Following debate over the Australian Stock Exchange Corporate Governance Council’s proposal to include a “social licence to operate” in its Corporate Governance Principles and Recommendations, Kyrn Stevens looks at what is being proposed.
The council’s draft fourth edition of the principles and recommendations, released in May, was met with a strong debate.
Shareholder groups, big super funds and the Australian Council of Superannuation Investors made submissions supporting the proposal, while former heads of the Australian Stock Exchange (ASX), an investment banker, the new chair of AMP and the Australian Institute of Company Directors publicly opposed or expressed concerns about it.
The council is proposing significant amendments to Principle 3, changing it from “[a] listed entity should act ethically and responsibly” to “[a] listed entity should instil and continually reinforce a culture across the organisation of acting lawfully, ethically and in a socially responsible manner”.
The proposed new commentary for Principle 3 says that a listed entity’s social licence to operate “is one of its most valuable assets and that it can be lost or seriously damaged if the entity or its officers or employees are perceived to have acted unlawfully, unethically or in a socially irresponsible manner”.
And that, “with appropriate training and reinforcement from senior management, a listed entity’s code of conduct can help to instil a culture of acting lawfully, ethically and in a socially responsible manner”.
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