NZSA Policy No 7 – Non-Executive Directors
Application: This policy applies to all NZX listed companies.
Purpose: NZSA maintains a range of policies to moderate the behaviour of all participants in the NZX listed company sector. These policies should be read in the context of the NZSA Policy Framework Statement.
1.0 Non-Executive Directors
1.1 NZSA support for the election of any person as a director will depend on its judgement of their capacity. This judgement will be based on appropriate and objective criteria, including the scale and nature of the company, and the governance and financial performance of other companies with which that person is associated.
1.2 In reaching conclusions the NZSA will apply the greatest weighting to the appropriateness of the skill set that the candidate brings to the job. We will also take account of the need for diversity on boards, particularly in terms of age, gender and background experience. It is undesirable that boards be populated with a group of directors who all have the same viewpoint and experience. This stifles innovation, rigorous debate and forward looking strategic considerations, which we see as essential if companies are to grow and adequately reward their shareholders.
1.3 Any candidate for election as director must be able to devote adequate time and appropriate skill to the company and its affairs. Directors have a legal obligation to bring their own skills and knowledge to bear on all board decisions. It is not sufficient to rely solely on the views expressed in management reports or even outside advice.
1.4 All board members should be subject to regular performance appraisals. Any candidate seeking re-election should be subject to a performance review by their peer directors shortly prior to the Annual General Meeting.
1.5 No person should hold more than five equivalent public company directorships. For this purpose, a position as chair is taken to be the equivalent of two directorships (reflecting the usual relativity of fees and time commitment).
1.6 Salaried executives of a company will not be supported by NZSA for election as a director of more than one non- associated company.
1.7 Full details of the existing directorships of candidates for election as director should be provided in the Notice of Meeting.
1.8 Candidates should address the meeting and answer questions from shareholders.
2.1 There is ample evidence of under-performance and inadequate supervision of companies whose directors have been unable or unwilling to give the time commitment necessary to execute their important roles. Too often this is because the number of companies with which individuals are involved as directors exceeds their capacity to do justice to all of them.
2.2 Directorship is too important to be treated as a reward for past service. Nor should it be treated as a concession to holders of a significant equity position in the company.
2.3 Executives of companies are appointed and paid as employees of that company. Exposure to other company’s board and senior management process may expand horizons to some extent, but it is not appropriate for them to take on more than one role as a non-executive director of a company outside their own corporate group. To undertake greater responsibilities risks inadequate execution of both roles.
NZSA Voting Discretionary Proxies
We will look at the merits of each candidate based on the position statements above and advise voting intentions accordingly.
The definition of Independence is given in the NZX Listing rules under 2.13.3 (f).
NZSA maintains other related policies regarding audit as shown below:
Policy 2 Auditor Rotation (hyperlinks)
Policy 3 Auditor Tenure (hyperlinks)
This document was approved by the NZSA Board: July 2018
This document is effective from: July 2018
The next planned review date is: July 2021