The Australian Council of Superannuation Investors (ACSI) says the next edition of the ASX Corporate Governance Principles and Recommendations should set a more contemporary benchmark for gender balance on Australian boards.

Board composition is fundamentally an issue of effectiveness and long-term value creation, with investors benefiting from boards that bring together the right mix of skills, experience and perspectives.

In its submission to the ASX's consultation on the draft 5th edition of the Principles, ACSI recommends adopting a 40/40/20 measurable objective for board gender balance, rather than retaining the current objective of at least 30% women directors.

With women currently accounting for around 38% of ASX200 directorships, the proposed benchmark is well below that achieved across most of the market. Commentary in the Consultation Paper and quotes in the media suggest that the 30% recommendation has been retained to enable a focus on other aspects of diversity.

"The Principles should encourage companies to build on the significant progress already made by Australian companies on gender diversity at board level and support ambition rather than sticking to a benchmark that much of the market has already surpassed," ACSI CEO Louise Davidson said.

"Gender balance and broader diversity are not competing objectives. Effective boards draw on a range of skills, backgrounds, experiences and perspectives to support decision making and long-term value creation. Companies should be considering all of these as part of board composition and succession planning, not choosing between improving gender balance and diversity more broadly – the two go hand in hand."

Elsewhere, ACSI cautions against removing references to specific time frames when considering director independence. While the ASX states it is seeking to avoid prescription by proposing to remove 'serving more than 10 years' in favour of 'such a period that their independence…may have been compromised', this is vague and risks undermining transparency on director independence. As the Principle operates on an 'if not why not' basis, specifying time periods acts as a trigger for the board to consider a director's independence and accompanying disclosure, rather than as a sole determinant for independence.

More broadly, ACSI supports the principles-based approach underpinning the ASX framework and welcomes the elevation of organisational culture to an active board-level responsibility and the proposed new Recommendation to disclose the mechanisms the board has in place to monitor culture.

The proposed new Recommendation on security holders and other stakeholders is also welcome, recognising long-term value creation depends on an entity being valued, trusted and respected by security holders and other stakeholders, including employees, suppliers, customers, contractors and the communities in which it operates.