Most Read Contributor in New Zealand, September 2016
The newly-created New Zealand Corporate Governance Forum –
an organisation comprising institutional investors with
a substantial investment in the New Zealand share market
– has marked its debut by issuing detailed guidance on the
role and responsibilities of the listed company director.
The Forum guidelines, available here, build on and supplement
the recently updated FMA governance handbook. They seek to
incorporate best practice internationally, including the
International Corporate Governance Network, the UK Combined Code
and the Australian Council for Superannuation Investors.
Key points include:
the audit committee should review arrangements by which staff
may raise in confidence concerns about possible improprieties (i.e.
the board should have a policy on political engagement,
including lobbying, and should disclose political donations
the board should develop clear rules regarding any trading in
the company's securities by directors and employees
the board should disclose its policy and process for managing
directors should ensure they are independently familiar with
the company's operations and do not rely exclusively on
information provided by the senior management or external
a board should have a majority of independent non-executive
directors (with a detailed explanation of factors that may
compromise independence, such as employment within the previous
three years either by the company or by a significant professional
adviser to the company)
explanation should be provided to shareholders about the
presence of any executives other than the CEO on the board
non-executive directors should be subject to re-election at
least every three years and, after nine years' service, every
companies should report the company's policy on diversity,
with measurable objectives
share-based remuneration schemes should be implemented only
after shareholder approval
termination payments should not exceed 12 months' fixed pay
and should not be paid when an executive exits for poor
shareholder approval should be sought for share issuances above
5% of total shares or any employee issues, and
the board should state in the annual report the steps that
members have taken, in particular non-executive directors, to
develop an understanding of the views of shareholders – e.g.
through direct face to face contact, analysts' or brokers'
briefings and surveys of shareholder opinion.
The institutional investor bias to the forum membership means
some recommendations may be controversial – notably that
share issues above 5% should have shareholder approval. NZX
rules allow a board to issue up to 20% without shareholder
Chapman Tripp comments
The guidelines have been welcomed by the FMA, the NZX and the
Institute of Directors and will support the FMA's objective
– expressed in both its
Strategic Risk Outlook for this year and its
Statement of Intent 2015-2019 - to improve the quality of
governance culture in New Zealand.
They fill an existing gap in recognising that there are specific
responsibilities attached to being on the board of a listed
company. On the flip side, they add to the fragmentation in an
already crowded marketplace of governance advice and
This is in sharp contrast to Australia where all of the relevant
industry and sector organisations came together in 2002 to form the
ASX Corporate Governance Council, which was tasked with developing
and maintaining a single, all-encompassing governance code and set
of principles. See our commentary –
The Australian governance challenge – our old Hilux vs their
The Forum's contribution fills a need and will be very
useful so – to use the car analogy – upgrades us from a
Hilux. But we're still saving up for the Volvo.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Anyone with standard form contracts who deals with small business must review the contracts for potential unfair terms.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).