerate fairly and responsibly advocates the board establish a remuneration committee, which will be responsible for making recommendations to the board on director and executive remuneration. Principles 8 also recommends that companies clearly differentiate the structure of executive and non-executive director remuneration. 

The financial year 2009 was the second year in which auditors were required to opine on the compliance of the remuneration report (in the company’s annual report) with Section 300A of the Corporations Act 2001.

In March 2009 the Productivity Commission was tasked with examining the Australian regulatory framework in relation to the remuneration of directors and executives of entities regulated under the Corporations Act 2001. The Productivity Commission’s recommendations are expected to complement those of the Australian Prudential Regulation Authority (APRA), which have been drafted for APRA-regulated financial institutions.


Regulatory change is a fact of life for regulated entities, however the Global Financial Crisis  (GFC) has had, and will continue to have for some time, far-reaching effects.  At the G20 meeting in London in April 2009, the G20 leaders agreed a global plan for rebuilding trust and confidence in global capital markets, with targeted regulation and increased supervision.

The Australian Twin Peaks system of dual regulators, one focusing on prudential regulation and one focusing on consumer protection and market integrity, has been cited as close to optimal.  In spite of this,  the government’s response to the fallout from the Global Financial Crisis will lead to a significant  regulatory change in the foreseeable future.