Greater transparency needed to meet demands from consumers

Greater transparency needed to meet demands from consumers and shareholders

The Institute of Directors (IoD) is calling for more holistic reporting that includes diversity, health and safety performance, board composition and independence in its submission to the NZX on Corporate Governance Reporting requirements.

IoD Chief Executive Simon Arcus says it is about demonstrating to consumers, stakeholders and shareholders how an organisation is managing its opportunities and risks while creating long-term value.

“Good governance requires reporting that is open and meaningful, beyond tick the box compliance,” Mr Arcus says. “It is important with other exchanges around the world engaging with this, that NZX reporting evolves to keep up with international developments, trends and best practice. Financial information alone does not tell the whole story and corporate reporting needs to address this.”

A recent assessment by the IoD on current reporting of the NZX top 20, found 65% report in some form on environmental, social and corporate responsibility. Just 8% report on health and safety.

The IoD found the information highly variable, and support any initiative to improve the quality and consistency of reporting.

“Reforms on corporate requirements will aid clarity and minimise fragmentation. There is not a one size fits all, and any changes should be designed to assist organisations involved not made it into a compliance tool,” Mr Arcus says.

Increasing consumer and stakeholder demands for transparent and better data are driving changes in corporate reporting internationally. We’ve moved from requirement driven reform after the GFC to consumer driven reform world-wide. Institutional investors and shareholders now give scrutiny to broaden the ties than just the bottom line.

Overseas environmental, social and governance reporting (ESG) is often mandated. In Australia for example the ASX requires organisations to report on any material exposure to economic, environmental and social sustainability risks, and how it intends to, or currently manages risk.

In its submission the IoD focuses on the framework and approach to reporting on four areas in particular. These include board composition and independence, reporting on diversity, additional reporting on ESG matters and additional reporting on health and safety performance.

“Board diversity brings a broader range of perspectives to the boardroom and increases the potential for success,” Mr Arcus says. “Since the NZX introduced guidance on gender reporting the percentage of women on boards has increased (17% in 2015 from 12% in 2013), however there is still a long way to go, so a policy with measurable objectives for achieving diversity in senior management and board composition is recommended.”

“While significant reforms have been introduced to try and improve our appalling health and safety record, the IoD supports any requirement to report on an organisation’s performance here.”

“Good corporate reporting supports good corporate governance and the underlying principles of accountability, transparency, probity and long-term business sustainability. Thoughtful reporting focuses on performance and promotes shareholder and stakeholder trust.”

Submissions for comment on the NZX Review of Corporate Governance Reporting Requirements within NZX Main Board Listing Rules closes on Friday.

ENDS

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