Anne-Maree O’Connor: NZ Super head of responsible investment
The New Zealand Superannuation Fund (NZS) has called for international governance standards to apply to local listed companies.
In its submission to the NZX review of corporate governance reporting requirements, the NZS says the “New Zealand market is falling behind international standards”.
“We are unconvinced by many of the arguments for why these international standards might not be applicable in our home market,” the NZS says.
The NZS submission, published last week, says the NZX review itself needs to be restated in terms of desired “outcomes” rather than the current focus on “flexibility and appropriateness”, pointing to the G20/OECD ‘Principles of corporate governance’ as a useful exemplar.
According to the G20/OECD guidelines, a “corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders”.
The submission also calls on the NZX to work with the New Zealand Corporate Governance Forum (NZCGF) on the reforms. NZS head of responsible investment, Anne-Maree O’Connor, chairs the NZCGF, a group of local institutional investors looking to lift corporate governance standards in NZ.
While the NZS backs many of the NZX proposals, in many instances it calls for a tougher approach to corporate governance than the review paper lays out.
Specifically, the NZS recommends:
- Independent non-executive directors to be the majority on a board, including an independent chair;
- Directors on the board for more than nine years to face annual re-election
- Companies to discuss how they ensure boards include a mix of diversity and skills;
- Lowering the threshold for corporate capital-raising actions that “materially dilute shareholders without their approval”;
- Ending the current ‘show of hands’ approach in AGM votes, replacing it with a true one-share, one-vote policy allowing all shareholders to participate without necessarily attending the meeting or sending a proxy;
- Better disclosure of issues contributing to a company’s long-term health including, “strategy, risks, key performance indicators, remuneration policies and environmental and social issues”.
The NZS submission says better management of environmental, social and governance (ESG) factors would improve long-term performance of companies as well as the overall reputation of New Zealand markets for offshore investors.
“Increasingly New Zealand companies are being viewed through an international lens by a wide array of overseas investment funds, ratings agencies, proxy firms and other stakeholders,” the NZS says. “The New Zealand market is lagging in terms of company disclosure on strategy, risk and environmental, social and governance matters and we believe this to be to the disadvantage of New Zealand companies and shareholders.”
The NZX is scheduled to publish draft corporate governance rules in a consultation paper in the next quarter with the final regime slated to be in place before year-end.