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Georgeson Monthly Roundup - October 2019
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Georgeson 2019 Annual Corporate Governance Review

Georgeson has presented the 2019 Annual Corporate Governance Review: https://www.georgeson.com/us/news-insights/annual-corporate-governance-review. “The 2019 report provides a comprehensive review of relevant corporate governance issues including: shareholder proposals on governance issues, shareholder proposals on environmental and social issues, director elections, say-on-pay proposals, CEO pay ratio disclosure, M&A and activism.​” If you would like to download a copy, please follow this link: https://www.georgeson.com/us/news-insights/annual-corporate-governance-review/view-online. The report was covered in the Financial Times: https://www.ft.com/content/d0c4af5f-0004-3d0f-8238-e28be38a8327.

Shareholder Activism
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  • ISS has launched its 2019 ISS Benchmark Policy Comment Period: https://www.issgovernance.com/iss-launches-2019-iss-benchmark-policy-comment-period/. “Following the release in recent weeks of the results of its 2019 global policy survey, ISS is now making available for public comment a number of proposed changes to ISS’ benchmark voting policies for 2020. […] For policies covering companies based in Europe, proposed changes out for comment cover: director terms in Continental Europe; the use of discretion by remuneration committees in U.K. and Continental Europe; remuneration committee responsiveness; and board gender diversity. […] Comments received will be considered as ISS finalizes the updates to its benchmark voting policies to be applied for shareholder meetings taking place on or after Feb 1, 2020. ISS expects to announce its final 2020 benchmark policy changes during the first half of November.” The Proposed Benchmark Policy Changes for 2020 document is available here: https://www.issgovernance.com/file/policy/proposed-benchmark-policy-changes-2020.pdf.  

  • The Financial Times reports that Companies struggle to digest ‘alphabet soup’ of ESG arbiters: https://www.ft.com/content/b9bdd50c-f669-3f9c-a5f4-c2cf531a35b5. “Awareness builds that a standardised reporting approach is needed in the battle to fight climate change.”

  • Deloitte’s Global Center for Corporate Governance released the 6th edition of its Women in the Boardroom report: https://www2.deloitte.com/global/en/pages/risk/articles/women-in-the-boardroom-global-perspective.html. The report details “the latest statistics on global boardroom diversity, exploring efforts of 66 countries to increase gender diversity in boardrooms and features insights on the political, social, and legislative trends behind the numbers. Highlights include: 1) Women hold 16.9 percent of board seats worldwide, a 1.9 percent increase from our previous edition; 2) Women hold only 5.3 percent of board chair positions and 4.4 percent of CEO roles globally; and, 3) Women hold 12.7 percent of CFO roles globally – nearly three times that of CEO positions.” The full report is available here: https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Risk/gx-risk-women-in-the-boardroom-sixth-edition.pdf.

  • The Lex Column reports about Accountants: lies, damn lies and EBITDA: https://www.ft.com/content/05e00eb2-4d4a-3498-b1a8-3a4304116e7f. “EBITDA has the flexibility bosses crave, but which statutory profits lack. […] For investors, clarity and comparability matter more. That is why the International Accounting Standards Board (IASB) plans to clamp down on EBITDA.”

  • The ICGN has published a viewpoint entitled What is the role of the creditor in corporate governance and investor stewardship?: https://www.icgn.org/what-role-creditor-corporate-governance-and-investor-stewardship. “As investor stewardship extends beyond equities it can be challenging for investors to consider how to adopt their stewardship practices to include fixed income and other asset classes. In the case of corporate fixed income part of this challenge lies in creditors not having formal ownership rights – as well as sometimes competing agendas with shareholders. Yet in many areas of corporate governance there can be a significant alignment of interests that supports engagement on behalf of all financial stakeholders, both creditors and shareholders.”

  • Reuters reports that Socially responsible investing catching on among sovereign funds: study: https://www.reuters.com/article/us-swf-markets-environment/socially-responsible-investing-catching-on-among-sovereign-funds-study-idUSKBN1WF1DJ. “Almost two thirds of sovereign investors are making social and environmentally friendly investing part of their approach, up from less than half two years ago, according to a study by Invesco released on Monday. A buzz phrase that is increasingly being folded into how fund managers pick assets, environmental, social and governance’s (ESG) uptake has been more patchy among sovereign wealth funds and central banks which are among the world’s largest global investors.”
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Pan-European developments
  • EuropeanIssuers has published a position paper entitled Position On The Draft Guidelines On The Standardised Presentation Of The Remuneration Report: http://www.europeanissuers.eu/position-papers. “EuropeanIssuers’ members believe that the draft guidelines on the standardised presentation of the remuneration report have been significantly improved in the past months. The Company Law Expert Group meeting that took place on 20 September 2019 provided an excellent opportunity for its participants to exchange views and find a common denominator that can work in all markets and how to proceed forward. It is important to reiterate that companies are already subject to various EU and local rules requiring reporting on remuneration components, in some cases on individual basis, with different reporting standards. Therefore, EuropeanIssuers presents below additional comments containing important adjustments in order to make the guidelines: more flexible; compliant with various obligations; serve different purposes; and, become future proof.” See the full position paper here: http://www.europeanissuers.eu/positions/files/view/5da5e5f972759-en. The version of the draft European Commission Guidelines on the standardised presentation of the remuneration report which has been made public can be found here: https://ec.europa.eu/info/consultations/public-consultation-remuneration-report-guidelines-implementing-shareholders-rights-directive_en.   
  • The Financial Reporting Council (FRC) has launched a substantial and ambitious revision to the UK Stewardship Code: https://www.frc.org.uk/news/october-2019/revised-and-strengthened-uk-stewardship-code-sets. “The new Code substantially raises expectations for how money is invested on behalf of UK savers and pensioners. In particular, the new Code establishes a clear benchmark for stewardship as the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society. The new Code is a vital part of the comprehensive revision of the UK’s world leading corporate governance framework that began with the introduction of the new UK Corporate Governance Code in January 2019. The new Code focuses on protecting the interests of UK savers and pensioners by ensuring that their money is managed responsibly with a new emphasis on creating long-term value and on considering beneficiary and client needs. It directly addresses the issues raised by Sir John Kingman’s independent review of the FRC in respect of the previous Code.”

  • The Guardian reports that Smith & Nephew chief executive to stand down after pay row: https://www.theguardian.com/business/2019/oct/21/smith-and-nephew-ceo-to-stand-down-after-18-months-following-pay-row-namal-nawana. “It is understood that Nawana, who is based in Andover in Massachusetts, is leaving because his requests for higher pay, in line with the packages awarded by US medical device-makers, could not be met under UK corporate governance standards. The board reportedly discussed relocating the company to the US over the summer.”

  • The 30% Club has announced that FTSE 350 hits 30% women on boards for the first time in 450 years: https://30percentclub.org/press-releases/view/ftse-350-hits-30-women-on-boards-for-the-first-time-in-450-years. “The FTSE 350 can now demonstrate a third of board positions filled by women for the first time since the London Stock Exchange was established in 1571. The latest figure is from the 30% Club, the global campaign with presence in 14 countries that encourages greater representation of women on boards, and shows the number now stands at 30%, with 903 female directorships held by women out of 3008 positions in total (data source: BoardEx, 30 September 2019). This is in stark contrast to female representation on boards when the 30% Club was founded, by Dame Helena Morrissey, in 2010. Then, only 12.5% of FTSE 100 boards and 9.5% of FTSE 350 boards were female.”

  • The Daily Telegraph reports that Hargreaves founder lashes out at bosses after pulled vote: https://www.telegraph.co.uk/business/2019/10/14/hargreaves-founder-lashes-bosses-pulled-vote1/. “The founder of Hargreaves Lansdown has accused the firm of failing in its duty to shareholders amid a row about political donations. Peter Hargreaves fell out with the investment platform last week over a planned shareholder vote on making donations to political parties. The 73-year-old billionaire made it clear he would use his 32pc stake to oppose the motion, so Hargreaves Lansdown cancelled the ballot at the last minute before its annual meeting.”  

  • The Financial Times reports that Big Four accountants facing changing times: https://www.ft.com/content/a7a6aa80-e137-11e9-9743-db5a370481bc. “Long-held relationships between auditors and companies on the rocks.” Additionally, the Daily Telegraph reports that Every FTSE 100 company is audited by a Big Four firm, research shows: https://www.telegraph.co.uk/business/2019/10/28/every-ftse-100-company-audited-big-four-firm-research-shows/

  • The Spectator discusses How the Lyons Corner House became a haven for the single working woman: https://www.spectator.co.uk/2019/09/how-the-lyons-corner-house-became-a-haven-for-the-single-working-woman/. “Even more revolutionary were their business practices behind the scenes. When they took the company public they used a strategy since seen in the IPOs of Google and Facebook. They created two tiers of shares: a super class of shares, with higher voting rights, were held by the family, allowing them always to maintain control, while general shareholders had no influence.”
  • Reuters reports that French lawmakers urge tougher disclosure on activist investors: https://www.reuters.com/article/france-shareholders/french-lawmakers-urge-tougher-disclosure-on-activist-investors-idUSL5N26N55L. “France should step up disclosure requirements when activist investors and short-sellers take big positions in French companies, lawmakers said on Wednesday. France has not been spared growing interest in Europe from activist funds, which generally build stakes in companies they feel are underperforming and then push to force change. Finance Minister Bruno Le Maire told Reuters in April he was preparing measures to prevent activist funds from destabilising French companies after several high-profile campaigns.”

  • The Financial Times reports that Renault board votes to oust chief Thierry Bolloré immediately: https://www.ft.com/content/42057c90-ec06-11e9-a240-3b065ef5fc55. “Chief financial officer Clotilde Delbos to take over as interim boss of French carmaker.” 
  • The Economist reports that Martina Merz takes over at struggling thyssenkrupp: https://www.economist.com/business/2019/10/02/martina-merz-takes-over-at-struggling-thyssenkrupp. “When Martina Merz joined thyssenkrupp’s supervisory board as chairman in January, she was not her new colleagues’ first choice. They had approached Bodo Uebber, a former chief financial officer of Daimler, Tom Enders, ex-boss of Airbus, and Marijn Dekkers, a former chief executive of Bayer. All three turned them down. When Ms Merz said yes, she had no idea that within nine months she would be chief executive of the struggling German industrial conglomerate. She took over on October 1st. Ms Merz has thus become the first woman to lead one of Germany’s big industrial companies, whose products range from steel to lifts. She would have been the first to head a member of the DAX, the blue-chip share index – but only a few weeks ago thyssenkrupp was ditched from it because of a sagging share price.”

  • Reuters reports that Wirecard hires KPMG for independent audit after FT allegations: https://uk.reuters.com/article/us-wirecard-accounting/wirecard-hires-kpmg-for-independent-audit-after-ft-allegations-idUKKBN1X00LX. “German payments company Wirecard has hired KPMG to conduct an independent audit to address allegations by the Financial Times that its finance team had sought to inflate reported sales and profits, it said on Monday. The company, promoted to the DAX blue-chip index last year, has been the target of a series of investigative reports by FT reporter Dan McCrum, with the latest, on Oct. 15, knocking more than 20% off its share price.  It has rejected the newspaper’s allegations, based on internal spreadsheets and correspondence, that Wirecard’s senior finance team had sought to inflate reported sales and profits at its businesses in Dubai and Ireland. Monday’s announcement drove the company’s shares up by 8%.”

  • Bloomberg reports that Deutsche Bank’s Zeltner to Leave Board in Setback for Achleitner: https://www.bloomberg.com/news/articles/2019-10-10/ex-ubs-wealth-head-zeltner-is-set-to-leave-deutsche-bank-board. “Deutsche Bank AG supervisory board member Juerg Zeltner is set to step down after just a few weeks as regulators raised concerns about conflicts of interest, a setback for Chairman Paul Achleitner who oversees such appointments. Zeltner made the decision after regulators made clear he would have to give up his role as chief executive officer of KBL European Private Bankers SA in order to stay, said people familiar with the matter who spoke on condition of anonymity. Zeltner joined last month to represent the interests of the Qatari royal family, which owns KBL and is also Deutsche Bank’s biggest shareholder. Zeltner himself is an investor in KBL.”
  • Eumedion has published the Eumedion Focus Letter 2020 on executive remuneration and climate change impact: https://eumedion.nl/en/news/eumedion-2020-focus-points-executive-remuneration-and-dlimate-change-impact. “Executive remuneration and the impact of climate change are the two Eumedion focus points for the 2020 AGM season. […] Earlier this week, the so-called Eumedion Focus Letter 2020 was sent to all Dutch listed companies. At the 2020 AGMs, almost all Dutch listed companies must submit a new remuneration policy to their shareholders. Eumedion recommends that companies seek dialogue with relevant stakeholders (including shareholders) on their proposals as early as possible. The remuneration report must also be submitted to the AGM for an advisory vote from next year onwards. Eumedion calls on companies to prepare this report as much as possible on the basis of the draft guidelines from the European Commission published earlier this year. Eumedion also expects the listed companies to report clearly in their 2019 annual report on the impact of climate change on their business model and strategy and on the impact of the own company on climate. The Eumedion participants also expect companies to set specific targets with respect CO2 emission reductions, in line with the Paris Climate Agreement.” See here for the full document: https://eumedion.nl/en/public/knowledgenetwork/speerheadsletter/2020-focus-letter.pdf.
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North America
United States
  • Canadian Securities Administrators has published a report entitled Report on Fifth Staff Review of Disclosure Regarding Women on Boards and in Executive Officer Positions: https://www.securities-administrators.ca/aboutcsa.aspx?id=1841. “Key trends from this year’s review include: 1) The total number of board seats occupied by women increased to 17 per cent in 2019, compared to 11 per cent in 2015. 2) Seventy-three per cent of issuers had at least one woman on their board, an increase from 49 per cent in 2015. 3) When board vacancies were filled, a third of those positions were filled by women. 4) Five per cent of issuers had a female chair of their board. 5) Half of issuers adopted a policy relating to the representation of women on their board, representing a significant increase since 2015.”
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  • The Japan Times reports that Japan’s Cabinet approves tougher rules on foreigners owning stocks tied to national security: https://www.japantimes.co.jp/news/2019/10/18/business/economy-business/japan-cabinet-tough-rules-foreigners-stocks/#.Xbh2utWnyUk. “Prime Minister Shinzo Abe’s Cabinet approved draft legislation on Friday to impose tougher rules on foreign investments in stocks related to national security, despite opposition from market participants.  The planned rules will require overseas investors to report in advance when they plan to buy more than 1 percent of shares in companies related to Japan’s national security, compared with the current 10 percent threshold, according to the Finance Ministry. The government aims to secure passage of the revised bill outlining the rules during the current parliamentary session. To reduce the potential negative impact of the rules, the government plans to exempt foreign investors from reporting in advance where they have no intention of influencing corporate decisions.  Some market participants have complained that the planned rules could serve as an impediment to investment. They have also criticized the lack of clarity on how, if enforced, the new rules will be implemented, and which investments would be subject to exemptions.” The Wall Street Journal comments that Japan’s Foreign-Investor Screening Risks Undoing Years of Reform: https://www.wsj.com/articles/japans-foreign-investor-screening-risks-undoing-years-of-reform-11570700896. “National-security proposals would frustrate a surprising proportion of overseas investors.”

  • The Financial Times reports that Governance reboot keeps Hitachi in the spotlight: https://www.ft.com/content/9061ef70-e8ca-11e9-85f4-d00e5018f061. “Japanese group’s move to simplify its structure and focus has reaped rewards.”
  • Glass Lewis reports that Changing Markets Have Israeli Regulators Rethinking Governance Rules: https://www.glasslewis.com/call-for-comment-changing-markets-have-israeli-regulators-rethinking-governance-rules/. “Israeli regulators have opened a public consultation to discuss the perceived need to adapt corporate governance standards applying to non-controlled companies in the context of a visibly changing capital market. For Israeli companies a nucleus of control or ‘control block’, defined under Israeli law as a shareholder representing at least 25% of share capital, is the norm. As of December 2018, non-controlled companies traded on the Tel Aviv Stock Exchange made up about 12% of the total number of issuers, representing 28% of the index’s total market capitalization. In a review of Glass Lewis coverage, we found that 73% were considered to have a control block in calendar year 2018. However, according to the Ministry of Justice, which issued the request for comments in tandem with the Israel Securities Authority, in recent years a growing number of Israeli companies do not have a control block.” The consultation is available here: https://www.gov.il/he/departments/publications/Call_for_bids/call-for-bids-150919/ (in Hebrew).
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South America
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Daniele Vitale
Corporate Governance Manager > Corporate Advisory
T +44 (0)20 7019 7034 M +44 (0)7747 697 136 F +44 (0)870 702 0158
Moor House, 120 London Wall, London EC2Y 5ET, United Kingdom

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