The last two weeks have stretched the foresight of directors to the limit, as some have attempted to look beyond Covid and Brexit towards post-pandemic opportunities – although for many that remains easier said than done.
At the IoD’s Director of the Year awards virtual gathering last week, much discussion was given over to the challenges of supporting and motivating staff in the post-Covid transition. Sustainability was high on the agenda as a business issue – and given additional impetus by the prospect of COP 26 taking place in Glasgow in November. Many directors also felt that the underlying nature of our capitalist system may have subtly changed during the pandemic – with government now playing a larger supportive role than conceivable a decade ago, and a growing consensus around a more human, less hard-edged model of business.
In this week’s Governance Perspective, John Harte, IoD Fellow and Managing Partner at Integrity Governance, describes five factors that will enable boards to flourish in the era of Covid and its aftermath. John’s tough message is that boards that are weak in any one of his five drivers will struggle – and endanger the future long-term success and prosperity of the companies they lead.
Companies and Investors
21.01.2021 | Stuart Rose appointed EG Group chair
EG Group, the UK petrol stations company whose billionaire owners are buying Asda, is bringing in retail veteran Stuart Rose as non-executive chair to improve governance. EG’s auditors resigned over governance concerns last year. [The Guardian]
22.01.2021 | Beny Steinmetz found guilty of bribery
Mining tycoon Beny Steinmetz has been sentenced to five years in jail and fined $56.5m after being found guilty of bribery in a Swiss court. Mr Steinmetz and two colleagues were convicted of paying bribes of $8.5m to Mamadie Touré, a wife of Guinea’s late president Lansana Conté, to obtain the exploration rights for Simandou, a giant iron ore deposit. [NY Times]
28.01.2021 | SoftBank incentive plan leaves executives with potential $1.2bn collective gain
Four top SoftBank executives, including Rajeev Misra and Marcelo Claure, are sitting on a potential collective gain of $1.2bn after receiving loans from the company last year – prior to their departure - to buy its shares. The three executives stepped down from SoftBank’s board in November, as part of a corporate governance shake-up at the company after pressure from the activist hedge fund Elliott Management. [Financial Times]
29.01.2021 | Cineworld bonuses are approved
Investors’ have approved a bonus scheme that could pay Mooky Greidinger, Cineworld’s chief executive and his brother up to £65m of shares each. This has occurred despite strong criticism from some big investors, who raised questions over wider governance issues at the 91-year-old family business, which is currently suffering the full impact of the pandemic on the hospitality industry. [The Guardian]
01.02.2021 | Norway's wealth fund ditches firms over tax transparency
The world’s largest sovereign wealth fund, which owns an average 1.5% stake in every listed company in the world, is divesting from some companies due to their tax policies. These are companies that the fund believes to be pursuing aggressive tax planning - or those who not disclose adequate information about where, and how, they pay tax. [Reuters]
Charities, Public Sector and Not for Profit
01.02.2021 | Too many charities rush to appoint expensive bosses, says regulator
The Irish charities regulator, Helen Martin, has argued that too many charities rush to appoint an expensively paid chief executive before they have even done any fundraising. This is a particular concern where the chief executive is the only employee. [Law Society]
Policy and Regulation
24.01.2021 | US executives anticipate more corporate prosecutions under Biden
A flurry of pre-emptive deferred prosecution deals between prosecutors and companies in the final months of the Trump administration suggests that executives are bracing for more corporate prosecutions under Joe Biden. The number has fallen substantially during the past four years of the Trump administration. [Skadden]
27.01.2021 | No Brexit bonfire for City of London, but it won't be a 'rule taker'
The boss of the City of London Corporation has argued that the City is not seeking a bonfire of financial regulation in the post-Brexit era. It is hoping to achieve equivalence deals with the EU. However, the City should take the lead in financial regulation, not simply accept the rules determined in Brussels. [Reuters]
27.01.2021 | Lawmakers push for European due diligence law on environment and human rights
The European Parliament’s legal affairs committee has adopted a report calling on the European Union to legally require companies to protect human rights and the environment in their supply chains. The report urges the European Commission to propose mandatory due diligence requirements for all EU companies. [Reuters]
28.01.2021 | LSE boss says London must ‘move quickly’ to attract prized companies
The head of the London Stock Exchange Group has warned that the government must move quickly to overhaul the UK’s listing rules if it wants to challenge Wall Street for the next wave of tech companies going public. This comes ahead of a government commissioned review by former EU commissioner Jonathan Hill, due to be published later this month. [Financial Times]
Audit and Accounting
27.01.2021 | Investors warned of Covid delays to UK company reporting season
The Financial Conduct Authority and Financial Reporting Council have issued a joint statement urging businesses with a December financial year-end to use the extra time granted to them last year for preparing their annual accounts. Regulators gave listed groups an additional two months to publish their annual financial reports - pushing the deadline back to within six rather than four months of their financial year-end dates. [FCA]
26.01.2020 | BlackRock pushes companies to adopt 2050 net-zero emissions goal
BlackRock, the world’s largest asset manager, is pushing companies to commit to achieving net zero emissions by 2050 and raised the prospect of dumping companies that fail to do so from its actively managed funds. This follows a similar announcement in December from a group of 30 of the world’s largest asset managers. [Forbes]
23.01.2021 | Asset Managers and Climate Change 2021 Report
FinanceMap's Asset Managers and Climate Change report for 2021 finds that portfolios managed by the top global asset management firms continue to be misaligned with Paris climate goals in automotive, oil/gas/coal production, and electric power. However, it argues that European asset managers are taking the lead over their US competitors. [Influence Map]
03.02.2021 | Black representation at top of FTSE 100 companies falls to zero
The number of black people at the top of Britain’s biggest listed companies has fallen to zero. No black chairs, chief executives or chief financial officers remain at any FTSE 100 company. Just 10 out of 297 leaders in the top three roles had ethnic minority backgrounds, the same proportion as in 2014. [The Guardian]
Thought leadership, opinion and research
21.01.2021 | From Start-ups to Unicorns: Aiming for a Growth-Promoting Governance
A new report from IFA, the French association of non-executive directors, has highlighted 5 obstacles to the emergence of growth-promoting governance at start-ups: 1) Lack of trust between the founders and their Board of directors; 2) Limited understanding of what governance is about and what it can bring to the party; 3) Difficulty in setting-up the right governance structure, with the relevant people; 4) Lack of alignment between the founders and their Board regarding the level of risk taking; and 5) Limited understanding of the importance of a sound governance structure in the raising of capital. [EcoDa]
25.01.2021 | Corporate Governance, Business Group Governance and Economic Development Traps
A new paper by Bernard Yeung, Luis Dau, and Randall Morck argues that “good corporate governance” can be a sideshow, and even a distraction, in countries where decision-making power substantially does not rest with the directors of individual companies. The stock markets of such countries may appear to contain hundreds of distinct corporations. But they are often organized into business groups controlled by a common ultimate shareholder, usually a powerful family with deep political influence. [Harvard Edu]
25.01.2021 | Could do better: the need for tougher board reviews
Andrew Hill argues robust director appraisals are essential. However, Board evaluations are never going to provide a comprehensive scandal alarm system. A review may help reassure outsiders the board is taking its responsibilities for self-improvement seriously, but it cannot guarantee the directors and their company won’t fail in future. [Financial Times]
26.01.2021 | The ESG/TSR Activist “Pincer Attack”
Andrew R. Brownstein, Steven A. Rosenblum and Trevor S. Norwitz argue that activist hedge funds may seek to exploit the growing investor focus on ESG performance as a pretext for achieving their own, more financially-oriented objectives. [Harvard Edu]
03.02.2021 | The Future of Dual-Class Listings in the UK
Prof. Min Yan argues that if London is to attract the most successful and innovative companies to list, especially in the aftermath of Brexit and in the midst of the COVID-19 pandemic, it is time to relax the limitation on dual class shares on the Premium Segment of the LSE’s Main Market. [University of Oxford]
Responding to the Coronavirus Crisis
The leading source of governance principles and recommendations for companies with a premium listing on the London Stock Exchange.
Key governance principles for large private companies.
Supervisory guidance from the Prudential Regulation Authority for the boards of regulated firms.
OECD Guidelines on Corporate Governance of state-Owned Enterprises (OECD)
The OECD Guidelines provide an internationally agreed benchmark to help governments assess and improve the way Governments exercise their ownership functions in state-owned enterprises.
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