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Chartered Director

IoD Directors’ Briefing: Your update on Directorship and Governance 15-29 April 2020

28 Apr 2020

Welcome to this inaugural edition of the IoD Directors Briefing – a new fortnightly update on developments relating to directorship and corporate governance.  

This IoD Directors briefing is produced by the IoD’s corporate governance team and is dominated, for understandable reasons, by the COVID-19 pandemic. No-one said that directorship would ever be easy. But the crisis is presenting boards with some unprecedented challenges. The broad themes incorporated in the current Briefing address the following issues: 

  • What decisions do boards and policy makers need to make as a matter of urgency to enable companies to survive the crisis? 

  • Are existing governance rules and best practices still relevant in such unprecedented circumstances, or do they need to be significantly revised? 

  • Will we ever go back to ‘business as usual’ or is the crisis changing directorship and governance for ever?  

For a review of the key issues facing boards, read our briefing: The corporate governance of coronavirus - what boards should consider.


Governance Perspective

Owner Directors should be treated as Self-Employed by the Coronavirus Business Support Programmes  - an article by IoD Head of Corporate Governance Dr Roger Barker 


28 April |  Easyjet board and major shareholder at loggerheads 

The board of the UK-listed airline is in long-standing disagreement with the company’s founder and main shareholder, Sir Stelios Haji-Ioannou, over company strategy. The current issue of contention is an Airbus order for 107 new aircraft. [The Times]

25 April | ISS and Glass Lewis recommend voting against Boeing board appointments 

Glass Lewis and Institutional Shareholder Services (ISS), have separately urged  Boeing shareholders to vote against key board members in light of their handling of the 737 Max crisis. [Reuters] 

21 April | Thames Water to appoint new CEO 

Sarah Bentley, chief customer officer at Severn Trent, is to become the chief executive of the UK’s biggest water utility. Bentley also sits on the board of Lloyds Banking Group's ring-fenced bank. [Sky News] 

17 April | Debenhams in administration discussions with landlords  

Debenhams is currently in what it describes as a "light touch" administration and struck deals with landlords to keep most of its 142 stores open. [BBC] 

Policy and Regulation 

22 April |  The EU Commission is advocating that EU governments take ownership stakes in companies in order to prevent takeovers by Chinese state-owned enterprises  

Margrethe Vestager, executive vice-president of the European Commission, has suggested that European countries should buy equity stakes in companies to stave off the threat of Chinese takeovers during the Covid-19 pandemic. Regulators are already working on proposals to grant EU countries sweeping powers to prevent unfair competition from state-backed enterprises. [Barron's]  

20 April | SME recapitalisation taskforce established  

A City panel has been established to formulate a way forward for firms emerging from the pandemic with high levels of debt. Chaired by Sir Adrian Montague, Aviva’s chairman, the taskforce will bring together figures from across the City including from the London Stock Exchange, Herbert Smith Freehills and Schroders. [Sky News]  

15 April |  New York Stock Exchange relaxes rules for shareholder approval when raising capital 

Recognizing that many companies may have urgent liquidity needs as a result of the COVID-19 pandemic, the NYSE has waived, until 30 June 2020, certain requirements of its shareholder approval rules in order to provide greater flexibility for private placements of equity.  [Oxford Business Law Blog]

ESG and sustainability 

28 April |  Exxon Mobil shareholders demand lobbying transparency  

The Church Commissioners for England and the New York State Common Retirement Fund called on Exxon investors to support splitting the chairman and CEO roles, and require the company to disclose its lobbying policies and expenditures. [Bloomberg]

15 April |  ESG campaigners are concerned that the Coronavirus crisis will push climate change off the global agenda 

Pollution levels are dropping fast due to the Coronavirus crisis. However, ESG campaigners fear that the economic fallout from coronavirus will increasingly overshadow environmental concerns. Climate talks have already been delayed and new policy initiatives postponed. [Financial Times]

15 April |  A unified taxonomy to encourage green investments has been adopted by the Council of Europe 

The Council of Europe, on April 15, adopted a regulation setting out an EU-wide classification system which will provide businesses and investors with a common language to identify those economic activities which are considered environmentally sustainable. The taxonomy will enable investors to refocus their investments on more sustainable technologies and businesses. 

The future framework will be based on six EU environmental objectives: 

  • climate change mitigation, 

  • climate change adaptation, 

  • sustainable use and protection of water and marine resources, 

  • transition to a circular economy, 

  • pollution prevention and control, 

  • protection and restoration of biodiversity and ecosystems. 

The regulation now needs to be adopted by the European Parliament at second reading before it can be published in the Official Journal and enter into force. [European Commission]


27 April | Insolvency practitioners unprepared for incoming wave of insolvencies  

Insolvencies are likely to increase significantly however some fear that there may be too few licensed insolvency practitioners to deal with them.  There were only 1,565 licensed insolvency practitioners in the UK last year, of whom 1,244 were “appointment-takers” — the court-appointed “office-holders” who run the process. [The Times] 

16 April |  Distressed companies are seeking access to a ‘light touch’ administration process 

Large numbers of troubled UK companies – particularly from retailing and restaurant sectors – are seeking to take advantage of an experimental ‘light touch’ administration process. Debenhams last week became the first high-street business to enter into such a process. The new process would allow company directors to file for administration but retain day-to-day control, rather than ceding power to insolvency practitioners. Such a process emulates elements of the US Chapter 11 system. According to current administration rules, the officers of a company in administration may not exercise the powers of management “without the consent of the administrator”. The new process involves administrators retaining ultimate control and liability while permitting boards to remain in place in terms of day-to-day management. However, some accounting firms are unwilling to offer the arrangements because of the risks that could revert to them if the board mismanages the process. [Financial Times]

Corporate reporting 

16 April | UK accounting industry in crisis  

The Big Four have reduced monthly partner profit distributions by between 20 and 25 per cent to build up cash reserves in response the crisis and a fall in work. Smaller firm including Mazars, BDO and Grant Thornton have either furloughed staff or are considering doing so via the Government’s Coronavirus Jobs Retention Scheme. [Financial Times]

Investors and stakeholders 

27 April | The Investment Association urge pay restraint   

In newly issued remuneration guidelines, the investor group called for boards to be “proactive in determining the appropriate LTIP  award size in the current market environment given sustained share price falls”. [Sky News]

22 April | Legal & General calls on companies to act fairly during crisis 

Legal & General called for firms to sustainability, good governance, and the fair treatment of employees over the crisis as it launched its ninth annual “active ownership” report in which it details its engagement activity on ESG issues. [The Guardian] 

18 April | Dividends and share buy-backs expected to tumble  

The Economist estimates that global payouts to shareholders are set to tumble from $2.2trn in 2019 to $1.4trn this year suggesting that cuts could be deeper if the crisis worsens or regulators step in. [The Economist]

16 April | Schroders and Hermes EOS call for pay restraint   

In an open letter to UK companies, Schroders’ Global Head of Stewardship and Head of UK Equities called for boards to “reconsider management’s remuneration” if seeking additional capital. This call was echoed by the Head of Stewardship at Hermes EOS who in a letter setting out his expectations for senior executives wrote: “remuneration should be appropriately aligned with the experience of the wider workforce and society and adjusted taking a company’s circumstances into consideration”. [Board Agenda]

Thought leadership and research 

23 April | ICGN: Governance Priorities during the COVID-19 pandemic 

The International Corporate Governance Network published a Statement of Shared Governance Responsibilities which outlines priorities for companies and investors during the Covid-19 pandemic. The Statement emphasises the importance of social factors as a key determinant to a company’s long-term financial health and sustainability. [ICGN] 

23 April | The Evolution of Trust in the Era of Stakeholder Capitalism 

Law firm, Baker McKenzie have published research on the state of trust in business. Baker McKenzie stress that with trust and a strong supporting corporate culture, businesses can better balance the demands of all relevant stakeholders, including shareholders and investors. [Harvard Law School Forum on Corporate Governance] 

17 April |  Handbook on cyber-risk management for Boards of Directors 

ecoDa together with the Internet Security Alliance (ISA) and AIG have published a handbook on cyber-risk management for European corporate boards of directors. The handbook depicts a framework for Board Members to understand cyber-risk and compiles recommendations to assure that their organization is properly addressing its cyber-risk posture. A summary is also available to go straight to practical recommendations. As expressed in the press release, "the COVID-19 virus is a catalyst for expanded digital transformation. Business resilience depends on the capacity of board members to embed cybersecurity in all aspects of their strategy".[ecoDa]

IoD in the news and advocacy 

16 April | SMEs are most at risk from economic collapse writes the IoD’s Head of Trade and EU Policy, Allie Renison, for ConservativeHome  

16 April | Roger Barker, the IoD’s Head of Corporate Governance, calls for urgent clarification on what activities company directors can carry out while furloughed in The Telegraph  

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. 

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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