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IoD Directors' Briefing: Your update on Directorship and Governance 01 - 15 October 2020

14 Oct 2020

Over the last fortnight, we saw public health restrictions tightened in parts of the country triggering the temporary closure of some businesses. Alongside new restrictions, HM Treasury announced a new tightly targeted localised furlough scheme.

Though the coronavirus has once again dominated the political agenda, the Prime Minister used his speech to his  Party’s virtual Conference to set out an ambitious plan to tackle climate change. Johnson committed to boosting significantly offshore wind power as part of a “green industrial revolution”. Despite the Prime Minister’s climate ambitions, there remain questions within Whitehall over the UK’s approach to ensuring polluters pay for their emissions after the transition period comes to an end.

In this edition’s Governance Perspective, Senior Policy Advisor Carum Basra reflects on the purpose of corporate reporting as the Financial Reporting Council suggests that firms should publish ‘public interest’ reports in future.

Finally, we're pleased be supporting research being undertaken by academics at Madrid’s IE Business School examining how personal values drive boardroom behaviour. As part of this work, the research team are seeking to survey directors – if you would like to be involved you are invited to undertake this short survey

Governance Perspective
Companies
Charities and Public Sector
Policy and Regulation
ESG Issues
Diversity and Inclusion
Thought leadership, opinion and research
IoD in the News and Advocacy
Upcoming Events
Videos and Podcasts
Responding to the Coronavirus Crisis
Resources for Directors


Governance Perspective

Governance Perspective : Re-thinking reporting for the future - Carum Basra, IoD Senior Policy Adviser (Corporate Governance)

Companies

12 October | Unilever’s British shareholders back unification plan

The company’s UK investors voted in favour of plans to unify the company. Now that the plan has the backing of both sides, the Anglo-Dutch firm hopes to unify on 29 November and move to a simpler structure headquartered in London. The Dutch opposition has proposed levying an “exit tax” on the firm which could cost the company up to €11bn. [Reuters]

9 October | Hut Group faces investor pressure over board independence

According to the Daily Mail, some investors have voiced concerns over the firm’s failure to appoint a further non-executive to its board as it had committed to do ahead of its blockbuster IPO. The firm is not subject to the of the UK Corporate Governance Code having eschewed a ‘premium’ listing. [Daily Mail]

9 October | HSBC unveils net zero ambition

HSBC Holdings has announced plans to have a net-zero carbon client portfolio by 2050 in an effort to align its business activities with the goals of the Paris climate agreement. While other UK banks such as NatWest have already set net zero goals, HSBC's position as a global lender with a significant footprint in Asia makes the pledge particularly noteworthy. [Reuters]

1 October | Volkswagen’s governance criticised by BlackRock

The asset manager raised questions about the German automaker’s governance claiming that greater independence was required. In a voting bulletin, BlackRock argued “insufficient independent oversight provided by VW’s Supervisory Board played a major role in the events which led to the company employing what has become known as a ‘defeat device’ in some of its diesel engine cars”. [Financial Times]

Charities and Public Sector

9 October | Unicef UK appoints law firm to investigate bullying allegations

Morgan, Lewis & Bockius UK has been appointed by the charity after its executive director, chair and one of its vice-chairs resigned soon after one another following allegations of bullying. Unicef UK has said it will publish the findings on its website and make them available to the Charity Commission.  [Civil Society] 

9 October | Lord Gus O’Donnell appointed to chair review of UK civil society

The former Cabinet Secretary will chair the review established by Pro Bono Economics which promises to examine all aspects of civil society, from volunteering and philanthropy to communities and the relationship between civil society and government. Running for two years the review will seek to identify changes needed so that civil society organisations can play a bigger role. [Civil Society]

Policy and Regulation

12 October | Government debate post-transition approach to emissions trading

According to Bloomberg, the Treasury is pushing to replace the EU’s cap-and-trade system with an economy-wide carbon tax. While the business department reportedly favours replicating the existing EU model. [Bloomberg]

8 October  | FRC calls for more accessible annual reports

The UK’s reporting watchdog outlined proposals for a radical overhaul or corporate reporting with a focus on making disclosures more useful to non-experts. In a discussion paper, the regulator proposed moving away from a single Annual Report to a “network of interconnected reports” serving different audiences. [Financial Times]

8 October | Mark Carney calls for Central Bank style independent climate change councils 

The Former Bank of England Governor called on governments to tackle climate change by emulating the central bank model and establish independent councils to determine policies free from  political interference. Carney made the appeal alongside former US Federal Reserve Chair Janet Yellen. [Bloomberg]

7 October | Germany presses ahead with reforms in the wake of Wirecard

Germany’s Coalition Government has presented plans to strengthen financial regulator BaFin’s powers and to tighten accounting rules. Under the plans, the regulator would receive a number of new powers including the right to obtain information from third parties, to conduct forensic investigations, and to inform the public at an early stage about its actions on balance sheet control. [Reuters]

6 October | Retail investors lose voice at virtual AGMs

In a review of AGMs, the FRC found that 163 of the 202 AGMs across the FTSE 350 this year were closed to physical attendees. The FRC reported that over a fifth of those meetings no way for retail investors  a way to question boards or take part in live voting. [Financial Times]

5 October | Firms call on UK Government to strengthen deforestation measures 

Unilever, Tesco, Lidl, Nando's, Nestle and McDonald’s have called on the Government to toughen measures intended to protect rainforests. In an open letter to the Environment Secretary, the firms called for measures proposed by the Government to be strengthened so that that they apply to companies of all sizes and be based on their impact on deforestation rather than their turnover as currently envisioned. [BBC]

ESG Issues

14 October | LGIM to ‘name and shame’ climate laggards

Legal and General Investment Management warned firms to do more to tackle climate change or risk being publicly named and shamed. For those companies who repeatedly fail to address their climate responsibilities, LGIM has pledged to take action. The investment manager has publicly assigned 1,000 companies a traffic light score with those firms scoring a ‘red’ risk exclusion from LGIM funds altogether. [Financial Times]

14 October | Procter and Gamble shareholders revolt over environment

Two-thirds of votes cast at the consumer goods giant’s AGM  were in support of a shareholder proposal critical of how it uses palm oil and forest pulp. The proposal was put forwards by Green Century Capital Management and received the backing of BlackRock. [Financial Times]

11 October | UK supermarket avocado supplier accused of  human rights abuses

Kakuzi, which is owned by UK-based Camellia, supplies avocados to Tesco, Sainsbury’s and Lidl. Employees and the wider community allege a that a series of human rights abuses have been linked to the Kakuzi estate in Kenya. The allegations have prompted the UK retailers to reassess their relationship with the firm. [Daily Telegraph]

8 October | Church of England divests from Exxon Mobil 
The Church’s Pensions Board sold all its holdings  in the US oil major after Exxon Mobil failed to set goals to reduce emissions produced by its customers. [Bloomberg]

Diversity and Inclusion

5 October | LGIM to vote against appointments over lack of ethnic diversity

Legal and General’s investment division announced plans to vote against certain appointments at FTSE 100 and S&P 500 companies if they fail to include ethnic minorities on their board. It will use voting power against those that fail to have at least one BAME board member by 2022. [The Guardian]

Thought leadership, opinion and research

13 October | 2020 Climate in the Boardroom

Majority Action, claimed that two of the world’s largest asset mangers voted to undermine global investor efforts to promote responsible corporate climate action in the US––despite public commitments to hold directors accountable in 2020. According to the group, the two asset managers voted for 99% of U.S. directors proposed by the energy, utility, banking and automotive companies. [Harvard Law School Forum on Corporate Governance]

12 October | The Business Roundtable’s Purpose Statement, One Year On

Edelman, the global PR firm, offers its thoughts and reflections on the impact of the Business Roundtable’s (BRT) statement on the purpose of a corporation, committing to lead their companies for the benefit of all stakeholders, not just shareholders. Edelman notes that 38 percent of the public believe business is doing well or very well at putting people before profits. [Harvard Law School Forum on Corporate Governance]

IoD in the news and advocacy

Responding to the Government’s announcement of further support for jobs and companies affected by coronavirus restrictions, Dr Roger Barker, Director of Policy and Governance at said: “It is absolutely right for the government to step up its support, which must match the restrictions businesses are being put under”.

The BBC, The Guardian and the Daily Mail featured our Policy Voice findings which indicate that 74% of business plan on maintaining the increase in home working brought about by the pandemic.  While recognising the benefits or increased home-working, Roger suggested that over the long-term  it could raise legal questions around employers' responsibilities for staff outside the office.

As the Prime Minister announced ambitious plans to invest in wind power and infrastructure, The Independent highlighted the IoD’s perspective. Roger said that, while business leaders would  welcome the PM’s vow to put “wind in the sails of enterprise”, they were also "acutely aware of the precarious state of the economy, with the impending end of the furlough scheme and the conclusion of the Brexit transition period”.

Upcoming Events

5 November | Good Governance Academy  Colloquium on the Importance of ESG

The Good Governance Academy holds colloquia to share and engage on matters of corporate leadership. On 5 November, the GGA will host a series presentations on the importance of ESG with speakers including Professor Mervyn King, a corporate governance expert and former Judge of the Supreme Court of South Africa. [Register here]

Videos and Podcasts

1 October | EcoDa Corporate Governance Dialogue (Video) This session focusses on the emergence and governance of organisations with flatter and less hierarchal structures. The session addresses questions including how to ‘direct and control’ in less hierarchical organisations and how firms can implement the appropriate ‘checks and balances’. [YouTube]

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.  

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

  • Carum Basra – Senior Policy Adviser (Corporate Governance) and Editor of Directors' Briefing(carum.basra@iod.com

Coronavirus Hub - IoD

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