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IoD Directors' Briefing: Your monthly update on Directorship and Governance - March 2021

18 Mar 2021

On Thursday 18 March, the government finally published its long-awaited consultation document on audit and corporate governance reform, following the conclusions of the Brydon, Kingman, and Competition and Markets Authority reviews. The IoD welcomes the publication of the consultation and will respond in due course.

The IoD yesterday announced the appointment of our new chair, Patrick McDonald, following an extensive recruitment process. He replaces John Watson on the 22nd of March, who has been interim Chair of the IoD since September 2020 and will return to the board upon the conclusion of his term. 

The UK Budget on the 3rd of March was well received by business. The main business support measures were extended up to and beyond the date at which most pandemic restrictions are expected to be lifted. However, the Chancellor reminded us that the UK state is now the biggest since the early 1970s. It needs to be paid for at some point - starting with a hike in corporation tax in 2023. Furthermore, the long-term UK growth rate – which is the key to robust public finances over the longer term – remains depressing low (1.7% per annum). Hence, there is a pressing need for improved innovation and productivity across UK business.

The IoD has taken the opportunity to review the Directors’ Briefings publications, and from this edition, we will be switching their frequency from fortnightly to monthly. We invite IoD members to contribute their own Governance Perspective for a future edition of Directors’ Briefing. 

Governance Perspective
Companies and Investors
Charities, Public Sector and Not-For-Profit
Policy and Regulation
Audit and Accounting
ESG Issues
Thought leadership, opinion and research
IoD activities and podcasts
Responding to the Coronavirus Crisis
Resources for Directors

Governance Perspective

In this week’s Governance Perspective, Chris Turner, Better Business Act Campaign Director, highlights their campaign to amend s.172 of the Companies Act 2006 to incorporate stakeholders at the heart of the Act. Turner makes the case that the impact of the COVID-19 pandemic has created an opportune moment for the government to take action against inequality and environmental damage while liberating business leaders to do the right thing in difficult situations.

Companies and Investors

15.03.2021 | Elon Musk changes job title to ‘Technoking’

The CEO of Tesla announced that his job title would become ‘Technoking’ and that the CFO’s job title would also be changed to ‘Master of Coin‘. However, in a subsequent SEC filing, the company confirmed that both men would maintain their respective CEO and CFO positions. [BBC]

15.03.2021 | Danone’s board ousts their combined chair and CEO

The board of Danone announced the departure of its combined chair and CEO Emmanuel Faber. Faber, a long-time Danone employee who joined the company in 1997, lost a boardroom battle involving activist investors Bluebell Capital and Artisan Partners, which had called for a leadership overhaul over governance concerns. [Reuters]

14.03.2021 | Toshiba showdown could be a turning point for Japanese business

Toshiba has an unprecedented EGM taking place on Thursday 18th March. Two resolutions have been put forward by shareholders – one to investigate Toshiba’s conduct of its 2020 AGM, and another to scrutinise the company’s business strategy. At stake is the concept of shareholder primacy itself in Japan, the outcome of which could have major consequences for the entire Japanese business community. [Financial Times] 

14.03.2021 | Sanjeev Gupta’s eight £50m taxpayer COVID-19 loans

UK taxpayers are exposed to more than £400m of debt from Sanjeev Gupta, CEO and Chairman of the Gupta Family Group Alliance (GFAG), via the government’s government’s Coronavirus Business Interruption Loan Scheme (CBILS). The collapsed financial group Greensill Capital loaned GFAG so much money using CBILS that the Treasury grew alarmed and stepped in to investigate. [The Times]

11.03.2021 | Glencore chair to step down

The chair of Glencore, Tony Hayward, announced that he was stepping down by the company’s 2022 AGM at the latest. The change comes alongside CEO Ivan Glasenberg’s decision to step down in June. Under the UK Corporate Governance Code’s (Code) good practice of a maximum nine-year tenure for NEDs, Hayward should already have departed. However, major shareholders agreed to extend his term for a limited period, which the Code allows for, to oversee the company’s management transition as well as its response into several investigations. [Mining.com]

Charities, Public Sector and Not for Profit

10.03.2021 | Regulator launches campaign to help charity trustees improve governance

The Charity Commission has launched a campaign aimed at helping trustees refresh their knowledge of charity governance and be ‘certain in uncertain times’. [Gov.uk]

12.02.2021 | Kids Company founder and trustees exonerated by the High Court

The High Court has thrown out claims that Kids Company founder and chief executive Camila Batmanghelidjh and seven former trustees had caused the collapse of the charity by mismanaging money. The judge has said that it was “more likely than not” that children’s charity Kids Company would have survived had it not been for unfounded sexual assault allegations made by young clients of the charity against older clients. [London News]

Policy and Regulation

03.03.2021 | The Hill Review calls for significant changes to UK listing rules

A Treasury-backed review of the City has called for an overhaul of company listing rules so London can better compete against rivals in New York and Europe and gain a share of the booming market for SPACS (special purchase acquisition vehicles). The Hill Review also proposes allowing dual-class shares to give founders greater control of their businesses and attract a wave of tech companies to the London market. [Gov.uk]

05.03.2021 | An important new legal ruling on parent company liability

The United Kingdom Supreme Court has released its much-anticipated judgment in Okpabi v Royal Dutch Shell plc. As a result of this judgement, companies are likely to need to be more conscious than ever of their subsidiaries, and supply chain relationships, to avoid future liability. [University of Oxford]

13.02.2021 | Japan prepares to shake up corporate governance code

Japan’s Financial Services Agency prepares a raft of tough revisions to its corporate governance code. [Strategy+Business]

Audit and Accounting

08.03.2021 | Babcock parts ways with long-term auditor PwC

Babcock International, the UK’s second biggest defence contractor, is parting ways with PwC, its longstanding auditor. Governance rules stipulate that companies must rotate auditors after a maximum period of 20 years. Calls for more regulator rotation have intensified in the wake of corporate collapses, such as government contractor Carillion. The company has appointed Deloitte as its new external auditor, subject to shareholder approval at this year’s annual meeting. [Going Concern] 

24.02.2021 | German accounting watchdog chief to step down in wake of Wirecard scandal

The head of Germany’s accounting watchdog is to step down following mounting political pressure over corporate governance shortcomings exposed by the Wirecard fraud. He is the third head of a regulatory body to lose his job in the wake of one of Germany’s biggest post-war accounting scandals. [CityAM]

ESG Issues

17.03.2021 | Half of FTSE 100 companies link executive pay to ESG targets

According to a new report from London Business School and PwC, almost half of FTSE100 companies have linked executive pay to environment, social, or governance (ESG) targets as investors step up demands for companies to adopt these non-financial goals in the upcoming annual general meeting season. [PwC] 

16.03.2021 | Chevron accused of ‘greenwashing’ in complaint lodged with FTC

A group of environmental NGOs have accused US oil major Chevron of “greenwashing” in a complaint to the Federal Trade Commission, providing an early test of what role the regulator will play in enforcing the Biden administration’s climate goals. The activist groups want the government agency tasked with protecting consumer interests to act against Chevron for “egregiously misleading consumers” by exaggerating its investments in clean energy. [World Oil]

12.03.2021 | Almost a fifth of FTSE100 have no ethnic minority members

The latest update of the Parker Review has found that almost a fifth of FTSE100 companies have no ethnic minority members on their board with less than a year to go to reach the Parker target date of one ethnic minority board member by 2021. FTSE250 companies have until 2024 to appoint at least one ethnic minority board member under the Review. [The Guardian]

Thought leadership, opinion and research

07.03.2021 | Interview with Sir Anthony Habgood on the role of the chair

Veteran director Sir Anthony Habgood argues that the role of the chair is to raise the game of the executive, seek consensus, and make sure that the board spends sufficient time on the issues which are about creating value as opposed to just regulatory issues. [Financial Times]

03.03.2021 | 2021 global and regional trends in corporate governance

Russell Reynolds Associates have interviewed over 40 global corporate governance professionals to identify the corporate governance trends that will impact boards and directors in 2021. These include: 1) A greater focus on the E&S of ESG; 2) the increasing importance of corporate purpose; 3) better board oversight over corporate culture; 4) a more expansive view of board diversity that includes ethnicity and race and; 5) a return to corporate activism. [Harvard Law]

23.02.2021 | Crisis-resilient boards: Lessons from Vale

In January 2019, Vale, the Brazil-based global mining giant, faced an existential threat. A dam at the iron ore mine in the Brazilian state of Minas Gerais suffered a devastating collapse. The resulting mudflow killed some 270 people, most of them Vale employees and family members. Sandra Guerra was one of the then-two independent non-executive directors on the board. In this article, she discusses how she dealt with the sudden, daunting, regulatory, reputational, financial, and operational consequences that threatened the firm’s survival. [Harvard Law]

March 2021 | New report on preventing modern slavery and human trafficking in the financial sector

This new report has been commissioned by the UK Independent Anti-Slavery Commissioner in collaboration with Themis and the TRIBE Freedom Foundation. It looks at ways in which the financial services sector could identify and prevent modern slavery and human trafficking. In addition, a podcast: "Mythbusting in Modern Slavery", recorded with Andrew Wallis, CEO of leading UK-based anti-slavery charity Unseen, provides an excellent business overview of the key issues relating to modern slavery. [Themis]

IoD activities and podcasts

12.03.21 | IoD calls for EU/Brexit cooperation after nearly 20% of members halt trade with the EU

IoD research has found that nearly 20% of business leaders who trade with the EU stopped doing so in January. These findings come ahead of the upcoming publication of trade data by the Office for National Statistics.

05.03.21 | Directors’ Briefing Podcast

In this IoD podcast, Lisa Townsend (Media and Communications Lead), Tej Parikh (Chief Economist), Joe Fitzsimons (Senior Policy Advisor), and Dr. Roger Barker (Director of Policy and Corporate Governance) discuss the budget, Hill Review, and Khalifa Reviews.

04.03.21 | Directors’ Priorities Table

The IoD recently updated our table of directors’ priorities following our regular Policy Voice surveys, which details issues raised by members, actions taken by the government, and what still needs to happen. 

03.03.21 | Budget 2021: Need-to-know for Directors

The IoD has put together a summary of the most important aspects of the budget that members will be interested in. Much of the budget included measures that the IoD had called for over the past few months, including the extension of measures to deal with the ongoing economic impact of COVID-19. 

Responding to the Coronavirus Crisis 

The IoD’s Coronavirus Support Hub is being updated frequently.  

New resources include: 

Resources for Directors

UK Corporate Governance Code (Financial Reporting Council) 

The leading source of governance principles and recommendations for companies with a premium listing on the London Stock Exchange.  

FRC Guidance for Boards and Board Committees (Financial Reporting Council)

Guidance for boards and board committees on how to apply the UK Corporate Governance Code. 

Wates Principles (Financial Reporting Council)

Key governance principles for large private companies. 

Corporate governance: Board responsibilities at major banks (Bank of England)

Supervisory guidance from the Prudential Regulation Authority for the boards of regulated firms. 

OECD Guidelines  on Corporate Governance of state-Owned Enterprises (OECD)

The OECD Guidelines provide an internationally agreed benchmark to help governments assess and improve the way Governments exercise their ownership functions in state-owned enterprises.

The European Confederation of Directors Associations (ecoDa) 

The umbrella body for directors associations in Europe. 

The Global Network of Director Institutes (GNDI)

The umbrella body for directors associations around the world. 

IoD Corporate Governance Team

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