NZ institutional investors set up new corporate governance forum
A group of New Zealand's leading institutional investors plan to flex their investment muscle over corporate governance through a newly set up forum.
Corporate Governance Forum chairwoman Anne-Maree O'Connor, from the NZ Superannuation Fund, said best practice corporate governance was key to company performance and to the long-term health of the nation's capital markets.
"As institutional investors with significant long-term exposures to the New Zealand market, we have a strong interest in ensuring corporate governance practice in New Zealand is equal to the best in the world," she said.
The institutions involved manage about $10 billion worth of New Zealand equities, or some 15% of the total market. The main areas they will focus on include promoting high-quality and diversified boards, structure and disclosure of executive remuneration, better reporting and disclosure on strategy, risks, and conflicts, and that the companies are following guidelines and rules issued by the regulatory bodies. The group has the support of the market regulators, the Financial Markets Authority and the NZX.
The forum has also released a set of corporate governance guidelines for companies to follow, which were developed following a review of national and international principles and frameworks including the Australian Council for Superannuation Investors and the UK Combined Code.
Forum steering group member Paul Glass, of Devon Funds Management, said the guidelines provide a good starting point for investor engagement in listed companies and will be used by the institutions when talking to company boards on corporate governance matters.
The guidelines include listed company boards being comprised of a majority of independent non-executive directors; directors serving longer than nine years being subject to annual re-election to improve independence, succession planning and board renewal; and that companies should communicate how they plan to have an appropriate mix of skills and diversity on their boards.
The guidelines also suggest companies should not be able to materially dilute shareholders without their approval and should seek investors' approval to issue more than 5% of shares on issue. The group also argues the current use of a "show of hands" at company annual general meetings undermines the principle of "one share: one vote."