Most Read Contributor in New Zealand, September 2016
NZX has released a discussion
document on the corporate governance requirements imposed on
Submissions are due by 29 January 2016.
What is NZX proposing?
NZX has drawn upon the Financial Markets Authority Corporate
Governance in New Zealand Principles and Guidelines, updated
in December 2014, and the Australian Corporate Governance Council
Corporate Governance Principles and Recommendations.
NZX proposes to implement a corporate governance reporting model
that has three levels:
Principles – broad, thematic concepts that are used to
organise the more specific materials below them
Recommendations – issuers would be required to comply
with these under the revised NZX Code, or explain why not (the
model that currently operates in Australia)
Best practice commentary – issuers could choose to report
against these additional standards if they wish to meet best
practice in all areas, or where a commentary is of particular
relevance to them or their industry.
NZX has largely followed the FMA principles, although there are
some areas where they have deviated to take an approach that is
more relevant for listed issuers.
One point to note is that NZX has left the mandatory corporate
governance requirements under the NZX Listing Rules to next year to
address – this covers things like the minimum number of
independent directors and director rotation requirements. These
mandatory corporate governance requirements will need to be
complied with by all issuers but there may not be any reporting
required, although we will need to watch this space to see what NZX
Possible first steps towards a more unified approach?
As we have flagged previously (
here) one of the main issues in New Zealand has been the
fragmented approach taken to corporate governance principles and
recommendations. In Australia, the ASX Corporate Governance Council
represents a wide range of stakeholders and appears to have
achieved consensus on appropriate corporate governance requirements
for listed issuers.
In contrast, in New Zealand, NZX, FMA and others, such as the
Institute of Directors and the recently formed "New Zealand
Corporate Governance Forum" (comprising solely of
institutional investors), have all published their own guidance.
Many of these overlap. Indeed, NZX has largely followed the FMA
principles. However, there are still differences between the two
codes and any future changes to either may widen the gap.
In an ideal world, FMA (and other stakeholders) would have
significant input to the revised NZX corporate governance code, and
this could then be the single source of corporate governance
requirements for listed issuers in New Zealand.
This could be reflected by amending the FMA principles and
guidelines to focus on non-listed issuers, which would ensure that
any differences between the two primary regulators in New Zealand
would not result in issuers having to reconcile multiple pieces of
Health and safety and some other hot topics
While many of the suggestions in the discussion paper are
unlikely to cause much excitement, there are a few aspects on which
NZX is seeking feedback that we expect will provoke some
interesting submissions and discussions.
a possible move towards recommending a majority of independent
the extent to which non-financial reporting matters, such as
Environmental, Social and Corporate Governance (ESG) reporting,
should be recommended or suggested as best practice
more detailed information around CEO and senior executive
remuneration, as in Australia, and
querying the extent to which NZX should include managing and
reporting health and safety risks, and reporting against ESG risks,
within the recommendations or best practice commentary.
We intend to submit on NZX's discussion paper in the New
Year and would be happy to discuss our thoughts on these matters,
or assist you with your submission.
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.
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