The Australian Securities Exchange (ASX) Corporate Governance Council has announced amendments to its Principles and Recommendations, encouraging all listed companies to adopt policies on gender and diversity issues and set targets to be reported against in their annual reports.

The growing interest in gender diversity has been fostered by organisations such as the Australian Institute of Company Directors, who last November announced a range of initiatives to address the issue of board diversity. As a result, gender diversity should now be firmly on the corporate agenda of listed companies.

How have the recommendations been amended?

The amendments to the Council's recommendations will come into play in the first financial year beginning on or after 1 January 2011. However, the ASX is encouraging an early transition, and may be keen to see this information disclosed in the upcoming reporting season.

The changes to the recommendations will require ASX-listed companies to consider establishing a policy concerning the diversity of their board and employees, and to disclose the policy or a summary of that policy on the ASX announcement platform. If a company elects not to implement a diversity policy, it will need to explain to the market why it has chosen not to under the "if not, why not" principle of the recommendations. 

Proposed diversity policies essentially require a listed company to establish "measureable objectives for achieving gender diversity," and the board is required to assess their measurable objectives and their ability to achieve them on an annual basis.

The recommendations note that in addition to establishing a gender diversity policy, appropriate procedures also need to be put in place to ensure the policy is properly implemented and that internal review mechanisms are in place to assess the effectiveness of the gender diversity policy.

Where a listed entity has developed and implemented a diversity policy, the recommendations will require that company to disclose in its annual report whether it has achieved the "measurable objectives" that it set.

The ASX has stated that the promotion of gender diversity "[results in the] recruitment of high quality employees, enhances employee retention, encourages greater innovation and improves corporate image and reputation. Reporting on the diversity profile of the company facilitates greater transparency and accountability in relation to the policy that has been put in place, together with the objectives to be achieved by the company." It is clear that the ASX expects all listed entities to turn their minds to the issue of their organisational diversity and actively consider ways to improve it.

Additional amendments to the recommendations also require the remuneration committee of a listed entity to review the remuneration of its employees and senior executives and assess how this is distributed on a gender basis.

What should listed companies do?

The new recommendations are scheduled to be implemented in time for the first financial year after 1 January 2011, meaning that most ASX-listed companies will be required to consider diversity policies for the 2011/2012 financial year. With this in mind, listed companies should use this implementation timeframe to develop and implement diversity policies appropriate for the size and type of their organisation, so that their corporate governance policies are compliant with the recommendations ahead of the implementation date.

In addition to the unique circumstances of each organisation, other factors that will influence the policy development process will include statutory obligations larger employers already have under the Equal Opportunity for Women in the Workplace Act 1999 (Cth), and the obligations all employers have under State and federal anti-discrimination law.

For more information or advice on developing and implementing a gender diversity policy for your listed entity, please contact HopgoodGanim's Corporate Advisory and Governance practice.

Nicole Radice, Partner
Liz Cameron, Associate

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