MR No. 2016 – 23
4 August 2016
Work to do on corporate governance disclosure, FMA finds
New Zealand listed companies publicly disclose about two-thirds of the corporate governance information that the FMA
believes would be useful to investors. However, on average, unlisted companies provided only 24% of the recommended
governance information.
The FMA has completed a review of corporate governance disclosures by 45 companies, listed and unlisted. Good corporate
governance is one of the FMA’s strategic priorities because it is an important contributor to transparency and
efficiency in capital markets. In 2014 the FMA published a Corporate Governance Handbook comprising nine corporate
governance principles.
The FMA has reviewed information provided in public disclosures by companies about how they address the principles. The
resulting report, released today, is not an assessment of the quality of corporate governance in New Zealand companies -
rather, it reports the extent to which New Zealand companies are providing information about their approach to corporate
governance; which is a good indicator of how seriously companies are taking the corporate governance principles.
The review shows that while it is possible to find commentary in the annual report or on company websites about
governance principles such as a code of ethics, the remuneration policy, or risk management policies, few companies are
publically disclosing the actual code or policies.
Of the nine principles in the governance handbook, information was provided least often by companies about stakeholder
interests (19%), and reporting on remuneration (37%).
Improving the quality of reporting on corporate governance supports another of the FMA’s key priorities in its Strategic
Risk Outlook, investor decision-making. The FMA wants to promote high standards of corporate governance, and ultimately
improve confidence in New Zealand’s capital markets.
Simone Robbers, Director of Strategy and Risk at the FMA, said, “We are sharing our findings so companies can reflect on
their governance practices and disclosures. While the results overall are encouraging there is work to be done to ensure
that investors can find information to help them assess the companies they are considering investing with, and make
informed investment decisions.
“We also encourage unlisted companies to think about paying more attention to their corporate governance disclosures, in
particular how they can start raising the bar in providing useful information to their shareholders and customers.”
“We will also continue to work closely with the NZX on its review of corporate governance reporting requirements for
listed companies. We are keen to ensure alignment, as far as possible, across the different corporate governance
requirements for New Zealand companies,” Ms Robbers said.
The FMA also recently asked institutional investors how they rate the current corporate governance standards in New
Zealand. Together these investors manage about $100 billion of funds, and just under half, 46%, of them agreed that
corporate governance standards were high. Most said, however, there is still room for improvement. There was concern
that smaller companies were less aware of good corporate governance practice and think that it only applies to larger
businesses.
Chief areas of concern for institutional investors were board composition and performance, reporting and disclosure, and
remuneration. The fact that professional investors with capital at risk are also focussed on reporting and disclosure
supports the FMA’s view that other investors would also find the information useful for their decision-making.
The FMA will continue to engage with other parties and stakeholders in corporate governance in New Zealand including the
New Zealand Shareholders’ Association, the Institute of Directors, and The New Zealand Corporate Governance Forum, to
encourage consistency and high standards of corporate governance.
FMA’s review of corporate governance disclosure here
FMA’s handbook on the nine core principles of corporate governance here
ENDS