IoD Directors' Briefing Your update on directorship and governance

In this edition’s Governance Perspective, the University of California Hastings College of Law’s  Evan Epstein discusses governance trends in Silicon Valley. Evan suggests that we may be witnessing the end of tech firms opting to stay private with the growth in SPACs and a wave of IPOs.

Closer to home, the Governance and Policy Unit is looking to establish a number of Expert Advisory Groups to advise on UK policy issues. We want to tap the expertise of IoD members on the key issues for business – from Innovation to Sustainability to Taxation. To help us do so, we are setting up a number of small Expert Advisory Groups to inform the IoD’s position with insight from directors who have substantial experience and know-how in the relevant field.

Finally, we’re working with R3, the trade association for the insolvency and restructuring profession on a series of events to discuss the situations in which directors may require professional advice. The first event will take place on Thursday 5th November at 12:30pm.

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

Governance Perspective

Governance Perspective: The Governance Zeitgeist in Silicon Valley – Evan Epstein, Executive Director of the Center for Business Law and Adjunct Professor at the University of California Hastings College of the Law, Founder and Managing Partner of Pacifica Global.

Companies

27 October | Aviva censured by FCA over preference shares

The regulator said that the insurer had ‘failed to consider properly its obligations’ after it threatened to cancel preference shares in 2018 causing a price slump. Though censured, the firm escaped a fine with the regulator acknowledging Aviva’s prompt clarification and its efforts to compensate impacted investors. [The Times]

26 October | The Hut Group announces measures to strengthen governance

The Manchester-based London listed firm has announced that it has formed an independent advisory panel. The firm indicated that the panel would provide “additional counsel and support” to the company’s Board sub-committees. [Evening Standard]

26 October | Musk received $3m to indemnify Tesla board

Elon Musk, the automaker’s CEO, received $3m from the company after he offered up to $100 million in indemnity coverage for Telsa’s officers and directors according to regulatory filings. The unusual arrangement came after the company took the decision to forego directors and officers liability insurance due to high premiums. The filings made clear that the arrangement has now come to an end with the board now covered by a more conventional policy. [CNBC]

23 October | Investors resist calls for leadership change at Boohoo

Boohoo’s largest external shareholder, Jupiter Fund Management, has indicated that it would be opposed to new leadership at the firm. Writing to Leicester MP Liz Kendall, the investor’s Chair stated that it had been reassured by recent steps to bolster the fast fashion retailer’s governance including appointing two new board members. [Financial Times]

19 October | Amigo forced to seek regulator approval before paying dividends

The pay day lender will be required to secure the Financial Conduct Authority’s approval to transfer money out of the company, including dividend payments, under a so-called Asset Voluntary Requirement. The FCA has said that it implements such requirements when it suspects  “serious misconduct may have occurred and harm needs to be prevented immediately”. [Daily Mail]

Charities and Public Sector

23 October | Regulator to examine National Trust

Baroness Stowell, Chair of the Charity Commission, has indicated that the National Trust could face an official investigation for straying from its purpose. The Commission began to examine if the Trust had breached its charitable objects after members of the public raised concerns about the charity’s efforts to examine the links between the properties it maintains and British colonialism.  [Daily Telegraph]

Policy and Regulation

21 October | MPs call for an update on audit reform

The Chair of the Commons’ Business Committee has written to the Business Secretary to request an update on the Government’s progress in implementing reforms to the sector. Darren Jones MP called on Alok Sharma to set out a timetable for bringing forward the legislation needed to deliver reform.  [City AM]

20 October | Australia considers making virtual AGMs permanent

Emergency legislation was passed in May to allow companies to host online AGMs in order to comply with social distancing rules. Australia’s Treasury now wants to make these rules permanent by amending the Corporations Act and has launched a two week consultation. A number of proxy advisors and investors have voiced strong opposition to the proposed rule change. [Sydney Morning Herald]

Audit

21 October | FRC voices concerns over large companies’ reports

The regulator’s annual review of corporate reporting showed that it had  “substantive questions” to ask of large companies about their reports and accounts in 44 per cent of the cases it reviewed in the past year. [The Times]

21 October | FRC calls on auditors to do more to detect fraud

The regulator proposed the changes in a consultation on its rules on auditors’ responsibility to spot fraud. Under the regulator’s proposed new standard, auditors would be required to secure “reasonable assurance about whether the financial statements as a whole are free from material misstatement due to fraud”. [Daily Telegraph]

19 October | Auditors step away from Boohoo

Deloitte, KPMG, BDO and Grant Thornton have all decided not to bid for work with the fast fashion retailer after PwC announced its plan to resign as auditor. EY is said to be still considering bidding. The auditors are said to be wary about the potential reputational risks of being associated with the retailer. [Daily Telegraph]

16 October | US regulators eases auditor conflicts of interest policies

The Securities and Exchange Commission finalised a new rule giving auditors and companies that hire them greater flexibility in judging potential conflicts of interest. Under the new rule, audit firms will have more freedom to provide services to multiple companies owned by the same investor or group.

ESG Issues

28 October | Government issues sustainable finance best practice for asset managers

The UK Government has issued a set of  standards for asset managers engaged in the sustainable investment sector. Drawn up by the BSI, the business department and the industry new voluntary UK standard sets out the requirements to establish, implement and manage the process of integrating responsible and sustainable considerations into investment management. [Reuters]

25 October | TCI’s Hohn criticises BlackRock and Vanguard on climate

Sir Christopher Hohn has accused the large asset managers of taking “insufficient and ineffective action” on global warming. Hohn accused “most asset managers” of “total greenwash”, arguing they were far too complacent about the risks of global warming. [Financial Times]

19 October | Investors call for mandatory climate change reporting

The Investment Association, which represents 250 asset managers, has called for compulsory environmental disclosures for all 480 premium-listed FTSE companies. The trade body called for a “comply or explain” requirement to be implemented for all listed firms beyond the premium segment. [The Guardian]

Diversity and Inclusion

28 October | FA launch Football Leadership Diversity Code

Under the Football Association’s  voluntary Code, clubs will be required to meet a recruitment diversity target of 15% in new executive jobs and 25% in coaching roles. Nineteen of 20 Premier League clubs have signed up to the Code.  [BBC]15 October | Starbucks ties executive pay to diversity targets

The US coffee chain did not specify exactly how executive pay will be affected, but it set goals to raise the number of BIPOC, or Black, Indigenous and People of Colour, employees across the board. At the corporate level, Starbucks is aiming for 30% BIPOC employees by 2025. [CNN]

Thought leadership, opinion and research

21 October | Building a Healthy ‘Corporate Culture’ – Global Regulatory Trends and What All Directors Need to Do

Norton Rose Fulbright’s Scott Atkins and Kai Luck reflect on what boards can do to instil a healthy culture. Among other steps, they call on directors to establish and implement a comprehensive risk management framework for the company. [Oxford Business Law Blog]

16 October | Corporate Law and Corporate Psychopaths

Australian academics Benedict Sheehy, Clive Boddy, Brendon Murphy explore whether legal mechanisms can be used to control and deal with the issue of psychopathic leadership. The academics define corporate psychopaths as individuals sharing a cluster of behaviours and traits involving ruthless, conscience-free and unethical conduct and personality. [Oxford Business Law Blog]

IoD in the news and advocacy

Responding to the UK securing a landmark trade deal with Japan, Senior Policy Advisor Allie Renison told City AM the “deal could be the cherry on top if the UK manages to land an EU deal”.

Commenting on the long-term shift away from working in the office, Chief Economist Tej Parikh told The Telegraph “remote working has undoubtedly worked better than expected for many firms, but it can present a challenge in terms of on-boarding new recruits and for staff development.”

Director of Governance and Policy Roger Barker cautioned that reinstating liability for wrongful trading at this time would endanger businesses. Roger told the Evening Standard “reinstating wrongful trading liability adds to the pressure on directors to pull the plug on their companies, when long-term viability is still far from clear”.

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

27 October | The Independent Director in Society Book Launch (Video)

In this discussion, Gerry Brown discusses his new book which examines governance in the health, education, sports and charity sectors. The book is based in part on a two-year research programme conducted by researchers at Henley Business School in-depth qualitative interviews with nearly 50 key opinion leaders (e.g. chairs, vice-chancellors, CEOs, independent directors) across the NHS, charity, sports and university sectors. [Vimeo]

26 October | The ESG Agenda: How can stock exchanges drive corporate sustainability? (Podcast)

Evan Harvey, Global Head of Sustainability at Nasdaq discusses the race toward universal ESG reporting standards and whether market forces or regulation are best placed to drive corporate sustainability. [Apple Podcasts]

23 October | Chopper’s Politics: Deals, Hope and Charity (Podcast)

In this episode, Baroness Stowell, chair of the Charity Commission discusses excessive pay at charities as well as the regulator’s concerns over the National Trust straying from its purpose. [Apple Podcast]

Research

IE Business School: Director’s Personal Values

We continue to be pleased to support 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. We are aware a number of respondents had difficulties responding to the survey, the issue has now been resolved.

Responding to the Coronavirus Crisis

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

New resources include:

• Directors and Corporate Governance Resources
• Coronavirus Business Support – UK Government website
• Coronavirus (COVID-19): UK government response
• Guidance for Employees, Employers and Businesses
• How to Access Government Financial Support

• Coronavirus Toolkit from BEIS

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

• Dr. Roger Barker – Director of Policy and Governance ([email protected])

• Carum Basra – IoD Senior Policy Adviser (Corporate Governance) and Editor of Directors’ Briefing([email protected])