ASX diversity guidelines face axe as John Wylie issues blueprint

Senior business leaders have banded together to condemn a controversial move requiring company directors to disclose their sexual orientation, religious ­beliefs and more.

John Wylie said the proposed changes marked a massive overreach by fringe members of the Council and should be binned. Picture: Louis Trerise

Some of Australia’s senior business leaders have banded together to condemn a controversial move requiring company directors to disclose their sexual orientation and religious ­beliefs, amid expectations diversity reforms will be put on ice as tensions erupt within corporate boardrooms.

The 19 members of the ASX Corporate Governance Council last week failed to find consensus on a new set of corporate governance principles and on Wednesday they are likely to announce they will be paused amid growing concerns among directors over the contentious changes. The looming capitulation follows a call from investor John Wylie for the dismantling of the council over fears the reforms will damage the national economy and drive successful publicly listed companies into private hands.

The powerful Association of Superannuation Funds of Australia had called for the inclusion of even “stronger language” around the proposed extension of diversity characteristics to include race, sexual orientation, religious ­beliefs and socio-economic ­back­ground.

But Mr Wylie, founder of the $3bn investment fund Tanarra, said the proposed changes marked a massive overreach by fringe members of the Council and should be binned.

“I personally think it’s a gross invasion of people’s personal privacy to have to disclose their sexual identity when it comes to eligibility for board positions,” Mr Wylie told The Australian.

“AFL players aren’t obliged to disclose that and you have to question what is the relevance to corporate performance and the suitability of sitting on a board.”

Mr Wylie, backed by a dozen top directors including BlueScope chair Jane McAloon and UBS Australasia chair Lindsay Maxsted, said it was time to axe the diversity debate which had created a deep divide within the council.

Jane McAloon

Lindsay Maxsted

In its place, the investor has devised a new seven-page corporate governance blueprint aimed at getting rid of the divisive rules and offering a commonsense approach to issues such as board culture and diversity.

“I don’t believe it’s possible for these principles to be “edited to greatness”. We need as a country to start again, from a blank sheet of paper, with a clear and simple set of national interest objectives in mind,” Mr Wylie said.

Prescriptive rules including a proposal for company reporting of diversity, including sexuality and disability issues, was not in line with the needs of a modern boardroom.

“It is desirable that boards are diverse in their thought processes, life experiences, personal qualities and skills. It is in the self-interest of companies to have boards that understand and relate to their company’s customers, employees and communities, and make the company an attractive organisation to work at, or with which to do business.”

Other directors who added their support to Mr Wylie’s blueprint included top corporate lawyer Leon Zwier, barrister Allan Myers and leading director Christine Christian.

“We regard this initiative very positively. We believe in principle that simplification of the ASX’s corporate governance guidelines will be beneficial for our listed companies and for the national economy. We believe this can be achieved without derogating from Australia’s high corporate governance standards and commitment to market integrity,” the directors said in a statement.

“While individual views on particular details of the Tanarra proposal will inevitably vary, we are in substantial agreement with the document that has been put forward. It is a robust and reasonable starting point for a debate about a new, first principles approach to this vital subject for our national economy.”

Changes suggested as part of the blueprint include allowing non-independent directors to be chairmen of boards and scrapping the need for a lead independent director.

The paper also says all Australian public company directors should be up for re-election each year in line with the US and Britain, rather than every three years under current practice.

On Friday echoes of US President Donald Trump’s decision to junk diversity, equity and inclusion (DEI) laws rippled through Australia, where a meeting of finance, investment and corporate heavyweights on Friday failed to agree on controversial diversity reporting guidelines for ASX-listed ­companies.

In the wake of that meeting, council chair Elizabeth Johnstone asked its 19 members if it would it be true to say they could not find any consensus in the current approach.

It’s understood most members responded by saying consensus was unachievable, with the council poised to officially freeze plans to update the corporate governance rules.

The diversity debate has pitted the Australia’s $4 trillion superannuation industry against veteran company directors and shareholder groups.

One of the 19 council members, ASX Limited, said changes were needed.

“Our view is that any changes need to deliver material simplification for listed entities, and ensure there’s clarity on the Principles and Recommendations by making them easy to understand and practicable to implement,” ASX Limited chief executive Helen Lofthouse said.

“There has been respectful and insightful debate among members and other stakeholders during the consultation process, and we look forward to the process drawing to a close in a way that provides clarity and certainty for listed entities.”

Commentators have suggested a pushback against diversity programs is likely to escalate in Australia after Mr Trump signed an executive order in January promising to terminate all diversity, equity and inclusion (DEI) offices, positions and programs across the US federal government.