’Social licence to operate’ axed from ASX Corporate Governance Principles

The contentious phrase “social licence to operate” is missing from an updated ASX guide to Australian corporate behaviour.

Corporate guide, the ASX Corporate Governance Principles, has been updated. Pic: Hollie Adams

The phrase “social licence to operate” has disappeared from the final version of an updated guide to company behaviour in the wake of the Hayne royal commission.

However a 30 per cent gender diversity target has been included in an update of the ASX Corporate Governance Principles.

The contentious “social licence” phrase was dropped amid a backlash from some companies concerned that it could have unintended consequences for legitimate but sometimes controversial industries such as liquor, gambling, coal and coal-seam gas.

Elizabeth Johnstone, chairman of the ASX Corporate Governance Council. Picture: Supplied.

Despite support from large numbers of the companies, investors and advisers that make up the Corporate Governance Council, it was replaced with references to “reputation” and “standing in the community” which council chair Elizabeth Johnstone said were “synonymous” with social licence to operate.

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Ms Johnstone said the council decided to be more explicit about the issues bound up in a phrase that had become shorthand for many investors and directors, not because it was concerned about being seen as “politically correct”.

“We have not run backwards, we have not resiled or been afraid (to address the issue),” Ms Johnstone said.

“We have been in a conversation with the business community.

“I think that a lot of people fail to understand that this is a document of the market, for the market, by the market.”

After a two-year process of developing and consulting on the refresh of the principles, the council has added eight of the nine new recommendations first proposed.

It includes key changes around culture and values proposed in the consultation draft, with some drafting changes following feedback received in the consultation.

The council said it was “imperative that listed entities align their culture and values with community expectations to help arrest the loss of trust in business”.

Ms Johnstone said the principles and recommendations that require companies to disclose their compliance on an “if not, why not basis” had been developed with the Hayne royal commission in the background, and were not a specific response to the conduct issues raised in its interim and final reports.

She said the conduct issues raised by the commission were not linked to companies’ use or disregard of the governance principles.

“I do not accept any proposition that this document failed in its purpose,” Ms Johnstone said.