IoD Directors’ Briefing Your monthly update on directorship and governance
This week, the government announced that should ‘Freedom Day’ go ahead on the 19th July (and a final decision will be announced on the 12th of July), most legal restrictions relating to COVID-19 will be lifted.
All remaining businesses will reopen, social distancing will become voluntary, table service will no longer be mandatory, and capacity limits will be a thing of the past. However, although mask use will become voluntary, those companies and organisations that wish to retain their usage as a condition of service will have the ability to do so.
The IoD has submitted its response to the Government’s White Paper on audit and corporate governance. We support the government’s desire to restore trust in audit and business more widely. However, we have a number of concerns about the Government’s proposals, such as the viability of the proposed ‘managed shared audit’ concept. Will challenger audit firms have the incentive and the resources to embrace this new approach? Our view is that shared audits need to be properly trialled and assessed before they are rolled out to a large number of companies. You can read our full response here.
In this month’s Governance Perspective, John Harte, Managing Partner at Integrity Governance, sets out his view that it is time for boards to take succession planning seriously for all directors rather than simply the CEO. He argues that succession planning must be commenced well in advance to accommodate any unexpected crises or unplanned changes in leadership, and the importance of a formally structured induction process for new directors is pivotal for them to hit the ground running.
Companies and Investors
02.07.2021 | FTSE100 firms face rise in investor revolt on executive pay during pandemic
Chief Executives have seen their remuneration fall for the fourth year in a row, according to new figures. Research by Deloitte found that firms faced strong investor pressure to restrain their pay during the pandemic, with the number of FTSE100 companies receiving ‘low votes’ more than doubled from 5% in 2020 to 12% in 2021. [CityAM]
23.06.2021 | How ‘dark arts’ and dirty tricks turned investors against Toshiba
An independent report into Toshiba’s collusion with the Japanese government to influence investor voting behaviour sent shockwaves throughout the company, Japanese market, and the government. The report, which was commissioned following the unprecedented success of an EGM resolution in March spearheaded by investors, concluded that Toshiba’s 2020 AGM was conducted unfairly and involved a ‘dark arts’ campaign. [Financial Times]
17.06.2021 | Fintech firm Wise chooses City for rare direct listing
Estonian fintech company Wise has announced plans for a rare direct listing on the London Stock Exchange. The international money-wiring company, formerly known as TransferWise, chose to bypass the traditional IPO listing process to sell existing shares rather than issue new shares in a bid to come to the market in a ‘fairer, cheaper, and more transparent’ manner. [CNBC]
16.06.2021 | Smaller LSE firms lag far behind large companies on female directors
Less than half of the 260 smaller companies listed on the London Stock Exchange’s main index have met the target of having a third of their board roles occupied by women, according to new research. The analysis by campaign group Women on Boards UK identified that only 48% of smaller listed companies have met the government’s Hampton-Alexander review target of having women in 33% of boardroom roles, compared to nearly 2/3 of FTSE350 companies. [The Guardian]
Charities, Public Sector and Not for Profit
24.06.2021 | Macmillan unveils new strategy to tackle diversity challenges
Macmillan Cancer Support has set out a new four-year strategy to tackle its diversity representation challenges within its workforce. The charity plans to focus on recruiting more people from underrepresented groups, reviewing its communications to improve its perception as a representative organisation, and making its services more accessible and inclusive. [Medium]
23.06.2021 | Warren Buffett resigns as trustee of Gates Foundation
Warren Buffett has resigned as a trustee of the Bill and Melinda Gates Foundation. The legendary investor, who has donated billions to the foundation, has steadily resigned from all corporate boards except for his own company, Berkshire Hathaway. [CNN]
21.06.2021 | NCVO pulled out of consultancy work with charity over governance concerns
The National Council for Voluntary Organisations (NCVO) withdrew from a consultancy contract with the British Psychological Society (BPS) because it felt that the charity’s culture would be ‘detrimental’ to the wellbeing of its staff. In a letter to the CEO of the BPS, the umbrella body said that continuing with the strategy development process would be ‘unethical’ until ‘an independent governance review takes place’. [Third Sector]
Policy and Regulation
22.06.2021 | HMRC to go easy on struggling British companies to help with COVID-19 debt
The business secretary has confirmed in a letter to the IoD and R3 that HMRC would take a cautious approach to enforcement of debt owed to government due to the pandemic. The IoD had warned that a failure to utilise HMRC’s ‘key creditor’ status to support struggling companies that were aiming to restructure their finances would result in a wave of insolvencies. [Financial Times]
22.06.2021 | FCA proposes broader scope for climate disclosures
The Financial Conduct Authority has launched a consultation on proposals to broaden the scope of climate disclosures to a far wider range of companies. The watchdog proposes to extend the use of TCFD disclosures to companies with a standard listing, asset managers, life insurers, and FCA-regulated pension providers. [Reuters]
16.06.2021 | British government extends moratorium on commercial evictions
The government has extended its moratorium on commercial evictions until March 2022. The extension of the policy, which was first introduced in 2020 to help struggling businesses through the pandemic, came following calls by the IoD for business support measures introduced during the pandemic to remain in place following the delay to the final step of the government’s roadmap to the 19th of July. [Sky News]
Audit and Accounting
28.06.2021 | FRC opens investigation into Greensill and Gupta auditors
The FRC has opened an investigation into the auditors of Greensill Capital and GFG Alliance. Its probe, which will examine audits undertaken by Saffrey Champness and pwc, comes following the collapse of Greensill Capital in March and the subsequent financial struggles of Sanjeev Gupta’s business group. [BBC]
21.06.2021 | Audit reforms risk backfiring, accountants warn
The government’s audit reforms risk backfiring, accountants have warned. The Institute of Chartered Accountants in England and Wales, a professional body and audit firm Mazars have argued that the proposed expansion to the number of Public Interest Entities (PIEs), companies that are subject to more stringent regulation, would overwhelm the capacities of both the regulator and the audit market to oversee and audit the firms effectively. [Financial Times]
14.06.2021 | Former FRC head warns planned audit market shake-up likely to fail
A former head of the FRC has warned that the government’s plan to shake-up the market was likely to fail and that industry lobbying had deflected attention from the dominance of the Big Four accounting firms. Paul Boyle, who served as the FRC’s CEO from 2004-2009, said the proposed overhaul would increase costs for companies without fully tackling the lack of competition faced by the Big Four, which audit the entire FTSE100. [Financial Times]
23.06.2021 | The little hedge fund taking down Big Oil
The hedge fund that shocked Exxon Mobil by electing four candidates to the company’s board was only founded during the pandemic, had just 0.02% ownership in the company, and spent $12.5m to defeat the company, compared to Exxon’s valuation of $265bn. Engine No.1 succeeded largely based on the strength of its argument that failing to plan for the impact of climate change could spell the oil giant’s demise. [NYTimes]
20.06.2021 | Ed Miliband backs reform to broaden businesses’ responsibilities
The shadow business secretary Ed Miliband has backed a ‘fundamental rewriting’ of British company law to make it clear that every business should produce benefits for society and the environment. In his new book Go Big: How to Fix the World, Miliband draws inspiration from the US ‘B Corp’ model and argues that although the UK Corporate Governance Code was revised in 2018 to require companies to explain their purpose and values, the code was ‘voluntary and subordinate to 2006 legislation’. [Financial Times]
Thought leadership, opinion and research
05.07.2021 | Why ExxonMobil’s proxy contest loss is a wakeup call for all boards
In this post, Rusty O’Kelley and Andrew Droste, Co-leader and Board specialist at Russell Reynolds respectively, set out their advice to boards to avoid the same fate as Exxon Mobil. They argue that boards must be proactive in assessing board skills, risk, and building relationships with key investors and stakeholders while warning that some boards are vulnerable to compositional and material ESG issues that could pose problems for them. [Harvard Edu]
17.06.2021 | Trust: A critical asset
In this post, Don Fancher, Jennifer Lee, and Debbie McCormack, Principal of Risk & Financial Advisory, Canadian Managing Partner, and Managing Director at Deloitte respectively, set out their view that trust is one of the most critical assets that a board has to address the multiple challenges that they face. They argue that trust has an enormous impact on a company’s market value and that oversight of trust is critical to the board’s key role in overseeing strategy while setting out steps that boards can take to build and maintain trust within their organisations. [Harvard Edu]
IoD Activities, Podcasts, and Upcoming Events
15.07.2021 | Dealing with the Debt: A practical discussion of how to cope with the debt hangover
The IoD Centre for Corporate Governance, in partnership with R3 and UK Finance, invite you to a breakfast discussion on how to deal with the practical challenges arising from rising levels of corporate borrowing and indebtedness, particularly amongst SMEs.
14.07.2021 | Let’s Talk! Lessons from Inside No.10
IoD Central London branch welcomes all IoD members to an open Chatham House rules conversation with Lee Cain, Boris Johnson’s former Director of Communications, on how the UK government really works and challenges/ opportunities ahead. This event will dig deep and cover topics ranging from communications during a crisis, ways to dialogue with the government, to strategic decisions in play to regenerate the UK economy.
Additional member resources
Get Back to Business: A guide to dealing with corporate financial distress
This guide from R3, the insolvency and restructuring trade body, covers the key signs of financial distress for businesses, the main restructuring and insolvency procedures and how they can help, and directors’ duties in times of financial difficulty.
The Healthy Company
The Healthy Company, a book recently published by Mervyn King and Leigh Roberts, is a handbook for directors and executives that considers a company’s purpose and strategy under an integrated thinking approach, takes readers through a history of the company structure, and explores the role of the board. It shares practical tips and considerations for being a director, the successful running of board meetings, and how to be an effective chair. Available in print or eBook.
Boardroom 2030 is a campaign launched by B Lab UK that aims to explore the future of board meetings and business through facilitating company conversations in the runup to COP26. They are hosting a series of informal breakfasts over the next two months to engage with interested people who wish to learn more about the campaign and get involved.
Responding to the Coronavirus Crisis
The IoD’s Coronavirus Support Hub is being updated frequently.
New resources include:
Directors and Corporate Governance Resources
Coronavirus Business Support – UK Government website
Guidance for Employees, Employers and Businesses
How to Access Government Financial Support
Coronavirus Toolkit from BEIS
Resources for Directors
IoD Centre for Corporate Governance
The IoD Centre for Corporate Governance has launched its website. The Centre is hosting a number of ESG and governance related events and publication launches during the next couple of months. We invite you to follow the Centre on LinkedIn to be kept fully up to date.
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
Dr. Roger Barker
Director of Policy and Governance
Policy Advisor, Corporate Governance