Bosses set to disclose pay
Companies which do not comply will have to justify their decision
Moves by the NZX aimed at getting listed companies to reveal the pay packets of chief executives have been welcomed by the New Zealand Shareholders Association.
Stockmarket operator the NZX yesterday released the final version of its corporate governance code, which comes into force from October 1. The code has eight parts, including a section on remuneration which recommends companies disclose the pay package for their chief executive in the annual report.
Currently companies only have to report the number of people who earn over $100,000 and how many people earn in salary bands above that.
It is assumed the highest earner is the chief executive but that may not always be the case.
The NZX recommendation includes stating a CEO’s base salary, short-term incentives, long-term incentives and bonus payments, and the performance criteria used to determine performance-based payments.
Companies which do not comply with the recommendations will have to justify their decision.
The change will bring New Zealand more into line with Australia where listed companies have to be very open about how much their executives get paid.
Michael Midgley, chief executive of the Shareholders Association, said the move was a step in the right direction.
“Clarity and openness are good.”
Midgley said companies had to pay people for their performance but including an explanation would help shareholders understand why they were being paid that.
The code also includes a recommendation for companies to have a diversity policy.
Currently listed firms have to report the gender breakdown of their board and senior leadership team.
Hamish Macdonald, head of policy and legal at the NZX, said the code recommendations were designed to drive increased transparency for shareholders.
“The NZX Code seeks to promote good corporate governance and ensure a single source of recommendations for New Zealand-listed issuers.”
More than 80 parties submitted towards a draft version of the code.
“The extensive engagement NZX received as part of this review reflects the industry’s desire for strong corporate governance and the key leadership role NZX plays in encouraging these improved practices,” Macdonald said.
Companies with a reporting period ending December 31 are expected to follow the new recommendations although they are being encouraged to follow the new rules sooner.