NZX is committed to ensuring it employs best practice governance structures and principles in keeping with Appendix 16 of the NZX Main Board Listing Rules (the Rules) and the Corporate Governance in New Zealand Principles and Guidelines published by the Financial Markets Authority in December 2014.
NZX believes good governance starts at the top with the Board of Directors (Board), comprising individuals who are elected by shareholders.
The Board is responsible for the overall direction and strategy of NZX. It appoints the Chief Executive and delegates the day-to-day operation of NZX’s business to the Chief Executive. The Chief Executive implements policies and strategies set by the Board and is accountable to it. The Board has also made a direct delegation to the Head of Market Supervision in respect of NZX’s regulatory functions.
The Board has established a Code of Ethics that provides a set of principles for Directors to apply in their conduct and work for NZX. The principles deal with managing conflicts of interest, the required skills of Directors, trading in NZX’s shares, and maintaining confidentiality of information received in their capacity as Directors of NZX.
The Board operates under a Board Charter which sets out the objectives, responsibilities and framework for the operation of the Board
The Board currently comprises six Directors, all of whom are non-executive Directors. The Directors are James Miller (Chairman), Neil Paviour-Smith, Richard Bodman, Dame Therese Walsh, Jon Macdonald and Patrick Strange.
In accordance with NZX’s constitution and the Rules, one third of the Directors are required to retire by rotation and may offer themselves for re-election by shareholders each year. Nominations for Directors may also be made in accordance with NZX’s constitution.
The Board holds regular scheduled meetings. An agenda and papers must be circulated at least five business days before each meeting to allow Directors sufficient time to prepare. The Board also holds ad hoc meetings to consider time sensitive or specific issues (including via teleconference).
The Board has access to executive management and key executive managers are invited to attend and participate in appropriate sessions of Board meetings.
The Board has four standing committees: an Audit and Risk Committee, a Human Resources and Remuneration Committee, a Regulatory Governance Committee and a Conflicts Committee.
Audit and Risk Committee
The Audit and Risk Committee operates under Terms of Reference, which set out its role in assisting the Board with financial reporting and corporate financial matters. It may only comprise non-executive Directors and at least one member of the Audit and Risk Committee must have expertise in accounting. The members of the Audit and Risk Committee are: Neil Paviour-Smith (Chair), Patrick Strange, Richard Bodman and Dame Therese Walsh.
The Audit and Risk Committee has a clear line of communication with the independent external auditor and the internal finance and audit team, and it may, at its discretion, meet with the independent auditor without company management being present.
Human Resources Committee
The Human Resources Committee operates under Terms of Reference which set out its role. The Committee assists the Board to ensure that NZX's human resources policies and practices support NZX in achieving its commercial and stakeholder goals.
The Human Resources Committee comprises entirely non-Executive Directors. The members of the Human Resources and Remuneration Committee are Jon Macdonald (Chair), James Miller and Neil Paviour-Smith.
Regulatory Governance Committee
The Regulatory Governance Committee operates under Terms of Reference which set out its role. It assists the Board in fulfilling its governance responsibilities relating to NZX’s regulatory function for its registered markets.
The Regulatory Governance Committee comprises non-Executive Directors and an independent non-director member (Derek Johnston). The members of the Regulatory Governance Committee are Derek Johnston (Chair), Jon Macdonald, Richard Bodman and Dame Therese Walsh.
The Conflicts Committee operates under Terms of Reference which sets out its role. It makes recommendations to the Board on conflicts management policies and procedures, including recommendations to address any perceived or actual conflicts of interest between NZX's regulatory responsibilities and its commercial interests.
The Conflicts Committee is appointed by the NZX Board, and comprises directors who are deemed by the Board to be sufficiently independent of conflicts in relation to NZX group activities and an independent non-director member (David Flacks). The members of the Conflicts Committee are Dame Therese Walsh (Chair), Jon Macdonald, David Flacks and Richard Bodman.
Given the size of the Board, there is no nominations and succession committee. Rather, the full Board is involved in the Director Nomination process.
NZX has internal procedures in place to ensure that key financial and material information is communicated to the market in a clear and timely manner. In addition to its disclosure obligations under the Rules, NZX has adopted a quarterly reporting regime and produces operating metrics monthly. This additional information is intended to provide transparency and assist the market in evaluating NZX’s performance. NZX also maintains a website which provides contact points for the public and is updated with information regarding NZX and its releases.
The Board is responsible for ensuring that key business and financial risks are identified and appropriate controls and procedures are in place to effectively manage those risks.
Directors may seek their own independent professional advice to assist with their responsibilities. During the 2014 financial year no Director sought their own independent professional advice.
Insurance and Indemnification
NZX provides indemnity insurance cover and indemnities to Directors and executive employees.
NZX has adopted a formal Securities Trading Policy (“Policy”) to assist with compliance in relation to insider trading and market manipulation requirements under the Financial Markets Conduct Act 2013. The Policy is administered by NZX’s Corporate Counsel. The Policy restricts employee and Directors trading in a number of ways including:
- Prohibiting trading in NZX’s securities during “black-out” periods set out in the Policy. These occur prior to the release to the market of NZX financial results and prior to the release to the market of any prospectus for a general offer of securities issued by NZX or a subsidiary of NZX (excluding Smartshares and SuperLife).
- If a Director, officer or employee of NZX wishes to trade NZX securities outside a black-out period, that person must first apply, and obtain, consent from NZX’s Corporate Counsel.
If the Chief Executive wishes to trade NZX securities, additional arrangements including approval by the Chair of the Board apply.
Because of the nature of NZX’s business, any employee who wishes to buy or sell any security listed on NZX’s markets must follow the Policy and apply for consent to trade. This policy is reinforced through individual employment agreements.
As a registered exchange and the operator of an authorised futures exchange, NZX is required to undertake the supervision of the markets that it operates. This dual role as market operator and supervisor may lead to a perception of conflict between NZX's regulatory and commercial functions.
For this reason, it is important for NZX to effectively and demonstrably manage any conflicts that might arise between its commercial and supervisory roles. Accordingly, NZX has developed a Conflict Management Policy. The purpose of this policy is to identify possible conflicts and to describe the processes in place at a management and Board level to manage these and/or the amendments to NZX's regulatory regime proposed to address these.