NZX, the New Zealand stock exchange, has published a draft revised corporate governance code (NZX Code) and feedback to its earlier consultation on the changes required. This is the  first substantial update to the NZX Code since 2003.

The key changes to the code relate to environmental, social and governance (ESG) reporting, diversity reporting and executive remuneration disclosures. In its feedback paper NZX said that there was currently no requirements in New Zealand relating to ESG reporting and is proposing to develop specific guidance for NZX Main Board Issuers based on the model guidance provided by the Sustainable Stock Exchange Initiative to ensure that issuers who do choose to report ESG issues are reporting information which is comparable between New Zealand issuers. As an alternative, NZX has suggested reporting against a widely accepted international framework, the Global Reporting Initiative (GRI). The code has also been amended to reflect recent health and safety legislation in New Zealand. There is a a proposed recommendation regarding risk management which is supported  by specific commentary in respect of health and safety.

Meanwhile a new recommendation has been introduced - on the basis of comply or explain - that issuers have a published policy on diversity. The feedback from the consultation found that stakeholders have a wider interest in diversity, so the NZX has suggested that diversity be considered beyond simply gender.

It was acknowledged that New Zealand has been behind other countries in respect of remuneration reporting and NZX  recognised that this is an area of significant interest to investors and other stakeholders, particularly given that the structure of CEO remuneration is a key driver of company performance. NZX said it considered remuneration disclosure carefully to propose a suitable level of disclosure for a New Zealand context, while also providing flexibility for issuers.

NZX Head of Policy and Legal Hamish Macdonald commented: “The new NZX Code aims to streamline corporate governance reporting requirements in New Zealand to improve transparency for investors and drive better engagement in our markets.”

“The proposed NZX Code aims to strike an appropriate balance between promoting good corporate governance practices, while ensuring sufficient flexibility for issuers.”

NZX also recognised that there is currently a fragmentation of reporting requirements in New Zealand given the existence of a number of different reporting guidelines. NZX said aim of the review was to update NZX’s Code to ensure it reflects current best practice, to improve comparability and consistency between various reporting practices among issuers listed on the NZX Main Board.

New Zealand law firm Chapman Tripp said welcomed the new draft code as the it believed that New Zealand has been slipping behind in the governance area. The law firm had been pushing for the development of a single governance framework for New Zealand but recognised the changes were an improvement.

The deadline for comments on the draft is 14th October with implementation of the new code expected next year.