Mon 29 Jan 2018
News - Key Corporate Governance Developments December 2017 - January 2018
Description
Key Corporate Governance Developments December 2017 - January 2018

Introduction

Pension funds intensify focus on governance issues
European pension funds and other institutional investors are increasing their focus on governance issues at portfolio companies, recognising that failures can result not only in the absence of sustainable business practices – in areas such as climate change, for example – but often as a precursor to financial losses. In one case, a Swiss fund is seeking to tackle governance problems at a proxy voting foundation. 


Key governance developments December 2017-January 2018

Irish central bank seeks criminalisation of reckless financial decisions
The Central Bank of Ireland has called for new legislation that would criminalise “egregious recklessness” on the part of senior executives of banks, insurers and other financial institutions in the event the business collapses. The regulator’s proposals are tougher than the corporate governance reforms proposed by the government.
Irish Times
https://www.irishtimes.com/business/financial-services/central-bank-seeks-to-criminalise-reckless-financial-decisions-1.3349660

British government to investigate directors of collapsed construction firm
The UK government is investigating the directors of collapsed construction and service outsourcing group Carillion, which is reported to have continued paying significant bonuses to executives even as its finances weakened, inevitably resulting in the company’s liquidation. Carillion was a leading player in public-private partnerships created for the construction of hospitals and other infrastructure, as well as running services in prisons and schools.
The Independent
http://www.independent.co.uk/news/uk/politics/carillion-collapse-bonuses-investigation-inquiry-liquidation-government-outsourcing-a8160946.html

Stock exchange to introduce new CSR disclosure requirement for Luxembourg companies
A working group established by the Luxembourg Stock Exchange in September 2016 to revise its corporate governance principles has drafted a document that includes a new requirement on listed Luxembourg companies for mandatory disclosure of their corporate social responsibility approach and its role in their long-term value-creation strategy. SES executive Pierre Margue, who chaired the working group, says the measure underlines the exchange’s commitment to promoting sustainable growth in the global economy.
ABBL
https://www.abbl.lu/2017/12/18/new-principle-on-corporate-social-responsibility-added-to-the-x-principles-of-corporate-governance-of-the-lse/

Swedish bank loses claim against auditor and former executives
Sweden's HQ Bank has lost a court action claiming that negligence by its former management and auditor KPMG led to the loss of its banking licence. National regulator Finansinspektionen revoked the bank’s licence in 2010 after it incurred losses of SKR1.17bn on options trading.
Risk (subscription required)
https://www.risk.net/risk-management/5379666/bosses-escape-blame-for-options-blow-up-at-swedish-bank

Pension fund asks for portfolio company disclosure on climate risk
UK railway worker pension fund Railpen has written to more than 200 companies in its investment portfolio demanding enhanced corporate disclosures under its new voting and engagement policy, which now incorporates climate risk. The £28bn fund has increased its focus on board composition and effectiveness, remuneration and shareholder rights.
Pensions & Investments
http://www.pionline.com/article/20180116/ONLINE/180119904/railpen-calls-for-more-corporate-disclosure-from-its-holding-companies

BlackRock CEO calls on companies to play bigger role in society
Larry Fink, CEO of the world’s largest asset manager, BlackRock, has written to the CEOs of the world’s leading corporate groups calling on them to play a greater and more positive role in society, including creating a diverse workforce while planning for a more automated future. Fink says companies must demonstrate their positive contribution to society, as well as deliver strong financial performance.
Washington Post
https://www.washingtonpost.com/news/on-leadership/wp/2018/01/16/worlds-largest-money-manager-to-ceos-you-must-do-good-for-society/?utm_term=.b167174496b4

UK companies reveal gender pay gaps
Companies, public sector and charitable organisations in the UK have begun reporting their gender hourly pay gaps ahead of a legal requirement to do so from April this year. EasyJet has one of the widest gaps at 51.7%, mainly because most of its pilots are men and are paid significantly more than cabin staff, who are mainly women.
The Guardian
https://www.theguardian.com/society/2018/jan/06/uk-firms-including-easyjet-and-virgin-money-reveal-huge-gender-pay-gaps

Swiss postal pension fund reviews proxy voting group membership
The €15bn Swiss postal pension fund is to review its membership of the proxy voting foundation Ethos. PK Post is concerned about governance at Ethos, which runs a proxy voting service for more than 200 pension providers. The fund’s managing director, Françoise Bruderer Thom, had a seat on the Ethos trustee board until last December, when she resigned together with lawyer Monika Roth, a member of the supervisory board. Dominique Biedermann is president of the foundation’s supervisory board, while his wife Yola heads Ethos’s corporate governance department.
Investment & Pensions Europe (registration required)
https://www.ipe.com/news/people/swiss-postal-pension-fund-to-review-membership-of-proxy-voting-group/10022603.article

Norwegian sovereign wealth fund appoints first corporate governance head
Norges Bank Investment Management, the manager of Norway’s sovereign wealth fund, has appointed Carine Smith Ihenacho to the new position of chief corporate governance officer. The fund says good corporate governance, sustainable business practices and well-functioning markets are essential to safeguard its wealth for future generations, and responsible investment is of increasing importance for risk management.
Investment & Pensions Europe (registration required)
https://www.ipe.com/news/people/norways-swf-manager-expands-leadership-team/10022481.article