2016 Australia, New Zealand, South Africa Season Preview
Gender diversity and board skills matrix disclosure are two of the hot topics in the Australian market, and together with business strategy, financial performance and risk management, continue to be the focus points for engagement between issuers and investors. Shareholders are also more closely assessing the level of directors’ commitments and length of directors’ service. Culture and behavioural practices within organisations, particularly in the financial sector, have also come under increased scrutiny and will certainly make an impact for investors in their decision process.
Given the dynamic changes in the business environment and challenges associated with factors such as climate change, disruptions and volatility in commodity prices, setting executive remuneration that properly incentivises executives and prevents pay-for-failure is a pivotal task for every remuneration committee. Companies now even more than ever need to consider whether their remuneration structures reflect their business strategy, and whether they drive the desired behaviour and performance while creating long term value for shareholders.
And lastly, more and more ASX-listed companies now release sustainability reports highlighting the economic, environmental and social impacts caused by their everyday activities. In light of the 2 degrees global target, the main focus is on climate change and actions taken by the companies to reduce their carbon emissions and carbon emissions exposure.
Following a review of reporting requirements in New Zealand, in August 2016 the New Zealand Stock Exchange issued a draft version of an updated NZX Corporate Governance Best Practice Code as part of a consultation exercise. This will be the first significant update to the Code since 2003, and will include changes to both Code provisions and the Code’s overall structure. The new Code is expected to be implemented in the first quarter of 2017.
South Africa’s market governance framework, King III Code, is also getting a serious revamp. King IV, to be released in November this year, will attempt to enhance the accessibility of the “apply or explain” regime for smaller companies. Investors will want to watch this space.
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