NZX’s decision not to require listed equity issuers to adopt gender diversity policies will disappoint some, and there will be pressure on NZX to move to a compulsory model if its current approach is not effective.
But, if the momentum for change is as strong as the body of submissions to NZX suggests, NZX policy may still deliver the goods.
The new Diversity Rule
Listed equity issuers will need to disclose in their annual report:
a breakdown of the gender composition of their directors and officers, including comparative figures from the previous reporting period, and
a statement from the Board evaluating the company’s performance with respect to its diversity policy, if it has one.
An issuer will be encouraged to disclose any other diversity policy, practice or position it has in place (including in relation to diversity other than gender).
The Diversity Rule applies to annual reports with a balance date on or after 31 December 2012.
Changes from original proposal
The rule NZX plans to implement, subject to FMA approval, differs from the proposal it put out for consultation in the following ways, and for the following reasons (offered by NZX):
for practicality - issuers will no longer have to provide a breakdown of the gender composition of each of their subsidiary boards
for certainty - issuers will need to disclose the gender composition of their ‘Officers’ (as defined in the Securities Market Act 1988) as opposed to their ‘Senior Management Teams’
for clarity in diversity trends - issuers will need to provide comparative figures in respect of the gender composition of their directors and officers, over time, and
for guidance - issuers will be encouraged to follow recommendations in an NZX guidance note (yet to be released), Diversity Policies and Disclosure, including to adopt a diversity policy with measurable objectives, and to report progress against those objectives.
Chapman Tripp comments
Several submitters, including heavy-hitters like the Institute of Directors and the 25 Percent Group, argued for a mandatory policy with measurable objectives.
NZX must have given this serious consideration, not only because that is the way ASX has gone but also because the ASX rule, adopted on 1 January 2011, has proved successful. But NZX decided against compulsion to provide issuers with flexibility and because of the potential compliance costs.
NZX has committed to working with the Ministry of Women’s Affairs, the 25 Percent Group and Global Women to help companies develop and implement gender diversity policies and we expect that these efforts will deliver a positive improvement within a relatively short time frame.
But if that does not happen, NZX can expect that this issue will be brought back onto the table.
Chapman Tripp’s submission on the proposed diversity rule is available here. Other submissions are available here.