A key architect of the compulsory retirement savings system lauds its many achievements, stretching from the national economy to the individual. Where it’s double faulting is in serving members – and it needs to be addressed promptly.
With performance and diversification driving demand, these funds are expected to experience four-fold global growth over the next decade to nearly $AU65 trillion.
NZ’s top 16 funds and managers form governance body
Anne-Maree O’Connor
A new corporate governance alliance between New Zealand’s largest institutional investors was launched last week with 16 member organisations, representing about 15 per cent of the NZ share market.
The Corporate Governance Forum (CGF) is being chaired by Anne-Maree O’Connor, who is head of responsible investment for the NZ Super Fund.
CGF currently includes the four government-owned investment funds plus a range of other managers including AMP, Harbour, Nikko, Salt and Milford. Along with the Crown-owned entities, Devon Funds Management and Mint Asset Management were also part of the steering group behind the CGF. In total, the CGF members manage over NZ$10 billion in New Zealand equities.
O’Connor said the group, which has been 18 months in the planning, would not function as a collaborative proxy-voting organisation.
“The purpose is two-fold,” she said. “Firstly, we want to help institutional investors be aware of good corporate governance practices – it’s for our own education. And also we want to inform discussions with boards.”
She said the CGF planned to meet at least twice a year as a full group with smaller, more frequent side-meetings likely to focus on specific issues.
The CGF has identified a few areas for immediate attention, including:
>Â promoting high quality boards, in particular through a focus on board composition including skills, diversity and independence;
>Â reporting and disclosure, in particular through better disclosure on strategy, risks and conflicts and through fair and accurate communication of financial performance;
>Â structure and disclosure of executive remuneration (to align with the company’s short and long-term strategic objectives);
>Â guidelines and rules issued by regulatory bodies.
O’Connor said NZX-listed companies should welcome the more “consistent voice” the CGF would provide on corporate governance standards expected by investors.
“There will also be a much better discussion during the year – not just at the AGM or when quarterly results are release,” she said.
According to O’Connor the CGF would also help keep local investors and companies up with global corporate governance trends by sharing research and networks.
Most other developed markets have similar organisations to the CGF, she said. The NZS is also a member of the Australian version of CGF and part of an international global corporate governance network.
O’Connor said other New Zealand fund managers would probably join over time, however, the CGF has a cut-off mark for membership of more than $100 million in funds under management.
“Other groups with particular expertise could join as honorary members,” she said.
According to the CGF terms of reference, the group will not speak on behalf of individual members or vice versa – although firms can “publicise their membership”.
“As a general rule the Forum will not opine on the practices of an individual company but may commission and /or issue research that provides a comparative market analysis that identifies individual companies,” the CGF terms of reference say.
– David Chaplin, Investment News NZ
