NZX corporate governance code review

In response to initial consultation feedback in 2021 on the NZX Corporate Governance Code Review, the NZX released three further consultation papers in August 2022:

1. A standalone targeted review of Capital Raising Settings and Listing Options.
2. A second consultation paper containing recommendations on the Code review (plus an Exposure Draft incorporating suggested Code amendments), and;
3. An accompanying ESG Guidance Note review paper containing recommendations for changes (also with an Exposure Draft).

IoD supported changes proposed in the Capital Raising Settings and Listing Options review paper. This included support for the NZX objectives to reinforce the fundamental duty of directors to act in the best interests of the company. We noted that best practice governance encourages organisations to embrace a long-term view and develop strategy that results in sustainable business, and that shareholders elect directors and entrust them with responsibility for protecting shareholder interests, and complying with the duty to act in the best interests of the company. We also submitted that boards need to be adapting their skills matrix to reflect changing company circumstances, including capital raising.

The Code review was expanded in the second consultation paper, as a result of initial feedback provided to the NZX, including from the IoD. At the same time, the NZX proposed amendments to the ESG Guidance Note to ensure it conformed with the proposed changes to ESG regulatory guidance in the reviewed Code.

The IoD also provided general support for the reviewed Code and ESG Guidance Note, in recognition of the important role the Code has in improving corporate governance in New Zealand, and assisting directors to carry out their roles and responsibilities in a continually evolving corporate governance landscape.

The IoD continued to support the ‘comply or explain’ approach the NZX advocated retaining for the Code, and encouraged reporting requirements that provide for meaningful disclosure to owners and stakeholders, while avoiding creating a culture of ‘tick-box compliance’. In line with our earlier submission, we supported proposed NZX changes that recognised reporting requirements needed to align with other codes and practices issued by standard-setters and regulators, including the XRB’S climate-related disclosure standards, and the recently enacted Protected Disclosures Act 2022.

We supported NZX proposals to ensure the Code clarifies the content and frequency of Code of Ethics training practices for their employees, and recognising the value of diverse boards and leadership teams in driving long term business sustainability and success.

We also supported the establishment of the NZX Corporate Governance Institute to help raise governance standards across NZX listed entities and offer better investor protections.