IoD Directors' Briefing Your monthly update on directorship and governance

Two weeks ago, the European Confederation of Directors’ Associations (ecoDa) released an updated version of its Corporate Governance Guidance and Principles for Unlisted Companies, eleven years after the first edition in 2010. The new edition contains a greater focus on the role that ESG issues play, and retains a flexible and phased set of 14 principles for companies to apply depending on their size, complexity, and individual level of business maturity. The IoD played a critical role in the development of this edition through the involvement of Dr. Roger Barker, who co-chaired the working group that created this edition, and Chris Hodge, who played a key role in drafting and refining its content. You can find the publication here.

Yesterday, the IoD formally launched the website for the IoD Centre for Corporate Governance. As you may recall, the Centre was set up by the IoD last year to explore current issues in corporate governance, company stewardship, and ESG for the benefit of the business community and wider society. It aims to foster dialogue in a way that encourages collaboration, debate and mutual understanding. The Centre will be hosting a number of events and publishing papers on a wide variety of topics over the next few months. We encourage IoD members to engage with the Centre if you have identified an issue that you look at from a different angle that you think needs more discussion.

In this month’s Governance Perspective, Amin Aboushagor, our IoD Policy Advisor who leads on both Corporate Governance and Innovation, Science, and Technology policy, discusses the IoD’s response to the Government’s recent consultation on mandatory climate-related financial disclosures by publicly quoted companies, large private companies, and limited liability partnerships (LLPs) using the Taskforce on Climate-related Financial Disclosures (TCFD) framework. This Governance Perspective provides some background on what TCFD is, the key issues within the consultation, and summarises some of the IoD’s views that were submitted to the government. You can read our response in full here.

Finally, our keenest readers may be aware that this edition of the Directors’ Briefing marks a year since its inaugural publication. We would be interested in getting your feedback on what has worked well, what could be improved, and new ideas that the Directors’ Briefing could incorporate going forward. We would like to thank you for the continued engagement you have shown with this newsletter, and we hope you have found it to be a useful and informative source on the latest updates in directorship and governance.

As always, we welcome the contributions of IoD members to offer your own Governance Perspective for a future edition of Directors’ Briefing.

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

Governance Perspective

In this month’s Governance Perspective, Amin Aboushagor discusses the IoD’s response to the Government’s recent consultation on requiring mandatory climate-related financial disclosures by publicly quoted companies, large private companies, and limited liability partnerships (LLPs) using the Taskforce on Climate-related Financial Disclosures (TCFD) framework.

Companies and Investors

10.05.2021 | 14 major UK employers join the socially focused Purposeful Company scheme

The leaders of 14 large companies, such as PwC, Capita, and Unilever, have joined the Purposeful Company, a non-profit that seeks to encourage companies to place company purpose at the heart of their businesses. The Purposeful Company is one of a growing number of organisations, such as the British Academy and the B Lab, to focus on partnering with businesses to place a greater emphasis of purpose. [The Guardian]

10.05.2021 | Thousands recruited to front UK firms in tax dodge

More than 40,000 people from the Philippines have been recruited to front British companies as part of schemes costing the UK hundreds of millions of pounds in lost taxes. A BBC investigation found that some recruitment agencies have utilised a technique to cut their tax bill by appointing British directors of companies temporarily before swiftly resigning and being replaced by a Filipino director to take advantage of the government’s employment allowance. [BBC]

10.05.2021 | UK CEOs suffer big pay cuts

More than half of the first 50 companies to publish their annual remuneration reports have had their salaries frozen in 2021. Research by PwC found that total pay for CEOs, including pension contributions, salaries, and bonuses fell by a median of 22%. Additionally, nearly a third have either waived, cancelled, or reduced their 2020 annual bonuses. [Bloomberg]

03.05.2021 | Warren Buffett names Greg Abel as his heir apparent at Berkshire Hathaway

At his annual general meeting, billionaire investor Warren Buffett accidentally revealed that his likely successor at Berkshire Hathaway will be his vice-chairman Greg Abel. Abel, 55, currently holds responsibilities within the conglomerate relating to companies in the railway, manufacturing, and utility industries. [The Times]

20.04.2021 | European Super League collapses within 48 hours of announcement

The European Super League that was launched by 12 European football clubs collapsed within 48 hours of its announcement after its six founding Premier League clubs withdrew from the league. The dramatic U-turn came after universal condemnation of the project by fans, government, governing bodies, managers, and pundits from across football. [NY Times]

Charities, Public Sector and Not for Profit

04.05.2021 | The Gates’ divorce injects uncertainty into their foundation’s governance

Bill and Melinda Gates have announced that they will be divorcing one another after 27 years of marriage. The billionaires, who both co-founded and run the Bill and Melinda Gates Foundation, intend to remain co-chairs and trustees of their foundation, but questions remain over the long-term governance implications for their charity. [Financial Times]

26.04.2021 | Government introduces anti-corruption information note for NGOs

The government has established its Global Anti Corruption (GAC) sanction regime via the Global Anti-Corruption Sanctions Regulations 2021. It has published an information note for NGOs setting out the purpose, scope, and information required for designations under this regime. [Gov.uk]

Policy and Regulation

05.05.2021 | Japan to add a human rights provision to their corporate governance code

Japanese regulators will add a provision on respect of human rights to their corporate governance code. The authorities aim to push companies to act voluntarily to root out potential abuses in their supply chains to limit boycotts from customers and investors. [Nikkei Asia]

Audit and Accounting

28.04.2021 | Sanjeev Gupta’s empire is audited by a tiny audit firm

The struggling steel empire of Sanjeev Gupta’s GFG Alliance is audited by a tiny audit firm based in Regent Street, the FT has learned. King & King, who are unknown in accountancy circles, have audited more than 60 GFG companies individually, which has never filed a consolidated set of accounts. [Financial Times]

26.04.2021 | Accountancy firms seek leniency from FRC for high-risk audits

A significant number of the UK’s biggest accounting firms have asked the FRC to pause quality inspections of their work if they agree to audit high-risk companies listed on the London Stock Exchange. This comes a year after the FRC found that 1/3 audits fell short of expected standards, which it considered unacceptable. [Accounting Web]

19.04.2021 | Wirecard parliamentary inquiry exposes links to German political and financial elite

The continuing inquiry by the German parliament into the collapse of the DAX listed financial payments company Wirecard revealed that the head of the German auditor watchdog owned shares in the company, which triggered his firing. The Bundestag’s investigation has so far resulted in the firings or resignations of eight senior political and financial bosses, including the head of the accounting watchdog, senior executives from EY, and a senior executive at Deutsche Bank. [Financial Times]

ESG Issues

11.05.2021 | Ethixbase Global Modern Slavery White Paper

Ethixbase, a provider of third-party compliance solutions, have published a guidance document on global modern slavery legislation in 2021 for businesses. [Ethixbase]

05.05.2021 | BlackRock accused of ESG inconsistency over Indonesia palm oil

BlackRock has been accused of inconsistency for supporting a shareholder protest against Proctor & Gamble’s sourcing of palm oil from an Indonesian company in which it holds a significant stake. The world’s biggest investment group, which has made ambitious ESG commitments, has faced criticism from green finance groups and sustainable investment advocates, but finds it harder to sell its holdings when it encounters problems with businesses it invests in. [Asia Times]

28.04.2021 |Finance sector’s funded emissions over 700 times greater than its own

Greenhouse gas emissions associated with financial institutions are on average more than 700 times higher than their direct emissions. The latest research from the Carbon Disclosure Project found that while almost all climate-related impacts and risks of global financial institutions come from financing the wider economy, just 25% of the 332 financial institutions surveyed disclosed their portfolio emissions. [CPD]

22.04.2021 | President Biden commits US to slash its emissions by 50-52% by 2030

The president of the United States, Joe Biden, unveiled an ambitious new pledge to slash US emissions in half by the end of the decade. Addressing a virtual gathering of over 40 world leaders in an Earth Day climate summit the president convened, Biden said that the new goal would set the US on a path to zero emissions by 2050. [Sky News]

21.04.2021 | Leading finance firms sign up to Glasgow Financial Alliance for Net Zero

Banks and financial institutions with more than $70tn assets have pledged to cut their greenhouse emissions and ensure their investment portfolios align with climate science. The initiative, chaired by the former governor of the Bank of England Mark Carney, includes 160 companies from 23 that will set targets to cut the carbon content of their assets by 2030 in line with an overall net zero target by 2050. [United Nations]

Thought leadership, opinion and research

12.05.2021 | FRC research finds that corporate governance code increases reporting on remuneration practices

Research conducted by the FRC in partnership with Portsmouth University has found that the 2018 UK Corporate Governance Code has directly resulted in a positive improvement in the reporting of remuneration practices in FTSE350 annual reports. However, amongst its findings are that many company reports lacked detail and outcomes on the application of the Code’s principles and provisions, which the FRC warns leaves a danger of boilerplate disclosures. [FRC]

26.04.2021 | Investors’ Attention to Corporate Governance

In a forthcoming paper, three academics, Peter Iliev, Jonathan Kalodimos, and Michelle Lowry, argue that contrary to some misconceptions, many investors devote significant effort towards governance research. However, they found that investors’ monitoring is disproportionately focused on large firms and firms with meetings outside the busy spring proxy season. [SSRN]

22.04.2021 | Climate scientists: Concept of net zero is a dangerous trap

A trio of climate scientists argue that focusing on net zero at the expense of carbon negativity is a dangerous trap that the world must avoid. In an essay in The Conversation, the scientists, from Exeter, East Anglia, and Lund universities, deconstruct what they believe are the flaws in the current approaches towards net zero, and set out the truth that they believe the world must acknowledge before it is too late. [The Conversation]

04.2021 | FTSE 350 non-executive director fees analysis

The executive compensation consultancy Pearl Meyer has published an analysis of how non-executive director (NED) fees vary by market cap, revenue, and sector. They note that almost all companies pay their NEDs in cash rather than shares, and that the stewardship roles of NEDs increase correspondingly with the scale of their businesses. [Pearl Meyer]

IoD activities and podcasts

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.

12.05.2021 | IoD: Despite Q1 drop, economy is set for a ‘bumper bounce back’

Our Chief Economist Tej Parikh responded to the latest official GDP figures, showing that the economy shrunk by 1.5% in Q1 2021, which was covered by the BBC and London Evening Standard.

06.05.2021 | IoD calls on business to voluntarily adopt climate-related financial disclosures ASAP

Responding to the Government’s consultation on proposals to require mandatory TCFD aligned climate-related financial disclosures, the Institute of Directors urges businesses to move now to implement the common reporting framework.

22.04.2021 | ecoDa publishes new Corporate Governance Guidance and Principles for Unlisted Companies

ecoDa released an updated version of its Corporate Governance Guidance and Principles for Unlisted Companies, eleven years after the first edition in 2010. The IoD played a critical role in the development of this edition through the involvements of Dr. Roger Barker, who co-chaired the working group that creating this edition, and Chris Hodge, who committed a considerable amount of time and effort into drafting and refining its content.

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.

10.05.2021 | Restoring trust in UK boards

The Centre for the Study of Financial Innovation held a panel discussion to discuss the Government’s recent white paper on audit reform and corporate governance. The panellists were Sir Win Bischoff, a former chair of the FRC, Lloyds Banking Group, Citigroup, and Schroders, and Baroness Helena Morrissey, the incoming chair of AJ Bell, and a board member for both LGIM and St James’s Place.

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
• 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.

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])
• Amin Aboushagor – Policy Advisor, Corporate Governance ([email protected])