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Chartered Director

IoD Directors' Briefing: Your update on Directorship and Governance 30 April-14 May 2020

13 May 2020

Welcome to your second IoD Directors’ Briefing  – a new fortnightly update on developments relating to directorship and corporate governance.  

This edition’s Governance Perspective comes from Stilpon Nestor, an experienced Corporate Governance expert who previously served as Head of the Corporate Affairs Division at the OECD. Stilpon offers a framework for thinking about corporate leadership in a post-pandemic world. In this edition, we’re also delighted to be able feature additional contributions from Ayesha Sultan CDir and Neil Britten CDir.

Governance Perspective

Boards and the Virus - seven perspectives on the day after - Stilpon Nestor, Managing Director, Nestor Advisors Ltd.

Companies

7 May | Samsung heir commits to ending family control

Samsung Group heir Jay Y. Lee announced plans end family control at South Korea’s biggest conglomerate. Despite Samsung’s success internationally, legal and governance issues surrounding the Lee family have made them unpopular in South Korea. [Reuters]

7 May | Liberty Global and Telefónica agree to O2 Virgin merger

After five months of negotiation, Liberty Global and Telefónica announced a deal to combine their British operations O2 and Virgin Media in a £31.4bn agreement . Under the terms of the deal, the companies will each take a 50% stake in the merged entity with a view to list in three years. [Financial Times]

30 April | Royal Dutch Shell cut dividend for first time since WW2

The Anglo-Dutch energy firm cut its  quarterly dividend by two-thirds, from 47 cents to 16 cents, starting in the first quarter of this year. The move came as it announced a 46% fall in first-quarter net income. [BBC]

Policy and Regulation

11 May | The CityUK warn businesses could face £105bn debt burden

In a letter to the Governor of the Bank of England, the trade body warned provisional analysis found unsustainable debt held by UK private companies could reach between £90bn and £105bn by March 2021. The trade body suggested that servicing  loans and paying them back would be a drag on investment and productivity. [City AM]

8 May | EU bars bailed-out firms from awarding dividends and bonuses

Businesses bailed-out by EU Member States with injections of equity will not be allowed to pay out dividends, buy back shares or provide bonuses under new rules being mulled by the European Commission. [Reuters]

7 May | UK regulators delay two-thirds of new measures

The UK regulatory forum made up of the Bank of England, Prudential Regulation Authority, Financial Conduct Authority, Payment Systems Regulator and Competition and Markets Authority published a plan for upcoming regulatory initiatives. The plan indicated that 52 of 80 planned  initiatives had had their timings amended in response to the coronavirus. Among the delayed projects is a plan to require enhanced climate risk disclosures from firms. [Financial Times]

Audit

12 May | KPMG faces a £250m negligence lawsuit over the collapse of Carillion

The official receiver has claimed in legal documents that Carillion’s board of directors believed the outsourcer was “profitable and sustainable” as a result of KPMG’s clean audit opinions. The court filing claims that KPMG may be liable for £234.2m in dividends that were paid to Carillion’s shareholders between 2014 and 2016. [Financial Times]

ESG and Sustainability

12 May | Unilever CEO on company’s stakeholder-centric approach

In an interview with Bloomberg Businessweek, Alan Jope discusses the Anglo-Dutch company’s multistakeholder model and his approach to leading a ‘purpose led’ businesses. [Bloomberg]

D&O Cover

12 May | Chinese firms buy liability insurance at record rate

Public records show that 72 companies listed in Shanghai and Shenzhen have announced plans this year to buy D&O cover compared with just 23 in the whole of 2019. The surge comes as China’s stock market regulator steps up enforcement efforts. [Financial Times]

30 April | Tesla’s Elon Musk offers to provide liability cover to board

In an unusual move, Tesla’s founder and CEO Elon Musk has agreed to provide personal liability insurance for directors of the automaker after D&O premiums soared following recent legal claims against the board for its failure to maintain independence. [Bloomberg]

Investors and Stakeholders

13 May | Standard Life Aberdeen shareholders vote against virtual AGM proposal

37 per cent of shareholders voted against a resolution calling for a change to the company’s articles of association to allow for virtual meetings to replace physical AGMs. Some shareholders voiced concerns that virtual meetings allow difficult questions to be avoided. [The Times]

13 May | Investments banks cut jobs at the fastest pace in six years 

Investments banks cut jobs at the fastest pace in six years during a first quarter in 2020 even though the coronavirus pandemic triggered a surge in volatility and boosted revenues to a five-year high according to research firm Coalition. [Reuters]

9 May | Coronavirus cuts dividends across FTSE 100

Since the start of the outbreak there have been 42 cuts to dividends by FTSE 100 companies totalling £23.8bn according to research by AJ Bell. The broker warned that dividends may not return to 2019’s levels for some time. [Yahoo Finance]

Thought leadership and research

12 May | Coronavirus crisis has accelerated the shift to stakeholder capitalism

Bill George a senior fellow at Harvard Business School argues in Fortune that the coronavirus crisis has resulted in an ‘acceleration of the shift to stakeholder capitalism away from companies’ singular emphasis on shareholders’. [Fortune]

30 April | WEF Stakeholder Principles in the COVID Era

The “Stakeholder Principles” were distributed by the World Economic Forum to 140 members of its “International Business Community” and presented to another 450 business leaders of the Forum’s COVID Action Platform. They were devised after World Health Organization Director-General called on the COVID Action Platform members to take a responsible stand. [WEF]

IoD in the news and advocacy

7 May | The IoD’s Policy Voice survey results were reported upon by ITV News with the broadcaster reporting that fewer than half of British businesses think they will be able to operate at pre-crisis levels if the economy opens up again with social distancing rules still in place.

7 May | Roger Barker, the IoD’s Head of Corporate Governance, addressed an IoD South Webinar in which he spoke about the corporate governance implications of the crisis  as well as board functioning through the pandemic. The session was recorded and is available to view here (Password: 8V!8O@7S).

2 May | Tej Parikh, chief economist at The Institute of Directors commented on the Government’s Coronavirus Job Retention Scheme in The Guardian arguing for the need to avoid a cliff-edge moment where support is ended suddenly.

Letters and Comments

Lessons of a Global Existential Threat | Neil Britten CDir shares a comment piece on the Governance lessons from Covid-19 reflecting on the way in which the pandemic brutally illustrates the consequences of existential threats arising from uncertainty  [External Link]

Board Considerations During A Time of Uncertainty | Ayesha Sultan CDir shares a comment piece on key issues for the board to consider during uncertain times offering suggestions on how to build resilience. [External Link]

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

Coronavirus Hub - IoD

Contact Press Office

Euan Holmes, Press Officer

020 7451 3280


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