Latest developments and key trends in corporate governance
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The document summarizes recent trends in corporate governance from multiple sources. It discusses trends reported by Russell Reynolds Associates such as greater focus on board quality, composition, compensation, and environmental and social issues. It also summarizes a report by Farient Advisors that found momentum for corporate governance is continuing globally, with common standards rising in areas like executive compensation, board structure, and shareholder rights. The document concludes that companies need to understand global governance trends, evaluate their adherence to best practices, and determine a roadmap for changes needed to attract investment.
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Latest developments and key trends in corporate governance
- 1. www.corporatedirector.co.uk Latest Developments and Key Trends In Corporate Governance Corporate Governance Masterclass
- 38. www.corporatedirector.co.uk King IVโข๏ธ This philosophy is centred on three paradigm shifts in corporate governance: โข From financial capitalism to inclusive capitalism โข From short term capital markets to long term, sustainable capital markets โข From silo reporting to integrated reporting
- 39. www.corporatedirector.co.uk King IVโข๏ธ โข Separation of technology and information โข Social and Ethics Committee โข Focus on opportunity not just risk
- 41. www.corporatedirector.co.uk United Kingdom Big changes for companies of all sizes
- 42. www.corporatedirector.co.uk United Kingdom Introduction of new governance codes: โข Alternative Investment Market (AIM) โข The Quoted Companies Alliance โข LSE Premium Listed Companies โ Corporate Governance Code โ Guidance on Board Effectiveness
- 43. www.corporatedirector.co.uk United Kingdom Introduction of new governance codes: โข Wates Corporate Governance Principles for Large Private Companies โข GC100 Guidance on Directorsโ Duties (Section 172, Companies Act 2006)
- 44. www.corporatedirector.co.uk Thought leader - bonus Malaysia
- 45. www.corporatedirector.co.uk Intended Outcome The Intended Outcome provides companies with the line of sight on what they will achieve through the practices.
- 46. www.corporatedirector.co.uk Russell Reynolds Associates Global and Regional Trends in Corporate Governance for 2018
- 47. www.corporatedirector.co.uk Russell Reynolds Associates โข Annual interviews โข 30 institutional and activist investors, pension fund managers, public company directors and corporate governance professionals
- 48. www.corporatedirector.co.uk Russell Reynolds Associates Overriding theme: โข Importance of board quality and composition
- 49. www.corporatedirector.co.uk Russell Reynolds Associates Forecasts โ closer attention to: โข Cybersecurity โข Climate change risk โข Corporate culture
- 50. www.corporatedirector.co.uk Russell Reynolds Associates Seven global Trends
- 51. www.corporatedirector.co.uk Seven Global Trends Better Investor Stewardship
- 52. www.corporatedirector.co.uk Seven Global Trends โข Enhanced interest in investor stewardship by governments and investors โข More investor accountability in how they use their influence and votes to steer the strategic direction of investee companies โข More staff and resources dedicated to engaging with investee companies and proxy voting.
- 53. www.corporatedirector.co.uk Seven Global Trends Board Quality and Composition
- 54. www.corporatedirector.co.uk Seven Global Trends โข Priority to gender diversity, director skills and experiences, composition and refreshment, and the appointment of directors who have enough time to dedicate to the company. โข Activists and some institutional investors paying close attention to the number of directors with direct industry experience when assessing composition and quality.
- 56. www.corporatedirector.co.uk Seven Global Trends โข Compensation to remain in the spotlight. โข Link to long-term strategic goals and business performance. โข Expect more enquiries related to incentive compensation schemes and how they drive desired employee behaviour.
- 57. www.corporatedirector.co.uk Seven Global Trends Activist investing
- 58. www.corporatedirector.co.uk Seven Global Trends โข Conflict between long-term value creation interests of institutional shareholders and short-term value enhancement interests of activists. โข Need for meaningful dialogue to achieve a resolution.
- 59. www.corporatedirector.co.uk Seven Global Trends Environmental, Social & Governance Risk
- 60. www.corporatedirector.co.uk Seven Global Trends โข Investors now consider climate changes and sustainability to be mainstream priorities. โข Greater investor focus on recommendations to prepare for the Paris Accord goal of minimising global temperature increase to two degree Celsius. โข Assess both risks and opportunities of climate change on the business.
- 62. www.corporatedirector.co.uk Seven Global Trends โข Cyber threats will be an important area of focus for boards to monitor. โข Many institutional investors formulating their policies on cyber risk and the role of the board, leading to further engagement on this topic.
- 64. www.corporatedirector.co.uk Seven Global Trends Increasing focus on human capital, including: โข Effective succession planning at C-suite level and beyond. โข The impact of company culture on performance. โข Gender pay disparity.
- 65. www.corporatedirector.co.uk Farient Advisors 2018 Global Trends in Corporate Governance
- 66. www.corporatedirector.co.uk Farient Advisors โข Independent executive compensation and performance consultancy. โข Third annual report undertaken in conjunction with other partner firms in the Global Governance and Executive Compensation Group. โข Covers 20 countries across six continents
- 67. www.corporatedirector.co.uk Farient Advisors I. Global Corporate Governance Momentum Continues to Build
- 68. www.corporatedirector.co.uk Farient Advisors โข Focus on governance expected to increase. โข Common standards for good governance likely to rise. โข Investors look to for well-governed corporate boards to protect their interests. โข Governments impose requirements to make their countries more attractive to foreign capital.
- 69. www.corporatedirector.co.uk Farient Advisors II. Governance Trends in Executive Compensation
- 70. www.corporatedirector.co.uk Farient Advisors โข Almost all countries require disclosures on executive compensation. โข Many countries require shareholders to approve equity plans for more than a set period (3yrs). โข Most countries discourage high severance payments (e.g. twice salary plus bonus). โข Most countries call for a minimum clawback in the event of fraud or misconduct.
- 71. www.corporatedirector.co.uk Farient Advisors III. Governance Trends in Board Structure and Composition
- 72. www.corporatedirector.co.uk Farient Advisors โข Board and chair independence. โข Statutory requirements for gender diversity. โข Diversity to include gender, race, ethnicity, age and skills.
- 73. www.corporatedirector.co.uk Farient Advisors IV. Governance Trends in Shareholdersโ Rights
- 74. www.corporatedirector.co.uk Farient Advisors โข Proxy access for shareholders โข Declassified boards โข Abolition of poison pills โข Single-class shares โข Majority voting standards
- 75. www.corporatedirector.co.uk Farient Advisors Conclusion: Implications and Action Steps for Corporations
- 76. www.corporatedirector.co.uk Farient Advisors Major findings from this study include: โข Corporate Governance now garners greater attention than ever before from governments, investors, board directors and, often, the public.
- 77. www.corporatedirector.co.uk Farient Advisors โข Capital is fungible, so governance trends are migrating. โข Companies want to attract capital
- 78. www.corporatedirector.co.uk Action Steps 1. Understand and keep current on global governance 2. Determine whether your company adheres to commonly accepted/best practices, not just locally, but more broadly as well. 3. Determine a roadmap for change.
- 79. www.corporatedirector.co.uk Your trainer Richard Winfield Founder & Principal Consultant Brefi Group, UK www.richardwinfield.com