Tue 4 Apr 2017
News - Key Gouvernance Developments February - March 2017
Governance plays greater role in companies’ public reputation
A UK survey has found that corporate governance is playing a bigger part than ever in shaping companies’ reputations, especially among consumers that like to feel their purchasing choices exert a positive influence on society, as well as demanding to be treated fairly and with respect. However, redemption remains possible for companies engulfed in scandal: companies such as Volkswagen and Samsung have seen their reputations improve because of their forthright response to a diesel emissions cheating scandal and exploding smartphones respectively.See below some of the most important national and international Gouvernance news Investors protest as banks lower CEO bonus hurdles
Investors have lodged objections to plans by banks Standard Chartered and Barclays to lower the levels at which their chief executives will be paid bonuses. Standard Chartered has lowered the threshold on its return on equity in its long-term incentive plan to 5%, leading to complaints that CEO Bill Winters will be paid a bonus even if he delivers a return on equity under the bank’s cost of capital. Barclays’s boss Jes Staley will be paid bonuses on a return target far below the bank’s double-digit profit target.
Financial Times (subscription required)https://www.ft.com/content/f140f14c-10c8-11e7-a88c-50ba212dce4dNew CAC40 index weights companies by governance quality
Stock exchange group Euronext and Video Eiris have launched a CAC 40 Governance index, a thematic index that rates the largest companies listed on the Paris market according to their governance standards. Video Eiris uses 45 indicators to gauge board practices including balance of power, integration of social responsibility, audit controls and shareholder rights. Companies in the index are weighted by their governance score, rather than by market capitalisation.
Leap Ratehttp://www.leaprate.com/financial-services/exchanges/euronext-launches-cac-40-governance-index-with-vigeo-eiris/MAS establishes governance review council
The Monetary Authority of Singapore is setting up a corporate governance council to review the country’s governance code. The code was last revised in 2012, when board independence, disclosure and remuneration procedures were tightened. The new review is likely to examine how the ‘comply-or-explain’ regime under the code can be made more effective, including improving the quality of companies’ disclosure of their governance practices and explanations for any deviations from the code. It will also propose mechanisms to monitor listed companies’ progress in strengthening their corporate governance practices.
Singapore Business Reviewhttp://sbr.com.sg/economy/news/mas-sets-corporate-governance-councilUK regulator issues private censure warnings to financial executives
The UK’s Financial Conduct Authority has issued 39 secret censure warnings to senior financial services executives over the past five years, including 14 CEOs and 14 individuals that still hold authorised roles. The individuals do not need to inform shareholders or the wider public about such warnings, but must tell future employers and seek authorisation from the regulator for new appointments to senior positions.
Financial Times (subscription required)https://www.ft.com/content/08cff312-002f-11e7-96f8-3700c5664d30 Regulator warns on governance risk from passive fund investment
Ashley Alder, CEO of Hong Kong's Securities and Futures Commission, has warned that the increased use of passive index-tracking funds could harm governance standards. As more institutional investors increase their exposure to passive funds, the level of shareholder interaction with companies represented in indices is set to fall, he says.
Financial Times (subscription required)https://www.ft.com/content/ffb3b86c-096c-11e7-97d1-5e720a26771Banca Carige chairman sentenced for fraud
A court in Genoa has sentenced Giovanni Berneschi, the former chairman of Banca Carige, to eight years in prison for fraud, criminal association and money laundering. Berneschi was forced out in September 2013 after 20 years as chairman in a management overhaul imposed by the Bank of Italy after audits revealed poor lending practices, substantial derivatives exposure and questionable accounting methods. He and seven other defendants were accused of arranging for the bank's insurance business to acquire property and company shares from business partners, yielding some €22m.
Reutershttp://www.reuters.com/article/uk-italy-banks-carige-ruling-idUKKBN1611YKEmbattled Falcon changes chairman again in bid to emerge from 1MDB scandal
Falcon Private Bank is restructuring its governance following a turbulent year which saw the closure of its Singapore operations following investigation of the bank's dealings with scandal-plagued Malaysian investment fund 1MDB, a CHF128m loss for 2016 and a capital injection from main shareholder Aabar Investments. The Abu Dhabi-backed, Zurich-based bank has appointed Christian Wenger as chairman, its fourth in seven years, in succession to Murtadha M. Al Hashmi, after Swiss regulator Finma demanded that the position be held by an independent director. The bank, whose management persisted in dealings with suspect figures linked to 1MDB over the objects of lower-ranking employees, says it has acted to address legacy issues and made good progress toward strengthening its compliance and risk management.
finews.asiahttp://www.finews.asia/finance/24229-falcon-private-bank-1mdb-capital-injection-khadem-al-qubaisi-mohamed-badaway-al-husseiny-abu-dhabi-christian-wenger-marc-bernegger-walter-berchtold-martin-keller-dominik-schaerer-abu-dhabiShareholders of US publisher battle over governance standards
Patrick Soon-Shiong, whose investment firm last year paid $70.5m to acquire a 13% stake in US newspaper group Tronc, publisher of the Los Angeles Times and Chicago Tribune, has written to the board accusing the company of poor corporate governance. He has asked for access to books and records including communications with board members and lawyers relating to decisions including moving up the date of the company’s annual meeting and its purchase of 3.75 million shares from long-time investor Oaktree Capital.
New York Timeshttps://www.nytimes.com/2017/03/27/business/media/tronc-patrick-soon-shiong-ferro-nant.html?_r=0Corporate governance has bigger impact on reputation and consumer decisions: study
Corporate governance is having a bigger impact on company reputation than ever before, according to a report by UK consultancy Reputation Institute. While a company's products and services are still the main drivers behind its reputation, having a broader positive influence on society has become the third biggest influence in consumer decision-making, and people want to feel they are being treated with authenticity, transparency and fairness by those they spend money with. The firm notes that Samsung, Lloyds Banking Group and Volkswagen have all seen their reputation improve because of their handling of crises.
City A.M.http://www.cityam.com/261351/companies-reputations-hinge-corporate-governance-now-moreNew legislation poses challenges in governance and reporting functions
Corporate governance challenges for independent reviewing officers include a broad range of new rules and legislation dealing with disclosure, reporting and transparency, including the EU’s implementation of the European Single Electronic Format for digital reporting of company information from January 1, 2020. In addition, the adoption last year of new regulatory technical standards under the EU’s Transparency Directive aims to ensure transparency of information for investors through regular disclosure and dissemination of periodic and ongoing regulated information.