Archive Monthly Archives: February 2017

A broader perspective on corporate governance in litigation

Corporate governance issues often figure prominently in litigation, but the issues raised typically have a narrow focus.

Disputes most often build on the formal legal skeleton of corporate governance created by the state’s corporation’s statutes, the particular corporation’s organizational documents, and the judicially imposed fiduciary duty of directors and officers.

However, this structure represents an overly formal and significantly incomplete understanding of what makes up a publicly held corporation’s corporate governance structure.

In this article, the authors outline the much broader corporate governance structure that underlies the operation of a modern public corporation, and show how that structure has important implications for a wider range of litigation than is commonly understood.

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FRC announces a fundamental review of the UK Corporate Governance Code

The Financial Reporting Council (FRC) has announced plans for a fundamental review of the UK Corporate Governance Code.

This will take account of work done by the FRC on corporate culture and succession planning, and the issues raised in the Government’s Green Paper and the BEIS Select Committee inquiry.

The review will build on the Codes globally recognised strengths developed over the past 25 years while considering the appropriate balance between its principles and provisions and the growing demands on the corporate governance framework

To guide this review, the FRC will seek input from a wide range of stakeholders including its recently established Stakeholder Advisory Panel of high profile representatives from a wide variety of sectors.
In its response to the Government’s Green Paper on Corporate Governance Reform the FRC will highlight the importance of helping boards take better account of stakeholder views, linking executive remuneration with performance, and extending the FRC’s enforcement powers to ensure that disciplinary action can be taken against all directors where there have been financial reporting breaches.

Any changes to the regulatory frameworks and to the Code will be done carefully and through full consultation with a wide range of stakeholders.

The FRC will start a consultation on its proposals later in 2017, based on the outcome of the review and the Government’s response to its Green Paper.

Corporate Governance Frameworks for US Listed Companies

The Investor Stewardship Group (ISG) is a collective of some of the largest U.S.-based institutional investors and global asset managers, along with several of their international counterparts.

The ISG was formed to bring all types of investors together to establish a framework of basic standards of investment stewardship and corporate governance for U.S. institutional investor and boardroom conduct. The result is the framework for U.S. Stewardship and Governance comprising of a set of stewardship principles for institutional investors and corporate governance principles for U.S. listed companies.

The corporate governance framework articulates six principles that the ISG believes are fundamental to good corporate governance at U.S. listed companies . They reflect the common corporate governance beliefs that are embedded in each member’s proxy voting and engagement guidelines, and are designed to establish a foundational set of investor expectations about corporate governance practices in U.S. publicly-listed companies.

Principle 1: Boards are accountable to shareholders.

Principle 2: Shareholders should be entitled to voting rights in proportion to their economic interest.

Principle 3: Boards should be responsive to shareholders and be proactive in order to understand their perspectives.

Principle 4: Boards should have a strong, independent leadership structure.

Principle 5: Boards should adopt structures and practices that enhance their effectiveness.

Principle 6: Boards should develop management incentive structures that are aligned with the long-term strategy of the company.

Principle 1: Boards are accountable to shareholders.

1.1 It is a fundamental right of shareholders to elect directors whom they believe are best suited to represent their interests and the long-term interests of the company. Directors are accountable to shareholders, and their performance is evaluated through the company’s overall long-term performance, financial and otherwise.

1.2 Requiring directors to stand for election annually helps increase their accountability to shareholders. Classified boards can reduce the accountability of companies and directors to their shareholders. With classified boards, a minority of directors stand for elections in a given year, thereby preventing shareholders from voting on all directors in a timely manner.

1.3 Individual directors who fail to receive a majority of the votes cast in an uncontested election should tender their resignation. The board should accept the resignation or provide a timely, robust, written rationale for not accepting the resignation. In the absence of an explicit explanation by the board, a director who has failed to receive a majority of shareholder votes should not be allowed to remain on the board.

1.4 As a means of enhancing board accountability, shareholders who own a meaningful stake in the company and have owned such stake for a sufficient period of time should have, in the form of proxy access, the ability to nominate directors to appear on the management ballot at shareholder meetings.

1.5 Anti-takeover measures adopted by companies can reduce board accountability and can prevent shareholders from realizing maximum value for their shares. If a board adopts such measures, directors should explain to shareholders why adopting these measures are in the best long-term interest of the company.

1.6 In order to enhance the board’s accountability to shareholders, directors should encourage companies to disclose sufficient information about their corporate governance and board practices.

Principle 2: Shareholders should be entitled to voting rights in proportion to their economic interest.

2.1 Companies should adopt a one-share, one-vote standard and avoid adopting share structures that create unequal voting rights among their shareholders.

2.2 Boards of companies that already have dual or multiple class share structures are expected to review these structures on a regular basis or as company circumstances change, and establish mechanisms to end or phase out controlling structures at the appropriate time, while minimizing costs to shareholders.

Principle 3: Boards should be responsive to shareholders and be proactive in order to understand their perspectives.

3.1 Boards should respond to a shareholder proposal that receives significant shareholder support by implementing the proposed change(s) or by providing an explanation to shareholders why the actions they have taken or not taken are in the best long-term interests of the company.

3.2 Boards should seek to understand the reasons for and respond to significant shareholder opposition to management proposals.

3.3 The appropriate independent directors should be available to engage in dialogue with shareholders on matters of significance, in order to understand shareholders’ views.

3.4 Shareholders expect responsive boards to work for their benefit and in the best interest of the company. It is reasonable for shareholders to oppose the re-election of directors when they have persistently failed to respond to feedback from their shareholders.

Principle 4: Boards should have a strong, independent leadership structure.

4.1 Independent leadership of the board is essential to good governance. One of the primary functions of the board is to oversee and guide management. In turn, management is responsible for managing the business. Independent leadership of the board is necessary to oversee a company’s strategy, assess management’s performance, ensure board and board committee effectiveness and provide a voice independent from management that is accountable directly to shareholders and other stakeholders.

4.2 There are two common structures for independent board leadership in the U.S.: 1) an independent chairperson; or 2) a lead independent director. Some investor signatories believe that independent board leadership requires an independent chairperson, while others believe a credible independent lead director also achieves this objective.

4.3 The role of the independent board leader should be clearly defined and sufficiently robust to ensure effective and constructive leadership. The responsibilities of the independent board leader and the executive chairperson (if present) should be agreed upon by the board, clearly established in writing and disclosed to shareholders. Further, boards should periodically review the structure and explain how, in their view, the division of responsibilities between the two roles is intended to maintain the integrity of the oversight function of the board.

Principle 5: Boards should adopt structures and practices that enhance their effectiveness.

5.1 Boards should be composed of directors having a mix of direct industry expertise and experience and skills relevant to the company’s current and future strategy. In addition, a well-composed board should also embody and encourage diversity, including diversity of thought and background.

5.2 A majority of directors on the board should be independent. A board with a majority of independent directors is well positioned to effectively monitor management, provide guidance and perform the oversight functions necessary to protect all shareholder interests.

5.3 Boards should establish committees to which they delegate certain tasks to fulfill their oversight responsibilities. At a minimum, these committees should include fully independent audit, executive compensation, and nominating and/or governance committees.

5.4 The responsibilities of a public company director are complex and demanding. Directors need to make the substantial time commitment required to fulfill their responsibilities and duties to the company and its shareholders. When considering the nomination of both new and continuing directors, the nominating committee should assess a candidate’s ability to dedicate sufficient time to the company in the context of their relevant outside commitments.

5.5 Attending board and committee meetings is a prerequisite for a director to be engaged and able to represent and protect shareholder interests; attendance is integral to a director’s oversight responsibilities. Directors should aim to attend all board meetings, including the annual meeting, and poor attendance should be explained to shareholders.

5.6 Boards should ensure that there is a mechanism for individual directors to receive the information they seek regarding any aspect of the business or activities undertaken or proposed by management. Directors should seek access to information from a variety of sources relevant to their role as a director (including for example, outside auditors and mid-level management) and not rely solely on information provided to them by executive management.

5.7 Boards should disclose mechanisms to ensure there is appropriate board refreshment. Such mechanisms should include a regular and robust evaluation process, as well as an evaluation of policies relating to term limits and/or retirement ages.

Principle 6: Boards should develop management incentive structures that are aligned with the long-term strategy of the company.

6.1 As part of their oversight responsibility, the board or its compensation committee should identify short- and long-term performance goals that underpin the company’s long-term strategy. These goals should be incorporated into the management incentive plans and serve as significant drivers of incentive awards. Boards should clearly communicate these drivers to shareholders and demonstrate how they establish a clear link to the company’s long-term strategy and sustainable economic value creation. All extraordinary pay decisions for the named executive officers should be explained to shareholders.

6.2 A change in the company’s long-term strategy should necessitate a re-evaluation of management incentive structures in order to determine whether they continue to incentivise management to achieve the goals of the new strategy.

2016 Corporate Social Responsibility Awards announced

NEW YORK, NY / ACCESSWIRE / February 1, 2017 / Bulldog Reporter is excited to announce the winners of the 2016 Bulldog Corporate Social Responsibility Awards. Thirty-seven awards have been presented, including the Grand Prize winner, to deserving companies who have done great things in corporate social responsibility.

Winners were chosen exclusively by working journalists from a multitude of submissions, with the winners representing the very best in the public relations and communications business. All campaigns were assessed on the basis of their ability to achieve extraordinary visibility and influence opinion, as well as on their creativity, command of media, and technology and tenacity.

The 2016 Grand Prize for Corporate Social Responsibility Communications Campaign of the Year was awarded to Ketchum for their entries titled, Care Counts by Whirlpool, which was awarded three Silvers in the following categories; Best Cause/Advocacy Campaign, Best Social/Community Education Campaign, and Best Campaign Supporting Education.

Here is a complete list of the 2016 Bulldog Corporate Social Responsibility Award winners:

Grand Prize Award Winner
Ketchum
2016 Corporate Social Responsibility Communications Campaign of the Year
Care Counts by Whirlpool

Gold Award Winners

Havas PR North America
Best Charitable Giving/Fundraising Campaign
#GivingTuesday: The Super Bowl of Philanthropy

St. Joseph Hoag Health
Best Campaign Supporting Health
Shop With Your Doc

Weber Shandwick
Best Community Relations Campaign
Honeywell Hometown Solutions & Safe Water Network – India

Weber Shandwick
Best Disaster Relief Campaign
Honeywell Hometown Solutions & Operation USA – Ngolos Elementary School

Goldman McCormick Public Relations
Best Cause/Advocacy Campaign
Truth for Nick Hillary

Aflac
Outstanding CSR/Sustainability Executive
Catherine Blades: Outstanding CSR Executive

BlueCross BlueShield of Western New York
Best Corporate and Community, Non-Profit or NGO Partnership
BlueCross BlueShield and Canalside Buffalo

Silver Award Winners

Havas PR North America
Best Green/Environmental Campaign
Earth To Paris: A Global Movement for Bold Planet Action

Havas PR North America
Best Event Supporting a CSR/Reputation/Sustainability Campaign
Earth To Paris: A Global Movement for Bold Planet Action

Havas PR North America
Best Mid-Size Agency for Corporate Reputation and Good Works (over $10 Million to $20)
Havas PR North America

St. Joseph Hoag Health
Best Social/Community Education Campaign
Shop With Your Doc

Aflac
Best CSR Campaign: Organizations $1 Billion – $5 Billion in Revenue
Aflac: CSR Campaign

HughesNet & Brodeur Partners
Best Campaign Supporting Education
HughesNet & 4-H: Inspiring the next generation of leaders in science, technology, engineering, and mathematics (STEM)

State Street Corporation
Best Cause/Advocacy Campaign
Investing Capital to Create Change: State Street’s ‘SHE’ Gender Diversity ETF Campaign

Cabot Creamery Co-operative
Best Cause/Advocacy Campaign
Reward Volunteers

Cabot Creamery Co-operative
Best Community Relations Campaign
Reward Volunteers

American Heart Association
Best Cause/Advocacy Campaign
CPR in Schools

American Heart Association
Best Campaign Supporting Health
CPR in Schools

ERA Real Estate
Best Employee/Stakeholder Engagement Program for Good Works
ERA MDA Summer Camp Challenge

ERA Real Estate
Best Event Supporting a CSR/Reputation/Sustainability Campaign
ERA Riber Run and Dance Party

Ketchum
Best Cause/Advocacy Campaign
Care Counts by Whirlpool

Ketchum
Best Social/Community Education Campaign
Care Counts by Whirlpool

Ketchum
Best Campaign Supporting Education
Care Counts by Whirlpool

Astellas
Best Cause/Advocacy Campaign
Astellas and the World Transplant Games Federation: Fit for Life!

Astellas
Best Corporate and Community, Non-Profit or NGO Partnership
Astellas and the World Transplant Games Federation: Fit for Life!

Spectrum
Best Cause/Advocacy Campaign
C3 Prize – Changing Cancer Care

Spectrum
Best Campaign Supporting Health
C3 Prize – Changing Cancer Care

GCI Health
Best Use of Social Media to Communicate CSR/Reputation/Sustainability
Pfizer Leverages Multi-channel Approach to Bring “Individual Voices” to Life on Social Media

Bronze Award Winners

Lippe Taylor
Best Cause/Advocacy Campaign
5th Anniversary of Camp Wonder and Cetaphil Partnership

Ogilvy Public Relations
Best Social/Community Education Campaign
Pfizer: VacciNation Campaign with Dr. Jennifer Arnold

Ogilvy Public Relations
Best Campaign Supporting Health
Pfizer: VacciNation Campaign with Dr. Jennifer Arnold

Aflac
Best Annual Report on CSR and/or Sustainability
Aflac: CSR Report

Constellation
Best Green/Environmental Campaign
Constellation & NHL – Power Game Day. Powering Every Day.

GCI Health
Best Sustainability Campaign
Pfizer Uses Augmented Reality to Bring to Life the UN Sustainable Development Goals

GCI Health
Best Campaign Supporting Health
Pfizer Uses “Individual Voices” to Bring CSR Programs to Life

City Developments Limited
Best Campaign Supporting Arts/Culture
CDL Singapore Young Photographer Awards 2016

Corporate governance practices converge

A study by Farient Advisors in conjunction with the Global Governance and Executive Compensation Network (GECN) covering 17 countries into executive compensation, board structure and composition, and shareholder rights reveals the following findings:

  • There is an unmistakable and growing trend toward commonality in governance practices around the world. This convergence of governance norms is likely to persist.
  • Shareholders are becoming more adept and proactive in influencing governance change.
  • Companies want to be seen as an attractive place in which to invest capital. As a result, boards themselves are volunteering for strong, more shareholder-friendly governance.

Industry leaders write to Prime Minister

The heads of the International Corporate Governance Network, IoD, ICSA and the TUC have written to Theresa May to express their concern that although Section 172 of the Companies Act requires directors to promote the success of the company for the benefit of shareholders, and in so doing to have regard for the interests of workers, consumers and other stakeholders, there is no effective mechanism for policing this law.

This means that  if companies – particularly private companies where there is little or no institutional shareholder oversight – do abuse the law, they are not always held to account.

They called for the following:

  • Create a mechanism which allows those whose interests should supposedly be protected by the law to  make complaint and find an appropriate remedy.
  • Ensure investors and stakeholders are involved in the governance of the mechanism.
  • Strongly encourage, or mandate larger private companies to apply the principles of independence and transparency  which have worked for public companies.
  • Help encourage frameworks for executive pay which are more broadly acceptable, and recognise that it, like other aspects of corporate governance will require a long-term focus, by directors, investors, stakeholders and government.

FTI Consulting appoints director of corporate governance

FTI Consulting has appointed Peter Reilly as director, corporate governance, in its strategic communications division Dublin.

Reilly joined FTI from Glass Lewis, a leading independent proxy adviser, where he led the analysis of corporate governance, executive compensation and environmental, social and governance practices of companies listed in the UK, Ireland and the nordic countries.

Reilly will partner with FTI’s corporate governance specialists  across Europe and North America, extending the firm’s advisory capabilities in corporate governance, shareholder engagement and activism defence.

The King Report on Corporate Governance for South Africa

South Africa has become an acknowledged leader in corporate governance with its series of ‘King’ reports.

The long-awaited update of the King Report on Corporate Governance for South Africa, King IV™, was launched at a high-level conference at the Sandton Convention Centre on 1 November 2016.

“King IV introduces some important updates to the landmark King III’s report. In addition, it breaks new ground by differentiating clearly between principles and practices, and linking practices to outcomes—all with a view to making implementation easier,” said Angela Cherrington, CEO of the Institute of Directors in Southern Africa (IoDSA). “Governance is ever evolving, and King IV provides closer, more practical guidance on how to integrate its principles into the way organisations do business.”

Ansie Ramalho, the former CEO of the IoDSA and leader of the King IV task team, said that a number of developments in corporate governance have made a new version necessary. These include the increased focus on executive remuneration; the key role of social and ethics committees, the regulations for which only came out after the launch of King III; and the continuing development of integrated reporting, which was originally recommended in King III.

“King IV breaks new ground by offering an integrated approach to corporate governance encompassing the economic, social and environmental spheres as well”, said Prof Mervyn King. “It also impacts on sectors other than listed or large companies, such as state-owned enterprises, local government, non-profits, SMEs and retirement funds, among others. Quality and effective corporate behaviour offers a way out of many of our current economic and sustainable development challenges.”

King IV differs from King III in a number ways. The code is now integrated into the report, with a clear differentiation between principles and practices, with the latter linked to outcomes – these and other innovations are designed to make it easier to use.

This is to help organizations move beyond the compliance mindset to describing how implemented practices advance progress towards giving effect to each principle – the application of which is assumed due to it being basic to good governance.

“Too many people see corporate governance as a compliance issue whereas it is actually a critical tool for strengthening all our public and private institutions, to the benefit of the whole economic system. The overriding message is clear that good corporate governance practices help any organization improve its ability to sustain itself and the social environmental context in which it operates” says Ramalho.

Welcome to The Directors Academy

Let me introduce myself …

I am Richard Winfield, founder of Brefi Group and a dedicated life long learner.

I have more than 30 years experience as a management development consultant, much of it working internationally at board level.

During that time I have been helping directors and boards become more effective by clarifying goals, improving communication and applying good corporate governance.

My skill and contribution is to be able to bring structure and clarity to ideas, concepts and processes, making the complex simple.

Why I can help you now

During my long career I’ve accumulate more than 600 training files on my hard drive, and with each client commission I develop and refine them further.

Now, I’m converting my knowledge and experience into products that anyone can use, anywhere at any time.

How you can benefit

All you have to do is to sign up with The Directors’ Academy and you can download many of these resources for immediate access: personal and professional development, coaching, HR, training needs analysis – some at no immediate cost.

Subscribe to one of our membership plans and you can follow a valuable programme designed to continuously develop your awareness of current issues and further develop your knowledge and skills.

I recognise that for a busy executive like you keeping up to date can be a chore if it requires setting aside extensive special study times. And it can be counter-productive to try to absorb too much information all at once.

That’s why The Directors’ Academy has been designed in chunks of no more than 20 minutes – it can be consumed while you take a coffee break or listen in the car or on the train. And with audio, visual and print components, it appeals to all learning styles.