Directors can expect to attract more scrutiny from shareholders, stakeholders and regulators in the year ahead, Chapman Tripp said.

The law firm, in its latest edition of New Zealand Corporate Governance Trends and Insights, said directors would increasingly come under the spotlight, particularly in the aftermath of the Hayne inquiry into the Australian banking sector.

Partner Geof Shirtcliffe said the "shareholder primacy model" may also be under serious challenge.

He quoted a speech from Financial Markets Authority (FMA) chief executive Rob Everett in which he suggested that the "Milton Friedman model," where the responsibilities of a listed company board were primarily aimed at the returns to shareholders, was broken.


In addition, the UK Companies Act, which was amended in 2018, now requires directors to actively turn their minds to a range of specific factors.

"At present in New Zealand, directors' core legal obligation is simply to act in what they think is the best interests of the company - which will often, but not necessarily, be what is in the best interests of the existing shareholders," Shirtcliffe said.

"Requiring them, on each occasion, to have regard to a list of factors is novel and a move away from longstanding law," he said in a statement.

The Hayne Royal Commission noted that directors have a duty to pursue the long-term interests of the business, as distinct from the short-term gain.

In addition, Shirtcliffe said there could also be increased liability risks for directors as litigation funders become more active in the New Zealand market, raising the importance for directors of good director and officer insurance cover and of boards being able to rely on manageable information flows.

Chapman Tripp partner Roger Wallis said several of the firm's clients expect to see a widening of the expectations both on and of directors.

"But, as of now, the strict legal obligation is still relatively narrow – to act "in what they believe is the best interests of the company" which "will often, but not necessarily, be what is in the best interests of existing shareholders," he said.

"Another debate we touch on in our commentary is at what point the use of dedicated board committees can compromise the board's ability to take a broad strategic view, and reduce its effectiveness – an argument raised recently by veteran Australian director David Murray," Wallis said.


Other themes expected to occupy boardrooms in 2019 include:

• a strong focus on culture as the ripple effects from the Hayne Inquiry and the FMA/Reserve Bank reviews are "sluiced" through the system.

• closer scrutiny on directors from shareholders, stakeholders and regulators

• more comprehensive disclosure requirements

• increased liability risks, and

• continued development of a distinctive iwi strand in the wider governance culture.