NZ companies still relatively opaque on reporting remuneration, stakeholder interests, FMA finds

Thursday 4th August 2016

New Zealand companies generally got a pass mark from institutional investors in terms of their corporate governance but garnered relatively low scores in terms of reporting stakeholder interests and remuneration, the Financial Markets Authority says.

The FMA reviewed 45 listed and unlisted companies against nine corporate governance principles set out in a handbook it published in 2014 and surveyed fund managers about their confidence in current standards. The survey found about 46 percent of professional investors thought standards were high, while a similar number said they were moderate and 9.1 percent rated them low. That suggested room for improvement, especially among smaller companies.

New Zealand's listed companies disclosed about two-thirds of the corporate governance information the FMA deems useful to investors, while unlisted companies provided only 24 percent of the recommended information, the regulator said. It plans to repeat the exercise, probably next year.

"For us, it's about lifting transparency," said Simone Robbers, the FMA's director of strategy and risk. "That's a really good indicator of a healthy culture."

The corporate governance principles were meant to apply to a "broad church" and uncover any obstacles or hurdles smaller unlisted companies may face, "setting them up well for growth," she said. For smaller companies, "it's about working out what's appropriate for your size" and being aware of those structures as they grow.

The review didn't look at the actual behaviour of companies but the level of corporate governance disclosure relative to the guidelines in the handbook, the FMA said.

Companies scored lowest in terms of disclosures around the interests of stakeholders such as employees, creditors, customers and suppliers, providing just 19 percent of the information recommended. The FMA suggests companies identify their stakeholders and publish "clear policies explaining how they approach their relationships" with them. Just 22 percent of the companies under review disclosed they had a stakeholder policy and 16 percent said their boards assessed adherence to it.

Remuneration also got a low score, with companies on average providing 37 percent of the recommended information. While 41 percent disclosed they had a remuneration policy, only 21 percent published it. Listed companies fared better than unlisted, providing 52 percent of the information recommended compared to 14 percent.

The highest performance related to reporting and disclosure and the principle that boards should demand integrity in financial reporting and timeliness and balance in corporate disclosures. On average, companies provided 64 percent of the recommended information.

Robbers said one of the FMA's key messages about corporate disclosure is that companies shouldn't wait for the annual reporting cycle to disclose how they are operating, but rather it should be a continuous process.

Of the 45 companies reviewed, 25 had securities listed on the NZX and 19 were unlisted companies, largely from the financial industry, selected from the Finance Service Provider Register.

BusinessDesk.co.nz

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