AUT's Business School has set up a new centre for corporate governance. Member Professor Bob Garratt and centre heads Coral Ingley and Dr Alireza Tourani-Rad answer questions about what they are up to.
KEY POINTS:
Q. What exactly is this new centre for corporate governance?
A. It aims to support and generate academic and professional research investigating corporate governance, and disseminate this through publications, conferencing, education, networking, and the promotion of good governance and best practice.
Q. Why is good corporate governance important?
A. It provides a key underpinning of a sound financial system. It is essential to the effective operation of equity markets, for maintaining investor confidence and for generating of economic wealth. It operates in a legal framework, within which standards of accountability and responsibility for boards of directors are established for carrying out effectively their fiduciary duty.
Q. What are the standards of corporate governance like in NZ compared with the rest of the world?
A. Recent legislative and self-regulatory corporate governance codes introduced by the NZX and the Securities Commission have helped to improve market confidence, and in NZ are more in line with overseas markets. This includes better supervision of management, better board composition and greater director independence, more effective use of internal and external audit functions, higher levels of disclosure and greater transparency. Corporate governance standards in NZ are comparatively less rigorous than in most other developed countries with regard to reporting and disclosure requirements. The quality of information disclosed, and not just the quantity, is of importance for investors.
Q. What kind of research will you be doing at the centre?
A. It will focus on commercial and non-commercial entities including listed and non-listed firms, small and medium-sized enterprises, public sector and not-for-profit organisations, as well as the governance of indigenous firms. Examples of areas we are currently engaged in, or plan to investigate, include corporate governance practices in board rooms; the impact of corporate governance on corporate performance; board influence on decision making; and financial markets regulations.
Q. What help do you think this kind of research will bring to New Zealand businesses?
A. Information and insight can be applied to establishing best practice, enhancing corporate reputation and improving the competitiveness of NZ firms globally.
Q. How easy is it to define what constitutes good corporate governance?
A. The main elements are accountability, transparency, disclosure, stewardship with probity, and the prudent oversight of management by boards of directors.
Q. Why is the study of corporate governance becoming more popular?
A. Spectacular corporate failures and massive losses of investment capital have drawn the attention of the public and regulators to address causes perceived as resulting from weak governance. This has raised the debate, with calls for regulatory reform and demands to lift standards by holding boards and directors more accountable. We need to lift our governance thinking and performance so our companies can to compete in the global marketplace.
