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IoD Directors' Briefing Your monthly update on directorship and governance

The 31st of May marked a significant milestone for the UK as there were zero daily deaths recorded from COVID-19 for the first time since the pandemic began in March 2020.  Over 28 million people across the UK have been fully vaccinated, but the emergence of the Delta variant across the UK caused the Government to step up surge vaccinations in hotspots across the country and announce this week that 25-29 year olds can begin to book their vaccine appointments in a bid to tackle the variant. Consequently, it is unclear whether the final step in the government’s roadmap, the lifting of all remaining legal restrictions on social contact and the reopening of all remaining businesses that have not yet opened, by the 21st of June, will go ahead as planned.

The UK hosts the G7 summit this weekend in Cornwall, the annual summit of the heads of government and state of the UK, US, Canada, France, Germany, Italy, and Japan. The EU, Australia, India, South Africa, and South Korea will also be in attendance. Their agenda is comprehensive – accelerating the speed and distribution of COVID-19 vaccinations around the world, cementing a global tax agreement to ensure that multinational companies pay a minimum of 15% tax in each country they operate in, and continuing international efforts to combat the climate crisis ahead of COP26 in November, which the UK will chair. The UK also intends to complete negotiations on a UK-Australia free trade agreement at the summit.

In a recent survey of more than 700 IoD directors, 62% stated that they believed that businesses should not exist solely to make money and generate shareholder profits, and almost half felt that companies should have a stated social purpose to help solve problems in society. More than 9 out of 10 businesses have a purpose, mission, or vision that guides themselves and their companies. Businesses are increasingly taking a broader view of their purpose so that they serve the interests of all their stakeholders, rather than a sole focus on maximising shareholder value. This has led to a number of major UK employers committing to defining a social purpose, a trend that has been confirmed in the latest IoD research. Our research received coverage in the Times.

In this month’s Governance Perspective, Tom Boardman-Weston, Managing Director of Manston Investments, sets out his view that good governance should not be exclusive to publicly listed companies, and that SMEs can reap immense benefits from applying good governance practices themselves. He argues that the value of an effective non-executive director for businesses is immeasurable while warning of the consequences for companies of ignoring the importance of good corporate governance.

  • Governance Perspective
  • Companies and Investors
  • Charities, Public Sector and Not-For-Profit
  • Policy and Regulation
  • Audit and Accounting
  • ESG Issues
  • Thought leadership, opinion and research
  • IoD activities, podcasts and upcoming events
  • Additional member resources
  • Responding to the Coronavirus Crisis
  • Resources for Directors

Governance Perspective

In this month’s Governance Perspective, Tom Boardman-Weston, Managing Director of Manston Investments, sets out his view that good governance should not be exclusive to publicly listed companies, and that SMEs can reap immense benefits from applying good governance practices themselves. He argues that the value of an effective non-executive director for businesses is immeasurable while warning of the consequences for companies of ignoring the importance of good corporate governance.

Companies and Investors

07.06.2021 | Foreign investors own 2/3 of UK-listed shares, analysis finds

Foreign investors have increased their holdings in the London Stock Exchange to 66% of listed stocks. In a new analysis by investor relations consultancy Orient Capital, they found that internationalisation of stocks is a two-way street, with UK investors increasingly investing overseas. [CityAM]

26.05.2021 | Chevron forced to cut emissions by investors

Chevron shareholders successfully voted on a resolution to cut the company’s emissions, underscoring the role of investors to push companies to reduce their carbon footprint. The oil giant’s reversal came on the same day that ExxonMobil shareholders voted to add two board members to its board. [Reuters]

26.05.2021 | ExxonMobil’s shareholders vote to change its board in rebuke to management

ExxonMobil shareholders successfully elected two board members to the board of the company in a stunning rebuke to management. A newly created investment firm, Engine No. 1, submitted a resolution arguing that the company needed energy-specific guidance to change, nominating four candidates to ExxonMobil’s board to provide such expertise, that was backed by institutional shareholders dissatisfied with its performance and unconvinced by its strategy. [Fortune]

19.05.2021 | TSMC rules the semiconductor world

One company dominates the global semiconductor industry – the Taiwanese Semiconductor Manufacturing Company, or TSMC. The global semiconductor shortage sparked by unprecedented demand during the pandemic for technologies such as computers, phones, and cars, is expected to last until 2022 at least. TSMC’s scale, foundries, and manufacturing expertise has created a global dependency on the company that other countries are now belatedly struggling to rectify. [The Guardian]

18.05.2021 | Investors protest big pay-outs for UK bosses

British companies have come under pressure from shareholders over executive pay as investor support for remuneration resolutions falls to an eight-year low. Figures from data provider Proxy Insight concerning AGM remuneration resolutions so far in 2021 show that the percentage of votes against has risen to 7.3% on average, up from 4.8% in 2014. [Financial Times]

17.05.2021 | UK ‘faces labour shortage’ as Covid and Brexit fuel exodus of overseas workers

British employers are facing a shortage of workers due to an exodus of staff caused by COVID-19 and Brexit. New data from CIPD, the HR trade body, found that the hospitality and retail sectors in particular were struggling to hire enough workers to meet increased demand following the relaxation of pandemic restrictions. [The Independent]

Charities, Public Sector and Not for Profit

27.05.2021 | Charity Commission finds governance failures by Lancashire charity trustees

The Charity Commission concluded an investigation into a Lancashire charity by finding governance failures by its trustees. The former charity To Inspire, which provided support for children and young people in need, was the subject of a compliance case by the regulator over its governance, the proceeds of sale of an asset, and the quality of its financial controls. []

18.05.2021 | The UK’s decisive decade

The 2020s look set to be the UK’s decisive decade for its prospects of achieving economic success, a new report has said. The Economy 2030 Inquiry, a collaboration between The Resolution Foundation and the Centre for Economic Performance at the London School of Economics, launches with the proposition that the seismic changes set to impact the British economy this decade – including the aftermath of COVID-19, Brexit, and the net zero transition – need to be managed well and support those who lose out through each change. [Economy2030]

Policy and Regulation

05.06.2021 | G7 agree historic deal on tackling corporate tax avoidance

The G7 has reached a historic deal to tackle global corporate tax avoidance ahead of the UK’s hosting of the annual summit. The deal, which will advance to the G20 and OECD later this year for further negotiations, includes a minimum level of 15% corporation tax worldwide and the implementation of a principle that companies will pay tax based on the generation of revenue in a jurisdiction rather than their headquartered country. [Sky News]

19.05.2021 | Williams Review to overhaul British railway system

Rail passengers have been promised a better and more efficient service under the biggest shake-up of the railway system in decades. The long-awaited Williams Review outlined the creation of a new state-owned railway body, Great British Railways, the scrapping of the much-criticised franchising rail system in favour of a TfL style approach of passenger contracts, and the simplification and introduction of new types of tickets. [BBC]

Audit and Accounting

27.05.2021 | FRC CEO says regulator was not up to the job

The CEO of the Financial Reporting Council has said that he agrees with criticism of the regulator following company collapses such as Carillion and Patisserie Valerie. Sir Jonathan Thompson, appointed in 2019, said that ARGA, the strengthened and more powerful regulator that was proposed by the Kingman review to replace the FRC, was not be expected to be in place until at least 2023. [Financial Times]

27.05.2021 | FRC orders auditors to do more to spot fraud

The Financial Reporting Council has ordered auditors to do more to identify fraudulent misstatements in company accounts. The accountancy, actuarial, and audit regulator revised an audit standard to make auditors’ obligation to detect fraud more robust, which comes as the government consults on its comprehensive proposals to reform the UK’s audit and corporate governance frameworks. [Financial Times]

26.05.2021 | UK plans for audit market shake-up faces major setback

Smaller audit firms have warned that they do not have the resources to take on a share of FTSE audits from their larger rivals in a setback for the government. The managed shared audit proposal, which would require FTSE350 companies to appoint a challenger firm to undertake 10-30% of an audit alongside a Big Four firm, is aimed at building the capacity of other audit firms to increase competition in the market. [The Times]

ESG Issues

09.06.2021 | How the UK lost its leadership role against corruption

In 2013, the last time the UK chaired the then G8 summit, then prime minister David Cameron placed the UK at the forefront of the global fight against corruption. Eight years later, despite some initial good progress, the UK has lost its leadership role for reasons such as other more urgent political priorities rising up the agenda, the underfunding of key agencies, and contradictory government policies, even as corruption has regained international focus. [The Guardian]

26.05.2021 | Shell ordered to cut emissions by 45% by 2030 by Dutch court

A Dutch court has ordered Shell to cut its emissions by 45% by 2030 in a landmark legal case that has global repercussions for. The verdict marks the first time that a Dutch court, following similar outcomes in France and Germany, has imposed emission reduction requirements on a company. [Politico]

16.05.2021 | Capita’s first employee board directors make their mark

Capita first appointed two employee directors to its board in 2019 in the wake of Theresa May’s  proposals in 2016 to force companies to put workers on board, which were later watered down. The company put them through an intensive board training course to equip them for the challenges they would face as board directors, and CEO Jon Lewis praised their contributions to the board, saying they provided an understanding of the organisation different to the rest of the board that has proved beneficial. [The Guardian]

16.05.2021 | Umbrella companies cost government hundreds of millions in unpaid taxes

More than 40,000 people from the Philippines have been recruited to front British companies as part of schemes that cost the UK hundreds of millions in unpaid taxes. The scheme works by exploiting the government’s Employment Allowance, an annual discount on National Insurance contributions, by hiring British people to front mini-umbrella companies temporarily before sacking them and replacing them with a Filipino director. [BBC]

10.05.2021 | Twenty firms produce 55% of global plastic waste, study finds

Just 20 companies produce more than half of all single-use plastic waste globally, a new study has found. The Plastic Waste Makers Index, published by the Minderoo Foundation, a philanthropic organisation, highlights those firms that are at the forefront of the plastic supply chain and manufacture polymers. [CNBC]

Thought leadership, opinion and research

30.05.2021 | Three Lessons from the ExxonMobil activist victory

In this Harvard Law School blog, Neil Minow, Vice-Chair of ValueEdge Advisors, sets out three lessons that the activist victory over ExxonMobil has underscored for corporate executives and directors. He argues that the passage of the shareholder resolution is evidence that capitalism works, past performance is no guarantee of future performance, and warns that investors should not be taken for granted. [HarvardEdu]

29.05.2021 | ESG and Shareholder Activism

In this memo, Partners Kai Liekefett and Holly Gregory, and Associate Leonard Wood, all representing Sidley Austin LLP, set out the context behind the growing prominence of both ESG and shareholder activism, what follows them, and how public companies can best prepare themselves. [HarvardEdu]

24.05.2021 | The simple tools that helped companies combat COVID-19

In this FT op-ed, journalist Andrew Hill argues that better managed companies handled COVID-19 better than those that were not. He cites data from the ONS that suggests reasons for this greater efficiency includes company size, level of modernisation, and pre-pandemic home-working rates. [Financial Times]

IoD Activities, Podcasts, and Upcoming Events

06.07.2021 | Amending UK company law for a regenerative economy

A new report from the IoD Centre’s Regenerative Business Working Group presents the case for ‘Amending UK Company Law for a Regenerative Economy’. In this webinar, the authors of the report and some expert guests discuss what steps directors and regulators can take to accelerate the transition to a distributive and regenerative economy.

17.06.2021 | ethiXbase Panel Discussion: Practical steps to identify, mitigate, and remediate Modern Slavery Risk

In an increasingly globalised world with complex supply chain, combined with a lack of transparency, modern slavery has been a major challenge for businesses in Australia, the UK and around the world. This panel discussion will share first-hand insights on areas such as the practical steps that could be taken to understand the impact of modern slavery risk within supply chains, what to do when risk is identified, and how to mitigate or remediate it.

21.06.2021 | Who is behind the steering wheel of the stakeholder agenda?

The IoD Centre for Corporate Governance is launching a series of educational ‘How To’ webinars to explore key topics related to the practical implementation of stakeholder governance. In the first webinar in the series, presented in partnership with Black Sun, we will consider who is responsible for driving the stakeholder agenda within each organisation.

Additional member resources

17.06.2021 | National Freelancers Day Discount

The IoD has secured a 20% discount for members to use to register for The Association of Independent Professionals and the Self-Employed (IPSE)’s National Freelancers Day 2021 event. The discount code is NFD20IOD.

13.05.2021 | Good Governance Academy 5th Colloquium Memo

This memo from the Good Governance Academy describing the topics discussed during their 5th Colloquium, held on the 13th of May, serves as a comprehensive guide to the changing world of sustainability and value creation.

Responding to the Coronavirus Crisis

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

New resources include:

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

Better directors for a better world

The IoD supports directors and business leaders across the UK and beyond to learn, network and build successful, responsible businesses.
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