The Securities Commission's latest review of corporate governance reporting shows that while most issuers are doing well, many need to improve their disclosures when it comes to ethical standards, directors and executive's remuneration, risk management, and shareholder and stakeholder relations.
"It is important that investors are given high-level assurances that companies have robust corporate governance policies in place. This gives them confidence not only in the company but in the wider New Zealand market as well," Securities Commission Chairman Jane Diplock said.
The Commission's review of 68 issuers found many disclosed relevant information on:
- board members' independence, expertise and experience
- the use of board committees, such as remuneration and audit committees
- remuneration policies for directors and executives
- risk management policies and processes
- processes for ensuring external auditors' quality and independence.
However, issuers could improve their reporting by disclosing:
- how directors observe and foster high ethical standards, such as by complying with a code of ethics
- how remuneration incentives align with the issuer's objectives and risk management policies
- how risk management policies are applied to material risks faced by the issuer
- how the board builds constructive relationships with shareholders that encourage them to engage with the entity
- who the board considers its key stakeholders are and how it respects their interests.
"Good corporate governance is critically important to the integrity and stability of any company. Correct and thorough disclosure of corporate governance policies and procedures should be the first thing a company does to demonstrate the strength of its corporate governance, but it is, of course, no guarantee of good governance in practice," Ms Diplock said.
The review assessed the annual reports and website disclosures of selected issuers against the Commission's nine principles of good corporate governance. The principles are set out in a corporate governance handbook for directors, executives and advisers published by the Commission in 2004.
Review findings are published on the Commission's website - www.seccom.govt.nz