Chapman Tripp is welcoming the direction where the NZX Corporate Governance Code review is going, saying it’s a significant step forward even as there’s still further progress to come.
“These will be the first substantive updates to the Code since 2003 and catch up a lot of ground with Australia and other comparable jurisdictions. We welcome this as it is our view that New Zealand has been slipping behind in the governance area,” said Chapman Tripp Partner Geoff Shirtcliffe.
“We urge issuers to engage in the process as it is important that New Zealand have a forward-looking contemporary and internationally competitive governance culture.”
The NZX recently announced that they are seeking feedback on proposed changes to the corporate governance best practice code.
The changes outlined in the proposal are focused on the areas of Board diversity; environmental, social and governance reporting; health and safety reporting; and remuneration reporting.
Part of the proposal is for a code of ethics to be published along with rules about share trading and continuous disclosure as well as a published breakdown of CEO pay packages.
A discussion document was published last November and since then, the NZX has received 45 submissions. It also reached out to 15 small-to-medium-sized issuers representing the bulk of New Zealand’s corporate sector.
Chapman Tripp noted, however, that the NZX has not delivered a single governance framework, something that the law firm has been pushing for some time.
“But it does recognise that the current fragmentation is not helpful and has sought to better align the Code with other reporting frameworks and to improve comparability and consistency between the various reporting practices among issuers listed on the Main Board,” the law firm said in a statement.
Among the recommendations is the development of a code of ethics that not only directors can follow but the whole company can use. A formal written charter is also recommended for directors.
In terms of the board, Chapman Tripp noted recommendations don’t require that boards be made up of a majority of independent directors.
“We have long maintained that would be difficult given the small New Zealand market but note that the NZX has marked this as an issue to be addressed as part of a broader review later this year of the Listing Rules,” the firm said.
The recommendations, however, include that boards must be diverse and address at the minimum gender diversity and pay equality. Issuers would need to explain why if their boards do not comply with the proposed rule.
Chapman Tripp also welcomes the stronger remuneration reporting requirements as well as the suggestions in the risk management area – specifically environmental, social and governance (ESG) reporting and health and safety reporting.