NZX Diversity Rule – could have been more robust but may still work.

In June 2012, NZX, the operator of New Zealand’s capital markets, introduced a Diversity Listing Rule that must be applied to annual reports for all NZX Main Board listed issuers on or after 31 December 2012.

We are all aware of the evidence that gender diversity at both Board and senior management level contributes to improved performance. So NZX’s primary concern was to make sure that listed issuers provide all relevant information to the market, so investors can develop an informed view of the current and potential future value of a company’s securities.

The new Diversity Rule will require listed issuers to:

  • Disclose in its annual report the gender composition of its Board, senior management team and any Subsidiary board; and
  • Give an evaluation of their performance, if they have a formal diversity policy, with respect to that policy.

The statistics coming out of New Zealand are quite troubling in relation to gender diversity. Currently, women hold only 9 per cent of private sector directorships[1] and less than one-tenth of directors on New Zealand’s top 100 listed companies are women. [2]  The majority of NZX 100 companies have no female directors, while women account for 21 per cent of management positions reporting directly to chief executives.[3]

These numbers contradict the fact that women registered in tertiary education in New Zealand outnumber men by a factor of 21 per cent and the significant majority of all graduates are women – 59 per cent in 2010.[4] As of June 2010, women now constitute 47 per cent of the NZ labour force.[5]

Yet, women are essentially underrepresented in leadership positions in virtually all sectors in New Zealand. Women make up only 20 per cent of senior managers and 9 per cent of board members on the NZSX Top 100 companies where there has been no increase since 2008.[6]

Even more discouraging is the fact that at least 30 per cent of the NZSX Top 100 have no women in their senior management teams at all.[7]

NZX plans to work with the Ministry of Women’s Affairs and agencies such as the 25 per cent Group and Global Women, who are supporting companies to develop and implement their own gender diversity policies. The 25 Percent Group, led by Goldman Sachs New Zealand chief executive Andrew Barclay, supports the Ministry of Women’s Affairs, to publish research and advice on how to improve gender diversity around the board table. It is aiming for 25 per cent female participation on private sector New Zealand boards by 2015.[8]

However, the Diversity Rule has caused much controversy amongst Women’s groups, which have slammed the upcoming requirement, suggesting that it has been watered-down and doesn’t go far enough. Heavy-hitters like the Institute of Directors and the 25 Percent Group, have also been arguing for a mandatory policy with measurable objectives. 

Chair of the Global Women organisation and former Prime Minister Dame Jenny Shipley welcomed the rule, but described it as a missed opportunity to match the progress Australia has achieved in gender diversity through making formal diversity policies mandatory.[9]

To Australia’s credit, by introducing diversity reporting two years ago, a third of all new board appointments to ASX200 in the past year were women, up from just five per cent in 2009.[10]

Unlike the NZX Diversity Rule, ASX requires you to have a policy on diversity and if not, you need to explain why. The NZX is basically just saying if you have a diversity policy, tell us about it.

Council of Women of New Zealand president Elizabeth Bang called the NZX rule a half-step because it didn’t make having a diversity policy mandatory:[11] ‘’It should quickly become clear whether or not businesses are willing to take the necessary action to boost the number of women on boards.’’

In response to such claims, NZX has spoken about the need to balance the provision of information to investors with the ongoing compliance costs to issuers. NZX CEO Tim Bennett noted that “the responses on quantifying gender composition at governance and senior management level indicated that this is an issue of importance to our markets. Therefore we elected to incorporate this into our Rules.”[12]

“However, it’s important that we give our listed companies the flexibility to make their own decisions about whether a formal diversity policy is a priority for them at this stage. Obviously, over time, we’d like to see more listed companies taking the opportunity to report on diversity as a contributor to investing decisions made by shareholders,”[13] said Bennett.

As this has been an effective call to action in Australia, NZX’s decision not to require listed equity issuers to adopt gender diversity policies is disappointing. There will be pressure on NZX to move to a compulsory model if its current approach is not effective.



[1] Georgina Bond, “NSX adopts Gender Diversity,” Business Review, 7 May, 2012, http://www.nbr.co.nz/article/nzx-adopts-gender-diversity-gb-122829

[2] http://www.mwa.govt.nz/women-in-nz/stats

<[3] Ibid.

<[5] Statistics NZ Household Labour Force June 2010

<[6] Human Rights Commission 2010: New Zealand Census of Women’s Participation 2010

<[7]> NZ Census of Women’s Participation 2010

<[9] Amanda Best & Michael Berrty, “Gendered Rule Watered Down,” 6 July 2012, http://www.stuff.co.nz/business/industries/7233157/Gender-rule-watered-down

<[10] Ibid.

<[11] Ibid.

<[12] “Diversity Information Part of Investment Decisions,” NZX.com, 4 July 2012, https://www.nzx.com/companies/NZX/announcements/224643

<[13] Ibid.

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