On 21 July 2026, ASX released a new consultation draft of the fifth edition of its Corporate Governance Principles and Recommendations. It follows the collapse of the previous reform process, when the former ASX Corporate Governance Council concluded in February 2025 that it could not achieve the broad consensus needed to replace the fourth edition.

The new draft is not a minor rebadging exercise. It has been developed under a different governance model, with ASX assuming ultimate responsibility and receiving advice from a smaller Advisory Group on Corporate Governance chaired by former Reserve Bank Governor Dr Philip Lowe. Its stated approach is to “refine – not redesign” the existing framework.

That is the right starting point. The eight Principles and the “if not, why not” model have served the Australian market reasonably well. They recognise that a large, complex, prudentially regulated group and a small emerging issuer cannot sensibly be governed in precisely the same way. They also require boards to explain their choices, rather than treating governance as a mechanical compliance exercise.

That flexibility should not obscure the Principles’ original purpose. Australia’s governance framework developed against the background of major corporate failures and inquiries, including HIH, which exposed the damage caused when legal compliance is mistaken for effective governance. The Principles are intended to promote investor confidence, strengthen accountability and encourage boards to adopt practices that are suited to their circumstances. A departure from a recommendation can therefore be legitimate; an unexplained or formulaic departure is not.

The 2026 draft is materially more restrained than the abandoned 2024 version. It sharpens the distinction between the high-level Principles, the Recommendations that entities report against and the explanatory material that is intended to assist – not prescribe. It removes several recommendations that duplicate Australian law, including requirements concerning CEO and CFO declarations, poll voting, electronic communications and hedging of equity-based remuneration. It also abandons some of the earlier draft’s most controversial proposals, including broader sensitive-attribute diversity disclosures, a 40:40:20 board gender objective and more granular individual director skills disclosure.

Instead, the draft requires boards to assess their collective skills, knowledge and experience, disclose the outcomes of that assessment and explain how gaps are being addressed. A skills matrix remains available as a tool, but it is no longer the mandatory form of disclosure. This is a sensible balance. Investors need meaningful information about board capability and renewal, but an over-engineered matrix can produce false precision, boilerplate and unproductive debate about individual ratings.

There are also worthwhile changes to culture, reporting integrity and risk. A new recommendation states that the board should act in the entity’s best interests, have regard to security holders and other stakeholders and disclose its engagement processes. The draft combines values and code-of-conduct settings and shifts attention from merely publishing policies to explaining how the board monitors culture and receives information about material breaches and trends.

The stakeholder recommendation is potentially valuable because boards cannot oversee strategy and risk in isolation from customers, employees, regulators, communities and business partners. The drafting should, however, remain anchored to the board’s duty to act in the entity’s best interests. It should not imply a new free-standing hierarchy of stakeholder duties or encourage generic stakeholder lists. Useful disclosure would identify the engagement processes that matter to the entity, how significant themes reach the board and how those insights inform strategy, risk and long-term value.

Principle 4 is strengthened by requiring entities to disclose how they verify each periodic corporate report, including sustainability and other non-financial reporting. A new recommendation would disclose when the external auditor was first appointed and when the engagement was last comprehensively reviewed. Principle 7 would broaden board oversight of internal controls, risk appetite and assurance, and replace the narrower environmental and social risk recommendation with disclosure of all material risks and how they are, or will be, managed.

These proposals are directionally sound. They reflect the governance lessons of recent years: serious risks must be identified and escalated; boards need reliable information and credible assurance; and market disclosures extend well beyond audited financial statements. Recent decisions and enforcement action involving money-laundering, cyber and reporting failures reinforce the importance of clear responsibility, effective information flows and properly designed control systems.

Nevertheless, the draft should not be accepted without refinement. The first concern is disclosure gaps. Removing a recommendation because a matter is regulated is sensible only where the legal regime applies to the relevant entity and produces equivalent, accessible information. That may not always be true for workforce and senior-executive diversity, whistleblowing and anti-bribery arrangements. A cross-reference or scaled disclosure may be preferable to complete removal.

Diversity illustrates the issue. The draft sensibly avoids requiring disclosure of sensitive personal characteristics and retains the existing ASX 300 objective of not less than 30% of each gender. It also broadens the discussion towards diversity of skills, experience and perspective. But moving from an overly prescriptive proposal to almost no reportable workforce or senior-executive diversity expectation risks over-correction. Entities already reporting under WGEA could cross-reference that information; other entities could provide a proportionate narrative about objectives, progress and governance where the matter is material.

The second concern is proportionality. ASX proposes to remove the detailed alternative formulations that currently explain what an entity should do if it has no separate nomination, audit, risk or remuneration committee. ASX says those alternatives are unnecessary because every recommendation is already subject to “if not, why not”. Conceptually, that is correct. Practically, smaller entities should receive clear examples confirming that whole-board oversight may be appropriate, provided responsibilities, processes and outcomes are transparently explained.

Third, the new assurance expectations need boundaries. Boards should understand how they obtain confidence in governance, risk management and internal controls. But the Principles should not inadvertently imply that every entity must commission extensive external assurance. A fit-for-purpose model may combine management attestations, compliance and risk functions, internal audit, committee oversight and targeted external work. Materiality, complexity and risk should determine the mix.

Fourth, the treatment of artificial intelligence is too narrow. The draft usefully warns that AI may assist in summarising board papers but cannot replace a director’s judgment, inquiry or obligation to understand the material. By 2026, however, AI governance is much broader. Boards may need to oversee material AI systems, automated decisions, data provenance, model risk, third-party tools, cyber threats, privacy, workforce impacts, incidents and assurance. Additional explanatory material could address these matters without creating a prescriptive technology code.

The debate also occurs against concern about declining public listings and the growth of private capital. That context matters, but it should not lead to a false choice between governance and market competitiveness. ASIC has observed that the shift towards private markets is global and that regulation is not the primary driver of market attractiveness. Good governance is not merely a cost imposed on public companies; it is part of what gives public markets their credibility, transparency and investor protection.

The same balanced approach should be applied to Appendix 4G. A separate checklist creates work and some peer markets operate without one. Yet Appendix 4G also gives investors a navigational tool and makes governance disclosures easier to compare. Rather than abolishing it, ASX should consider a shorter, digital form that links directly to the relevant corporate governance statement, annual report or website disclosure. Simplification should remove duplication without making information harder to find.

Implementation timing is also important. The proposed first reporting periods – financial years beginning 1 July 2027 or 1 January 2028 – appear reasonable, particularly while mandatory sustainability reporting is being phased in. The benefit of that lead time will be lost if final Principles and guidance are delayed. Listed entities should receive a settled text, updated Appendix 4G and practical guidance early enough to revise charters, workplans, assurance processes and reporting systems before the relevant financial year begins.

The better policy test is whether each recommendation produces decision-useful benefits that justify its incremental burden. On that measure, the new draft is substantially stronger than its predecessor. It preserves flexibility, reduces duplication and focuses attention on capability, culture, reporting integrity, material risk and accountability.

ASX should now use the consultation to settle the remaining questions: how to avoid disclosure gaps; how to make proportionality real for small issuers; what assurance is reasonably expected; how auditor reviews should operate; whether Appendix 4G should be simplified rather than removed; and how the Principles can better address material AI governance.

The fifth edition should not attempt to anticipate every governance issue or prescribe a single model. Its task is more disciplined: to set durable expectations, promote informed explanations and support confidence in Australia’s public markets. This draft is much closer to achieving that objective – but targeted improvements would make it more robust, practical and future-ready.

Governance in Action Pty Ltd can assist clients with reviewing existing governance processes and documentation in response to the new Principles – once settled and implemented.

David Cantrick-Brooks FGIA FCG, Principal & Director of Governance in Action Pty Ltd, would be pleased to assist with enquiries. Please feel free to reach out via LinkedIn or via gia.net.au.

AI-assisted tools and techniques were used here to support the research, drafting and editing of this publication. Responsibility for the final content rests with David Cantrick-Brooks.

Whilst accounting and legal terms and references may be contained in this publication, it does not constitute or purport to be or represent accounting or legal advice of any kind – whatsoever.Readers should seek their own professional advice.