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IoD Directors' Briefing: Your update on Directorship and Governance 11 - 25 June 2020

25 Jun 2020

Welcome to your fortnightly IoD Directors’ Briefing  providing an update on developments relating to directorship and corporate governance.

Governance Perspective

This edition’s Governance Perspective written by IoD Course Leader Janhavi Dadarkar focusses on how boards navigate societal issues and social movements in light of the Black Lives Matter movement.


Companies
Policy and Regulation
Investors and Stakeholders
ESG Issues
Thought leadership and research
IoD in the news and advocacy
Responding to the Coronavirus Crisis
Resources for Directors

Companies

  • 23 June | Ex-Wirecard CEO arrested

Markus Braun, who led the German fintech firm for almost two decades, was arrested after being accused of manipulating accounts. EY, the company’s auditor, refused to sign off 2019 accounts over concerns around a missing €1.9bn. The Dax 30 company’s market value has collapsed by around 80%  in recent days in response to the scandal. [BBC]

  • 23 June | Intu prepares for administration

The owner of the Trafford Centre, Lakeside and Gateshead’s Metrocentre has appointed KPMG to act as administrator if it cannot reach agreement with its creditors. The company which has struggled to collect rent from tenants with lockdown measures in place has until Friday to come to a financial agreement with its lenders. [The Guardian]

  • 16 June | Foreign Secretary criticises HSBC over Hong Kong security law

Dominic Rabb when questioned about the UK listed bank’s decision to support the controversial Hong Kong security law said the UK 'will not sacrifice the people of Hong Kong over the altar of banker bonuses'. Aviva, the insurer which holds a significant stake in the bank, also expressed its unease with HSBC’s support for the controversial legislation.  [The Telegraph]

  • 12 June | Unilever scraps dual-structure in favour of London

The Anglo-Dutch conglomerate announced plans to simplify its structure with each Rotterdam-based shareholders receiving one new Unilever PLC share in exchange for each Unilever NV share. The move comes just under two years after the maker of Martmite, PG Tips and Lynx abandoned plans to scrap its London listing in the face of shareholder opposition. The firm has argued the new structure will allow it greater flexibility to pursue equity based deals and demergers. [The Times]

Policy and Regulation

  • 22 June | London Stock Exchange CEO to lead FCA

Nikhil Rathi, the current chief executive of the London Stock Exchange, is set to become the CEO of the UK’s financial regulator in the autumn. Prior to joining the LSE in 2014, Rathi served as a Civil Servant with a long spell focussing on financial stability in the Treasury. He replaces Christopher Woolard who took on the role on an interim basis after Andrew Bailey left the FCA to become governor of the Bank of England.   [The Guardian]

  • 22 June | Tougher rules on foreign takeovers

MPs voted to support the introduction of new powers for the Government to scrutinise certain foreign takeovers to ensure they do not threaten the UK’s ability to combat a public health emergency such as coronavirus. These new powers will allow intervention if a business that is directly involved in a pandemic response, for example, a vaccine research company or  PPE manufacturer – finds itself the target of a takeover. The changes to the Enterprise Act 2002 are designed as a stop-gap until the National Security and Investment Bill is introduced later in the summer. [Daily Mail]

  • 18 June | Tyrie steps down as chair of CMA

Andrew Tyrie, the former chair of the Treasury Select Committee, resigned as chair of the competition regulator citing the ‘inherent limits’ of the position. In a statement, the former Conservative MP who took on the role in 2018 said he was leaving the position to campaign more freely for new laws, including consumer protection powers. [City AM]

Investors and Stakeholders

  • 22 June | Investors press oil majors on climate risk disclosures

A group of investors managing £1.8 trillion in assets led by Sarasin & Partners are widening a campaign pressing oil majors to better reflect climate risks in their accounting. The group have sought to emphasise the legal duty companies have to ensure their financial statements fully reflect how potential regulatory action on climate change and the falling costs of renewables. [Reuters]

  • 21 June | Investors rebel on executive pay

Aviva Investors has warned companies that executive pay packets should be the first casualty of any cost-cutting measures linked to COVID-19, but said hard-hit sectors such as airlines should not shy away from making necessary job cuts.  [Financial Times]

  • 19 June | Investment Association issues ‘red top’ warnings over lack over diversity

The investor trade body issued its highest level of warning to shareholders in both Aston Martin and Domino’s over concerns around diversity; both firms have all-male boards. The automaker and the restaurant chain are now the worst for board diversity across the FTSE 350. [Financial Times]

ESG Issues

  • 23 June | KitKat cuts ties with Fairtrade

The Nestle owned chocolate brand cut ties with the certification body after a decade. The Swiss multinational will now source cocoa for KitKat bars from farms on Rainforest Alliance terms instead. [The Independent]

  • 22 June | Australian miners’ net zero plan criticised

 The Minerals Council of Australia, which represents firms including BHP, Rio Tinto and Glencore, launched a new climate plan which was criticised by investors and campaigners. The plan endorses net-zero emissions but with no target date. Climate campaigners characterised the plan as ‘meaningless’. [The Guardian]

  • 19 June | Big Tech reconsiders facial recognition in light of  Black Lives Matter

IBM, Amazon, and Microsoft have announced changes to their approach to selling facial recognition technologies to law enforcement agencies, as police forces across the US face additional scrutiny. Despite announcements there remain many unanswered questions about how policies will be implemented.  [Bloomberg]

  • 16 June | ESG funds outperform wider market

Research conducted by data provider Morningstar looking at the long-term performance of a sample of 745 Europe-based sustainable funds shows that the majority of strategies have done better than non-ESG funds over one, three, five and 10 years. The research adds to the debate around the impact of investing on ESG principles on performance.  [Financial Times]

Thought leadership and research 

  • 23 June | McKinsey presents emerging conronavirus themes for boards

The management consultancy spoke with a group of leading nonexecutive chairs and directors at companies around the world about their approach to risk and resilience. Fifteen key themes emerged from those discussions and have been issued as guidance. [McKinsey]

  • 23 June | The Harvard-Oxford Debate on Stakeholder Capitalism

Today, 25 June the Saïd Business School at the University of Oxford will hold a debate titled Stakeholder versus Shareholder Capitalism: the Great Debate. The debate will be held between Harvard Law School Professor Lucian Bebchuk and Oxford University Professor Colin Mayer. [Harvard Law School Forum on Corporate Governance]

  • 22 June | The COVID-19 Crisis: Legal, Policy and Ethical Challenges

Earlier this month, 45 speakers contributed to an Oxford University Law Faculty Webinar on ‘The COVID-19 Crisis: Legal, Policy and Ethical Challenges’. Sessions explored the precariousness of the labour market, the vulnerability of individuals during lockdown and the fragility of banks and businesses. [Oxford Law]

  • 19 June | Making Corporate Purpose Tangible—A Survey of Investors

SquareWell Partners, a shareholder advisory firm, aggregated the views of investors collectively managing approximately $22.1 trillion in assets in order to understand how relevant the concept of corporate purpose is. The firm’s research found that 76% of investors expect companies to have defined their purpose and 93% think it is a necessary foundation to set a long-term business that creates value and strengthens corporate culture. [Harvard Law School Forum on Corporate Governance]

IoD in the news and advocacy

  • 21 June | The IoD called for help for companies left out of UK bailout schemes in The Financial Times. In a letter to business secretary Alok Sharma, covered by the newspaper, the IoD’s Jonathan Geldart said that a fifth of members had not received any government help during the pandemic. The letter highlighted that company owner-directors who receive their income through dividends and those who do not own their premise have been left with little support.

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 

Coronavirus Hub - IoD

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