Corporate Governance Principles for New Zealand

News Release
18 February 2004

Corporate Governance Principles for New Zealand

The Securities Commission has given its report on Corporate Governance Principles for New Zealand to the Minister of Commerce.

The report follows extensive public consultation last year.

“The Commission has developed nine high level principles for good corporate governance in New Zealand,” Commission Chairman Jane Diplock said.

“There was strong support for the concept of a principles-based approach to corporate governance, and the final document is in line with the public views that came from the consultation process.”

Corporate governance practices and research from relevant overseas jurisdictions were also taken into account in drafting the Principles.

“This will bring New Zealand into line with best practice overseas,” Jane Diplock said. “It will increase the integrity of the New Zealand securities markets and make them more attractive to investors.”

The Principles focus strongly on reporting and disclosure of corporate governance structures and processes, as well as on reporting of financial and other material matters.

“Transparency is of paramount importance,” Jane Diplock said. “Shareholders and other stakeholders can only evaluate an entity’s performance if they are properly informed.”

“We encourage all public entities to consider, adopt and report against the Principles, as we believe this will result in a high standard of corporate governance,” she said. To assist with this, the document includes guidelines to help entities achieve each principle.

The Principles and listed entities
The Principles do not impose a new regulatory regime on listed entities.

The Commission believes that listed entities with high standards of corporate governance, which disclose these under the NZX Listing Rules, will probably not have to do any additional reporting to be consistent with the Principles.

“On the other hand, listed entities which have not achieved good corporate governance may well have to look to the Principles and the guidelines to bring their reporting under the Listing Rules up to an acceptable standard,” Jane Diplock said.

The Principles apply to a wide range of entities
The Commission’s Principles of Corporate Governance have been designed to be adopted by a wide range of entities.

“We recognise that different entities may find different ways to achieve good practices, but the Principles are designed to apply to entities that should answer to owners, shareholders, and other stakeholders,” Jane Diplock said.

These include all issuers of securities, unit trusts and other collective investment schemes, state-owned enterprises, and statutory bodies in the public sector.

The Commission encourages entities of all types to consider, adopt and report against the Principles as a means to achieving high quality corporate governance.

Principles do not impose new legal requirements
The Securities Commission’s Principles of Corporate Governance do not impose a new mandated requirement for issuers of securities.

The Principles identify good corporate governance behaviours. The Commission encourages entities of all types to adopt and report against these Principles.

“Many issuers in New Zealand do achieve good corporate governance,” Chairman Jane Diplock said. “However, the Commission has seen and commented on some very poor corporate governance by directors and boards that have raised money from the public. These companies have not met the standards of corporate governance investors have the right to expect.”

The Commission will continue to keep corporate governance high on its priorities for enforcement activity. When poor corporate governance is identified it will publicly report on this.

Report available
The Commission’s report, Corporate Governance Principles for New Zealand, is available on its website www.sec-com.govt.nz or in hard copy by phoning 04 472 9830.

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