Chapman Tripp –
Volatility and disruption In recent years, political and economic volatility have been a constant for boards, particularly in global-facing businesses. More generally, directors have faced an uncertain business environment and a step-up in expectations for workplace health and safety and, more recently, management of cyber risk.
Shareholders, customers and employees have demanded greater transparency of decision-making.
Trends at a glance Key themes we expect to see in the governance area this year are:
• a more activist shareholder culture
• a greater focus on director accountability
• increased professionalisation of directors
• more boardroom diversity, and
• enhanced disclosures.
These trends will be given a push-along with the implementation this year of NZX’s revised Corporate Governance Code. We also expect a continued regulatory focus on board conduct by the Financial Markets Authority (FMA) and continuing scrutiny from institutional and retail investors, including through the activities of the New Zealand Shareholders’ Association (NZSA).
Shareholder activism is still relatively rare in New Zealand but may be on the rise, reflecting international trends.
Recent examples include:
• the defeat of a resolution at the Rakon AGM to reappoint an existing director, who was a member of the company’s founding family, which still owns a 24% stake in the company, and
• the successful manoeuvring by Augusta Capital and institutional investors to vote down a proposal recommended by the NPT board and to replace three of the board’s four directors. The two cases are very different.
The first involved retail investors, coordinated by the NZSA, asserting their will over a company’s board and management. The second was a strategic play by a significant shareholder, which ultimately won majority shareholder support. The Augusta example highlights some shortcomings in the existing regulatory framework.
While investors holding 5% or more of voting shares can require a board to call a shareholders’ meeting to consider a shareholder proposal, the Companies Act provides no timeframe within which that meeting must be called – an omission that allows boards to prevaricate unless under threat of costly court action.
We recommend NZX consider a listing rule specifying that a requisitioned meeting must be held within 30 working days. This would align more closely with Australian law.