Governance reporting – could do better

Listed companies need to be more transparent about remuneration policies, Chapman Tripp says.

The Financial Markets Authority (FMA) sampling of recent governance reporting, released yesterday, shows that a significant number of companies are not disclosing adequate information in relation to the FMA’s core governance principles – particularly in relation to matters such as codes of ethics, remuneration policies and stakeholder interests.

“The FMA has taken a relatively small survey which includes only six of the top NZX50 companies and quite a few non-listed companies, so that result is hardly surprising,” said Chapman Tripp partner Geof Shirtcliffe.

The New Zealand listed companies included in the survey disclosed – overall – about two-thirds of the corporate governance information that the FMA believes would be useful to investors, whereas non-listed companies disclosed less than a quarter of it.  It also revealed that companies provided the least information about stakeholder interests (19%) and remuneration policies (37%).

“The review sets out the questions surveyed for each of the FMA’s nine corporate government principles, specifically noting the different compliance levels for each question of listed and unlisted companies.

“It also provides an example of a company that has done something well for each principle.  These questions and examples will likely be quite helpful for companies updating their website disclosures, or preparing annual reports in future, and we welcome them.”

Mr Shirtcliffe said Chapman Tripp is not surprised by the low level of disclosure on FMA’s principle nine (stakeholder interests). 

“We do not see this as having the same significance for investors as other principles - and, in the context of the NZX’s corporate governance review, have submitted that the principle be subsumed into principle 8, relating to shareholder relations.”

More significant is the low level of disclosure on remuneration policy, he said.

“Only one in five companies published their remuneration policy, and disclosure generally in relation to remuneration was low. “Even the listed companies included in the survey disclosed only half of the information the FMA’s guidelines recommend.   Greater transparency of remuneration policy and practice by listed companies is one of the key things which investors, including the New Zealand Corporate Governance Forum, have called for.  We agree, and expect the level of disclosure to continue to improve,” he said.

“The market should welcome the review as part of a continuing focus on corporate governance reporting.  The FMA’s publication is a very helpful document.”

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Related topics: Corporate governance; Corporate & commercial; Financial Markets Authority

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