ASX Markets Supervision (ASXMS) has conducted the first review of corporate governance reporting under the Revised Principles and Recommendations for listed entities with a 31 December balance date.
The Revised Principles and Recommendations were released in August 2007. The effective date for the Revised Recommendations to apply to an entity’s reporting is the first financial year starting on or after 1 January 2008. For entities having a 31 December financial year end the effective date for reporting in accordance with the Revised Recommendations is the reporting period ending 31 December 2008.
There were 168 listed entities (9% of total listed entities) subject to the 31 December 2008 corporate governance review.
A key change introduced in the Revised Recommendations is an emphasis on the disclosure of an entity’s actual practice when corporate governance reporting. No longer is it sufficient for a company to report that it has certain practices in place. The Revised Recommendations require that the entity disclose or provide a summary in the annual report of the practices or specific policies that govern the practices.
To take account of the emphasis on disclosure of information in the Revised Recommendations, the corporate governance review process undertaken by ASXMS divided the Recommendations into practice-based Recommendations (x19) and information-based Recommendations (x8), and gave greater scrutiny to each element of the practice-based Recommendations and the information required by the information-based Recommendations.
As this is the first group of entities required to report against the Revised Recommendations, ASXMS has taken the opportunity to provide feedback to assist companies in preparing their corporate governance statements for the 30 June 2009 financial year end.
The 168 entities reviewed comprised 62 top-500 entities and 11 entities in the trust sector, of which 10 were identified to also be in the top-500. As the trusts were largely part of the top-500 group and an otherwise very small sample, analysis of the trusts has not been done separately but forms part of the top-500 analysis.
Overall reporting levels, being the aggregate of the levels of adoption of the Recommendations and of “if not, why not” reporting against the practice-based Recommendations for 31 December entities was 93.4% for all entities and 98.3% for top-500 entities including trusts.
As part of the 31 December review, a subjective assessment of corporate governance reporting for each of the 168 entities was also made by ASXMS staff reviewing the governance reporting. ASXMS assessed each entity on whether its overall corporate governance reporting could be regarded as “Very Good”, “Good”, “Satisfactory” or “Poor”.
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