Regulatory reform updates from Louise Petschler GAICD, the AICD’s General Manager Education & Policy.
Director tenure in the spotlight as APRA releases its governance standards paper and “what next” for the ASX Principles?
In March, the Australian Prudential Regulation Authority (APRA) released a much-anticipated consultation on its prudential governance framework for banks, insurers and superannuation trustees, seeking to “strengthen and streamline” requirements.
The timeframe for consultation (initial three months) and review (draft standards in 2026, finalisation in 2027 and commencement in 2028) reflects the substantial changes proposed.
The paper is a thoughtful contribution to governance in the critical financial services sector — one where, as APRA notes, boards have “enormous responsibilities” in protecting the financial interests of all Australians.
The regulator makes a direct connection between strong governance and financial resilience in its paper, claiming that almost 80 per cent of regulated entities subject to heightened APRA supervision have underlying governance problems.
The paper also acknowledges regulatory complexity and its impact on board agendas — current APRA standards impose over 150 requirements on a typical regulated board. As a consequence, APRA has found, some boards are spending less than 30 per cent of their time on forward-looking strategy and risk oversight.
In the AICD’s view, simplification must be a key goal. We need a well-governed financial services sector with tightly targeted regulation, maintaining international competitiveness.
APRA has set out its proposals under the following areas:
- Skills and capabilities: Skills assessments, evaluation and succession plans
- Fitness and propriety: Higher standards and, for large entities, proactive engagement with APRA on appointments (such as candidate interviews)
- Independence: More prescriptive rules, adding personal relationships and extending majority requirements
- Board review: Requiring external evaluations of boards, committees and individual directors at least every three years
- Role clarity: Clarifying APRA’s view of the role of the board, committees and management, including the chair
- Committees: Extending rules for separate audit and risk committees to large superannuation funds, and new guidance on delegatable requirements
- Director tenure: Lifetime tenure limit of 10 years for directors, with possibility of extension with specific APRA approval, and more rigorous board renewal processes.
While some proposals are reserved for larger entities, others — including the 10-year tenure limit — would apply across the sector. These could have significant impacts on superannuation and mutual ADI governance, which will need careful review and sector input.
There are many sensible proposals and APRA will be consulting widely on its plans.
The AICD is concerned, however, about rigid approaches to director tenure and independence, including prescriptive rules across intra-group entities.
On such issues we believe boards should be accountable for the approaches that their entities adopt, and we will be looking at these proposals in detail.
The AICD looks forward to consulting with members in the sector and our APRA Forum of experienced directors. We welcome your views care of policy@aicd.com.au
ASX Principles: The next steps
February’s decision by the ASX Corporate Governance Council to cease its work on refreshing the ASX Principles leaves open the question of “what next?”
As discussed in Mark Rigotti’s CEO column and in the Australian Financial Review of 4 March (bit.ly/4ho5QpO) the AICD is calling for an independent review to reset the scope and processes of the Council and Principles.
The AICD recognises the important role the Principles play as part of Australia’s strong corporate governance architecture and in the governance of Australian listed companies. The Principles also set a benchmark for good governance practice across other sectors.
Similar governance codes apply in other mature and trusted capital markets globally, with good reason — setting clear standards on governance, reducing the need for black letter law (well-established legal rules and case law) and providing confidence to the market through “comply or explain” transparency on practice.
The recent (now cancelled) review took place at a time of debate on ESG issues and governance. For example, board diversity received media focus (although the ASX Council had not proposed that directors would be required to disclose personal information, as was reported). However, for the members of the Council, the scope of the Principles and compliance imposts from changes for listed entities were more central unresolved questions.
Improvements can be made to the current Principles — less prescription and greater focus on the interests of security holders among them. But the outcome of this process suggests a more fundamental review of the Council and the role of the Principles is required.
The goal must be a set of Principles that have broad market and director support, set strong and targeted governance standards, and support both strong governance and competitiveness.
FY25 regulatory priorities
The AICD advocates for balanced, fit-for-purpose and modern regulations that support diligent directors to govern for growth. Our regulatory priorities are:
- Cyber regulation that supports effective board oversight
- Balanced policy and liability settings that reflect disclosure complexity
- Fit-for-purpose digital regulation that supports sound governance
- Long-term, coordinated policy approaches that strengthen national governance, reduce regulatory complexity and promote economic growth.
This article first appeared under the headline 'Policy and Leadership in the Aprl 2025 issue of Company Director magazine.
Practice resources — supporting good governance
Examples of the AICD’s contemporary governance practice resources for members:
AI Fluency for Directors Sprint
- AICD is piloting this director sprint program with USyd Executive Plus.
Aged Care Director Guide
- Updated to reflect the new Aged Care Act 2024, this guide offers practical, clear advice for directors in the sector.
Directors’ “Best Interests” Duty in Practice
- Drawing on a legal opinion from Bret Walker AO SC and Gerald Ng MAICD, this guide is essential reading for directors navigating today’s uncertain environment and ESG pushback.
Free Climate Governance e-learning
- Free climate governance e-learning available to all AICD members.
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