news

Governance trends in 2019

07 May 2019

Chapman Tripp began its New Zealand Corporate Governance – trends and insights publication this year by asking whether the “shareholder primacy” ethos, which has prevailed in New Zealand and like jurisdictions for generations, is now in decline.

Two recent developments support this view:​

  • a significant expansion in s. 172 of the UK Companies Act 2006 of the matters directors must have regard to in their decision-making to include such things as the effect on the wider community and the environment, the interests of the employees and the need to foster relationships with customers and suppliers, and
  • a recent speech by Financial Markets Authority (FMA) CEO Rob Everett suggesting that the “Milton Friedman model”, where the responsibilities of a listed company board were primarily aimed at the returns to shareholders, is broken and was never valid or sustainable in the first place.

As of now, the strict legal obligation in the Companies Act is still relatively narrow – to act “in what they believe is the best interests of the company” which “will often, but not necessarily, be what is in the best interests of the existing shareholders”.

But, particularly since the Global Financial Crisis, there has been a steady widening of the expectations both on and of directors – and this will only accelerate as the imperatives created by climate change and the aspirations of diversity and inclusiveness are drilled deeper into corporate governance.

Change driven by public opinion

The change is being driven by shifts in the current of public opinion. Certainly, that is Rob Everett’s view. He said:

“Social licence is a phrase that is becoming over-used but I believe that most market participants now accept that all corporate structures have responsibilities to a broader set of stakeholders than their shareholders…

Boards have to balance serving the shareholders by doing the right thing. And as Hayne pointed out in the Australian Royal Commission that is a far higher standard than complying with the law, or doing stuff that may not be in the spirit of the law, or does not “affirmatively” and provably breach it.

I think the tide has turned in terms of what the public and the community at large expects from its corporate leaders.”

A legacy of the Hayne Report and, in New Zealand, of the FMA/Reserve Bank of New Zealand (RBNZ) reviews into the retail banking and insurance industry will be the promotion of organisational culture as a key board responsibility.

A strong theme across all three inquiries was what we’re calling the ABC of corporate governance – where Attitude at the top drives Behaviour through the organisation and sets the organisation’s Culture. As Hayne put it, culture is “what people do when no-one is watching”.

Reform programmes not costless

The New Zealand Government, in response to the recommendations of the Hayne and FMA/RBNZ reports, is developing fast-track legislation to promote good consumer outcomes and to encourage a more consumer-focussed approach. A consultation document for this will be released this month.

Obviously the intention is good but the response needs to avoid overreach. The solution being offered by Hayne and the New Zealand regulators is not costless. It will require a substantial resource commitment from its targets that will – inevitably – bear upon the dynamics of the market, potentially reducing its competitiveness and capacity to innovate.

These are not effects that should be incurred lightly or unnecessarily.

A new iwi strand to governance

The growth of the Māori economy and the iwi corporates, three of which are now billion dollar plus concerns, is introducing a distinctive new strand to New Zealand governance – one which has its own challenges but also has much to offer the mainstream.

Iwi corporates typically work to a 25 to 50-year planning horizon, reflecting the intergenerational nature of their mission, and are guided by Tikanga Māori values such as whanaungatanga (family), manaakitanga (looking after people), and kaitiakitanga (stewardship).

A clear example of this is Te Rūnanga o Ngāi Tahu’s tribal philosophy of Mō tātou, ā, mō kā uri, ā muri ake nei – for us and our children after us.

These characteristics tend to promote a focus on sustainability, and can make iwi boards strong in areas where the traditional board can be weak – taking a long-term view, managing assets to produce income streams over many generations, selecting investments which are relatively protected from technologically induced disruptive change.

Iwi boards also have clear and reinforced responsibility for the collectively owned assets of thousands of individual iwi members and are likely to be related to, or live in the same community as, at least some of these people – running into their whānau in the supermarket, or being questioned at the monthly marae hui on decisions made around the board table.

The accountability is direct and personal. But, in part because board members are necessarily drawn from small populations, a long-standing challenge for iwi is to get the ‘right people’ around the table.

This is a particular issue for parent trusts, where trustees are elected by iwi members – a political process that in this day of social media campaigns, often rewards popularity ahead of mana, integrity or skill.

For the more directly commercial subsidiary asset holding companies, directorships are by appointment. If there is a skills shortage, experienced independent directors can be recruited to fill the gaps and to share their expertise with whānau directors in exchange for the opportunity to bring a new cultural dimension to their own leadership and governance skills.

Ngāti Awa and Ngāi Tahu have also instituted associate director roles on their corporate boards for whānau members to gain governance experience.

Other trends we expect to occupy boardrooms this year include:

  • continuing close scrutiny from shareholders, stakeholders and regulators
  • more comprehensive disclosure requirements arising from the new NZX rules and an increasing shareholder interest in sustainability reporting, and
  • an increased importance for directors of good D&O insurance, and of boards being able to rely on manageable information flows, reflecting an increased legal risk as litigation funders become more active in the New Zealand market.

Clear winner in battle of the codes

Chapman Tripp’s annual New Zealand Corporate Governance – trends and insights publications track the annual reports of the top 75 listed issuers across a range of indices including the size and composition of the board, the frequency of board meetings, the use of board committees, the quality and timeliness of their communications to shareholders and their remuneration levels and practices.

We are assisted in the collation of this database by the fact that all 75 companies are required to report to the newly updated NZX Corporate Governance Code. The Code’s pre-eminence has removed an old bugbear of ours – a plethora of governance codes available to issuers, all much the same but with points of difference in wording and emphasis which created confusion in the marketplace.

This article was published as above in Law News on 3 May 2019.

Our latest news

See all news

Pip England appointed Chief Executive Partner

Chapman Tripp has appointed Pip England as the firm’s new Chief Executive Partner, succeeding Nick Wells.

Read more

Mercury's new green bond and green financing framework

Chapman Tripp and Mercury today jointly celebrate New Zealand’s first new retail green bond of 2020, totalling $200 million.

Read more

Will COVID-19 and climate change make NZ more litigious?

Read our latest Trends & Insights publication including observations across class actions, litigation funding, climate change-related disputes and the changing environment for access to the courts.

Read more

green shoots in soil

Certified commitment to environmental sustainability

We meet the requirements of Toitū's carbonreduce® certification programme, having measured our GHG emissions. We are committed to managing and reducing our carbon footprint.

Read more

brand launch logo spirals

A dynamic and fresh look for Chapman Tripp

Today is a significant milestone for Chapman Tripp as the firm unveils its dynamic and refreshed look – a modernised visual identity that better reflects the firm’s vision, strategy and people.

Read more

Finance partner recognised as Market Person of the Year

Ross Pennington has been recognised by KangaNews for his contribution to the development of the Australian and New Zealand debt markets.

Read more

boardroom office

Over $2.35b capital raised with equity capital markets experts

Our equity capital markets team has advised clients on capital raisings totalling over $2.35b since NZX Regulation released its COVID-19 relief package.

Read more

people walking through office

Generating social and environmental benefits alongside financial return

We are proud to have advised NZGIF on its investment to help Wellington’s port decarbonise – the first to benefit from NZGIF’s $100m in investment capital.

Read more

photos of senior associates who have been promoted

Chapman Tripp promotes nine to Senior Associate

Nine Senior Solicitors from across six of our specialist practice areas, have been promoted to Senior Associate.

Read more

building glass

Clients’ choice for capital raisings

Our equity capital markets team continues to be in hot demand, acting on more recent capital raisings than any other law firm in NZ..

Read more

covid 19

Six equity capital raisings in response to COVID‑19, to raise almost $2b

We have been trusted counsel on more capital raisings in response to COVID-19 than any other law firm in NZ.

Read more

2020 nz lawyer innovative firm graphic

Recognised on Most Innovative Firms List

Our technology and innovation business, Zeren, has been recognised on NZ Lawyer’s Innovative Firms list for 2020.

Read more

stock market chart on screen

First 2020 NZX new equity listing

Me Today was the first NZX equity issuer listing under a ‘reverse listing transaction’, after raising $1.5m growth capital amongst the challenging backdrop of COVID-19 lockdown.

Read more

covid 19

Recovering from COVID‑19: the critical legal pathways

We have published a visual diagram to illustrate the legal pathways required for businesses and economies to recover from the COVID-19 pandemic.

Read more

james fuller ceo

Zeren welcomes James Fuller as new CEO

Zeren, Chapman Tripp’s legal tech arm welcomes James Fuller as new CEO.

Read more

graduate scheme employees

Voted top graduate employer in NZ’s legal sector

Students have voted Chapman Tripp as the best law firm to work for in a recent survey conducted by GradNewZealand.

Read more

ocean wave

Tikanga Māori increasingly prevalent in law

NZ is in a period of transformative recognition of tikanga Māori in the law, now more prevalent in legislation and increasingly being recognised as an integral part of decision-making.

Read more

man holding tv remote control

Advising Sky on Lightbox deal

We advised Sky on its purchase of Lightbox, Spark’s streaming TV service.

Read more

orange windows on building

Innovation and change abounds for equity capital markets

​New Zealand’s equity capital markets are showing signs of revival, read more in the firm's annual Trends and Insights publication.

Read more

sienna spiral

Advising InfraRed Capital Partners on sale of stake in Auckland South Corrections Facility PPP

We advised InfraRed Capital Partners on sale of stake in Auckland South Corrections Facility PPP. The transaction is the first secondary PPP transaction in New Zealand.

Read more

sienna spiral

Supporting Vector on sale of Kapuni interests

We assisted Vector over the sale of its Kapuni gas treatment plant and related assets.

Read more

cartoon people stood atop a mountain

High rankings in Chambers Asia Pacific 2020

Chapman Tripp recognised with the highest number of ranked practice areas and individuals in NZ.

Read more

plane flying over cargo ship

Trade reform needed in wake of global disruption

The multilateral rules-based system, including the WTO, is more important than ever. But the system is under significant stress and its rules need to be updated...

Read more

cartoon people stood atop a mountain

KangaNews Law Firm of the Year

We have been named NZ Law Firm of the Year at the 2019 KangaNews Awards for the fourth consecutive year.

Read more

hands making heart graphic

Helping Mary Potter Hospice

We are proud to have provided pro bono support to Mary Potter Hospice over its plans to build an apartment complex next to its in-patient facility in Wellington.

Read more

photos of partners who have been promoted

Our three new partners are ground breakers

​In a busy and more demanding environment, we are pleased to announce the appointment of three new partners.

Read more

chapman tripp branded envelope graphic

Another big year at the NZ Law Awards

Chapman Tripp is thrilled to have won again at last night’s 2019 awards ceremony.

Read more

hands making heart graphic

Chapman Tripp marks 15 years of pro bono work

Celebrating 15 years of the firm's pro bono work and CSR programme.

Read more

wind turbine

Advising Mercury on Turitea wind farm project

​Chapman Tripp advised Mercury on the final stage of the development of New Zealand’s largest wind farm.

Read more

photos of special counsel who have been promoted

Chapman Tripp promotes two special counsel

We are pleased to announce the appointment of two special counsel in our Wellington office.

Read more

dairy farm cows

Advising ANZ on New Zealand’s first ESG loan

We worked with ANZ on a ground breaking deal for NZ’s first loan linked to environmental, social and governance measures.

Read more

surfer riding wave

Kathmandu's transformational acquisition of Rip Curl

Assisting NZX and ASX-listed Kathmandu Holdings as lead legal advisors on the NZ$368m acquisition of Rip Curl and associated debt and equity funding arrangements.

Read more

lyttelton harbour

Award-winner for Lyttelton Port Recovery Plan

Chapman Tripp has been recognised by the Resource Management Law Association for its exemplary work on the Lyttelton Port Recovery Project.

Read more

photos of senior solicitor who have been promoted

Celebrating the promotion of three senior solicitors

Chapman Tripp is pleased to announce the promotion of three senior solicitors in its Wellington office.

Read more

cargo ship

Chapman Tripp advise on Napier Port IPO

We advised on the NZX listing and initial public offering of shares in Napier Port, the largest IPO in NZ since 2016.

Read more

photos of senior associates who have been promoted

Nine new June appointments at Chapman Tripp

Chapman Tripp is pleased to announce the promotion of seven new senior associates, and the recognition of two senior legal advisors.

Read more

cartoon people stood atop a mountain

Winner at the 2019 Australasian Law Awards

​Chapman Tripp’s corporate and commercial team scooped up New Zealand Deal Firm of the Year and Partner John Strowger won New Zealand Dealmaker of the Year at last night’s Awards.

Read more

cartoon people stood atop a mountain

Chapman Tripp celebrates 2019 INFINZ winners

The sale of Seequent to Accel-KKR and the subsequent Seequent acquisition of Geosoft (financial advisor: Murray & Co) and Milford Asset Management, are this year’s winners...

Read more

mobile phone at night

Advising Infratil on Vodafone deal and capital-raising

We advised Infratil on the $3.4b acquisition of Vodafone New Zealand and $400m capital raising.

Read more

stock market chart on screen

RBNZ's proposals would benefit from an arbiter

The proposal is well within its prudential regulation remit but could have major repercussions for the economy.

Read more

ice cream

Chapman Tripp trumpets sale of Tip Top

Advising Fonterra on the sale of its iconic ice-cream brand Tip Top to global ice cream manufacturer Froneri for $380m.

Read more

crowds walking on purple path

Governance trends in 2019

We ask whether the “shareholder primacy” ethos, which has prevailed in New Zealand and like jurisdictions for generations, is now in decline?

Read more

crowds walking on purple path

Churchill a potential champion for directors in paper war

​Directors may find a champion in Sir Winston Churchill as they fight the battle of the bulging board information pack...

Read more

wind turbine

Chapman Tripp advises Mercury on new Turitea windfarm

We advised Mercury on the construction and long-term maintenance of a new windfarm at Turitea near Palmerston North.

Read more

chapman tripp branded envelope graphic

Managing IP New Zealand Contentious Firm of the Year

​Chapman Tripp has won the New Zealand Contentious Firm of the Year Award 2019 at the Managing IP Asia-Pacific Awards.

Read more

various blue computer screens

Defamation risk raised for publishers?

The embedding of the public interest defence to defamation has raised the bar for publishers.

Read more

lines connecting dots

IFLR Asia-Pacific's most innovative New Zealand law firm

​Chapman Tripp has won the Most Innovative National Law Firm (New Zealand) Award in the IFLR Asia-Pacific Awards for the third consecutive year.

Read more

photos of senior solicitor who have been promoted

Ten new promotions at Chapman Tripp

Chapman Tripp is pleased to announce the promotion of 10 new senior solicitors across its three offices.

Read more

stock market chart on screen

Top 25 NZX companies not reliant on banks for funding

A more cautious approach to capital within banks and higher interest rates, coupled with greater diversity of funding sources available, have driven several of the top 50 NZX-listed companies to look elsewhere...

Read more

outside of a office building

M&A market: Strong demand for now but threats from abroad and at home

Buyer interest is strong going into this year but this momentum is threatened by developments abroad and at home, Chapman Tripp says.

Read more

flax weave

Chapman Tripp proud to adopt formal te reo Māori policy

Chapman Tripp is proud to announce it has adopted a formal te reo Māori policy.

Read more

orange windows on building

The stage is set for more vibrant equity capital markets

The stage is set for a rebound of New Zealand’s equity capital markets, with much brighter years now firmly in sight, Chapman Tripp says.

Read more

sienna spiral

Chapman Tripp tops 2018 M&A league tables

We acted on more Merger and Acquisition (M&A) deals than any other New Zealand law firm in 2018.

Read more

abstract earth graphic

International trade up in the air

Predicted international trade events in 2017 fared well, the firm is now looking at what to expect in 2019.

Read more

people walking through office

Impact investment poised for lift off

​Increasing investor interest, evolving data capability and rapid advances in markets are aligning to create the conditions for a growth surge in impact investment in New Zealand.

Read more

auckland harbour bridge

Dealing to the infrastructure deficit

New Zealand’s sagging infrastructure is inhibiting the economy and our quality of life, in the form of gridlock, lost production, unaffordable housing, environmental degradation, and more...

Read more

swirls and lights

Disclosure – a key performance and risk area for boards

​The quality of disclosure is improving in response to regulatory signals but has a way to go yet despite a recent high profile reminder from mining giant Rio Tinto about the costs of getting it wrong.

Read more

kauri tree

Iwi business flourishing – more benefits for members

The Māori economy has powered beyond $50b and business-savvy iwi are now extending their investment into more social initiatives that directly benefit iwi members.

Read more

road bridges merging

M&A off to strong start, but challenges on the horizon

​Regulatory risk featured large in the mergers and acquisitions market last year and is shaping up to be a big factor again this year.

Read more

orange geometric shapes

A return to form for ECM? Not this year

​​More vibrant equity capital markets may be on the horizon for New Zealand – but not this year, Chapman Tripp says.

Read more