Magazine article New Zealand Management

Responsible Governance: A Healthy Concern for Strong Governance - Abano Healthcare; Global Statistics Suggest New Zealand's Top Companies Are Behind the Eight Ball When It Comes to Meeting Accepted Global Criteria for Ethical and Responsible Governance, and Senior Management Practices. the Chair and Managing Director of Abano Healthcare Explain What Responsible Governance Means to Them

Magazine article New Zealand Management

Responsible Governance: A Healthy Concern for Strong Governance - Abano Healthcare; Global Statistics Suggest New Zealand's Top Companies Are Behind the Eight Ball When It Comes to Meeting Accepted Global Criteria for Ethical and Responsible Governance, and Senior Management Practices. the Chair and Managing Director of Abano Healthcare Explain What Responsible Governance Means to Them

Article excerpt

Byline: Reg Birchfield

"When it comes to the governance of Abano Healthcare," says Alison Paterson, the company's high profile chair, "our overriding concern is to comply with the New Zealand Stock Exchange's (NZX) listing rules and to keep the market fully informed of the company's activities. That focus drives much of what we do."

Alan Clarke, Abano's managing director, agrees. "We are the stewards of our shareholders' funds and we are charged with making sure the market knows everything that we know about the business. Trickling off that go all the codes, policies and behaviours that we need to follow to achieve that," he adds.

There is, however, nothing incompatible with meeting NZX rules and governing responsibly. The demands of both are, to their minds, part and parcel of being a responsibly governed and managed business.

But given that all NZX 50 companies comply -- at least most of the time -- with listing rules, why are so many New Zealand corporates seemingly somewhat cavalier about meeting the kinds of global measures of ethical and responsible governance performance that companies in other countries, such as Australia, more willingly embrace?

In some cases, New Zealand's corporates seem little bothered about even complying with the New Zealand Securities Commission's Principles and Guidelines of Corporate Governance.

Duncan Paterson is chief executive of Corporate Analysis Enhanced Responsibility (CAER), the Canberra-based organisation that measures the governance and senior management performance of the NZX 50 for institutional investor AMP Capital.

According to him, no NZX 50 company has an "advanced" environmental, social and governance (ESG) risk rating, only 19 percent are rated "good", 23 percent qualify as "intermediate" and a solid 57 percent provide limited or no evidence of making any commitment to an ESG performance measure.

The criteria for measuring board and senior management risk and opportunities performance is set by Experts in Responsible Investment Solutions (EIRIS), CAER's London partners.

As Duncan Paterson puts it: "According to research by the world's leading ESG analysis firm EIRIS, less than half of New Zealand's listed companies can supply reasonable evidence of senior corporate accountability for ESG risk."

At the heart of responsible governance measures are questions such as:

* Does the company have an approved code of ethics?

* Is the code published?

* Does it include measures for dealing with breaches of the code?

* Is employee and management training on the provisions and practices of the code provided?

* Is implementation of, and compliance with, the code monitored and reported on?

* Does the company provide whistle-blowing procedures?

* Are there procedures for implementing and reviewing the code?

* Do board policies describe the company's relationships with significant stakeholders?

* Does the board regularly assess compliance with these policies?

Both Alison Paterson and Clarke accept that Abano's reputation for being governed responsibly is critical to its success. "A board that is recognised and respected goes directly to the company's ability to transact business," says Clarke.

And Paterson believes that responsible governance involves, at least in part, creating a board that "has the range of individual director skills necessary to make it fit for purpose".

They interpret "responsible governance" to mean having captured both organisational competence and, as a result, market confidence. "You cannot have responsible governance if there is no confidence in the company," says Clarke.

"We are in the business of investing shareholders' funds and providing a good return. That will not happen unless investors and market analysts alike are confident that the company is governed and managed responsibly. …

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