Governance news bites – 16 May

A person stands by a window, holding a newspaper in front of them, with natural light illuminating the scene.

Governance is often in the headlines, and the last few weeks have been no exception. Recent news related to governance includes: 

Tenure, talent and transparency: Australian Prudential Regulation Authority’s (APRA’s) proposed new rules for directors

On 6 March 2025, the Australian Prudential Regulation Authority (APRA) released a discussion paper setting out proposals to modernise its prudential governance and fit-and-proper requirements including:

- ensuring boards have the right mix of skills and experience to execute strategy
- raising minimum fitness and propriety thresholds and requiring major institutions to engage with APRA on succession planning
- extending conflicts-of-interest rules from superannuation to banking and insurance
- strengthening board independence, particularly within groups
- clarifying the respective roles of boards, chairs and senior management
- imposing a 10-year tenure limit on non-executive directors

- streamlining duplicative requirements into a single set of proportionate standards for all regulated entities.

These changes will be closely followed by New Zealand financial sector regulators and could influence regulatory thinking here. They also have wider implications for oversight of governance generally.

From shareholder value to systemic value: rethinking directors’ duties in New Zealand

A May 2025 paper by the National University of Singapore’s Ernest Lim argues that directors’ fiduciary duties extend beyond traditional “internal” concerns of shareholder value. He says that boards must also grapple with the “external” impacts of their companies on climate, society and the broader economy, even when these considerations don’t immediately advance firm-specific returns.

It remains to be seen whether similar considerations will feature in the Law Commission’s forthcoming review of the directors duties.

Lim research suggests that:

- Simply embedding nature-positive clauses in constitutions (or other founding documents) is a start but needs stronger enforcement and clear prioritisation of environmental interests.

Catering to shareholders’ non-financial preferences can improve long-term performance, but most investor activism remains financially driven, so boards should be judicious about when to sacrifice short-term returns for systemic good.

In state-owned enterprises, paralleling New Zealand’s partially government-owned energy and other companies, directors’ duties naturally align with government-as-owner imperatives to balance economic, social and climate objectives.

Together, these lessons underscore the importance of adopting a double-materiality mindset, strengthening governance charters, and engaging proactively with both investors and regulators to embed sustainability in board decision-making.

From tariffs to tech: governing resilience in today’s financial landscape.

Launching the May 2025 Financial Stability Report, Reserve Bank Governor Christian Hawkesby cautioned that heightened geopolitical tensions, particularly recent US import tariffs, have driven up market volatility and pushed “non-performing” home loans to their highest levels since around 2013, even as domestic activity remains subdued by elevated interest rates and a soft housing market.

Despite these headwinds, the Reserve Bank considers that New Zealand’s banks and insurers continue to have strong capital and liquidity buffers, and the imminent Depositor Compensation Scheme (effective 1 July 2025), alongside an ongoing review of key bank capital settings, should further shore up financial resilience.

Surprisingly, the May report also spotlights artificial intelligence as a new frontier of financial stability risk. While AI tools can bolster risk modelling, productivity and cyber defences, they may equally introduce model errors, data-privacy breaches, market distortions and concentration risks that could amplify systemic vulnerabilities if left unmanaged.

All of these are matters that directors and boards governing any sort of organisation should be taking note of, not just those in the financial sector.

The prospect of changes to prospective financial information (PFI)

In recent reporting, NZX Chief Executive, Mark Peterson, has said that a move by Commerce and Consumer Affairs Minister, Scott Simpson, “to make prospective financial information (PFI) optional will make the New Zealand stock exchange a much more attractive option for local businesses”. Other reporting indicates that “from June 12, newcomers to the market will no longer have to provide financial forecasts as part of the listing process.” A cost saving of between $150,000 and $500,000 has been cited as a strong motivator for more companies to consider listing on the NZX.