The proposed NZX code broadly follows last year's discussion document, with a range of recommendations set out under eight principles on ethical standards, board composition and performance, board committees, reporting and disclosure, remuneration of directors and CEO, risk management, auditors, and shareholder rights and relations.
It recommends issuers develop a code of ethics for directors capable of being modelled for the entire organisation to deal with issues ranging from conflicts of interest to gratuities to treatment of whistleblowers, share trading by directors and employees and the need to act honestly.
It recommends boards operate under a formal written charter which sets out roles and responsibilities of directors, with a formal and transparent plan for appointments, written agreements with each director, published information on each board member and their interests, and a gender diversity policy. Boards should also ensure directors get appropriate training and are regularly assessed.
The proposed code spells out requirements for board committees including that the audit committee should comprise only non-executive directors and not be chaired by the company chair, and that remuneration and nomination committees be established. All committees should operate under written and published charters, it says.
Boards should also have a written policy on continuous disclosure and make available all board guidelines - the code of ethics, committee charters and other governance documents. Disclosure should include financial and non-financial information which could range to environmental, social and governance policies.
The draft recommends remuneration of directors and CEO be transparent, fair and reasonable, and that the pay components and performance criteria for executives be clearly spelled out. Remuneration arrangements for the CEO should be disclosed, spelling out base pay, short and long-term incentives and how these are triggered.
Under the risk management principle, the draft recommends "appropriate policies and procedures to identify and manage the key risks" facing a business and ensure the board regularly reviews the risk management framework.
Auditors should be independent, with rules in place for the audit committee to oversee any additional services provided by the auditor as part of a formal and transparent framework. It also recommends the auditor attend the company's annual meeting and be available to answer questions from shareholders in relation to the audit.
The final principle is on shareholder rights and relations and includes providing access to a range of information on the company website and making it easy for investors to communicate with the company.
NZX is seeking feedback on the proposed updates before putting them in place. It said the updated code is based on a three-tier structure comprising principles, recommendations and commentary.
