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NZX releases new governance code

NZN 10/05/2017 Paul McBeth

NZX says it wants international best practice in the boardrooms of publicly listed companies with the release of a new corporate governance code set to come into effect from October.

In the first substantial overhaul of governance rules since 2003, the Wellington-based stock market operator on Wednesday released the code spanning eight principals that are meant to protect the interests of and build long-term value for shareholders, NZX said in a statement.

Those principles encompass ethics, board make-up, board committees, reporting and disclosure, remuneration, risk management, auditors and shareholder rights, with each carrying a number of recommendations for firms to meet.

"The NZX Code wasn't designed to be too novel or outrageous - the recommendations are recognised as best practices for a reason and a number of top New Zealand companies are already adopting them," NZX head of policy Hamish Macdonald told BusinesDesk.

"The NZX Code seeks to promote good corporate governance practices and ensure greater transparency for investors about these practices, with the aim of driving increased confidence and participation in our markets."

The new code has been in the works for more than a year, with two papers attracting more than 80 submissions over that period.

The Financial Markets Authority has also kept tabs on the NZX code, which it will have to ratify as the market regulator, and said it lined up with the principles of its own governance guidelines. The FMA said it will review its handbook to make sure everything is consistent.

Among the more controversial recommendations in the code is a requirement for chief executive remuneration be disclosed, including the criteria for bonuses to be paid out.

The code has also recommended firms should provide non-financial information such as environmental and social disclosures at least once a year, and report on health and safety risks, which are often cited by ethical investors as giving indicators on long-term value creation.

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