Australia
‘At the board level, there have been demonstrable moves by boards (encouraged by many shareholders) to improve diversity, including gender and skills. But some companies are not reacting. Overboarding remains a concern as some directors are increasing their commitments to large, listed company boards.
‘This year saw significant change at the executive level with approximately 20 percent of CEOs at S&P/ASX 200 companies leaving their roles because of the challenging business and economic environment, and substantial pay packages already received act as disincentives for some CEOs to stay on. Issues relevant to investors include excessive remuneration and misaligned incentive payments following financial underperformance or earnings losses, and excessive rewards for non-financial targets.’
– Georgina Marshall, head of global research, ISS
Brazil
‘Brazil established a pretty robust new governance approach in the Novo Mercado, a subset of Bovespa with stricter governance standards. It was successful in attracting a lot of non-Brazilian capital with the expectation that there would be more transparency and more opportunity to effect change.
‘The situation at Petrobras, with government interference and the massive bribery scandal, has probably turned off a lot of shareholders, however. It is an unfortunate trend in a market that had been a pretty good example in a region with rather checkered corporate governance practices. [In future] there will be more shareholder pressure there but some investors may decide it’s not worth continuing to push in a market where they may not feel able to properly effect change.’
– Robert McCormick, chief policy officer, Glass Lewis
Canada
‘The standout issue for me is board diversity. Comply or explain rules were put in place last year by the Ontario Securities Commission but it has already issued a report saying that it’s disappointed with progress. I think there’s going to be a lot of scrutiny from the regulators this year and, if people don’t step up now, they’re going to see quotas in another couple of years.
‘Closely tied to that is the idea of term limits or board renewal. If you want to get women on boards, you have to have empty board seats. In order to get those, you have to have term limits or a retirement age, for example. At the moment this is more about diversity but investors are beginning to understand that it’s really about board independence.’
– Sylvia Groves, president and creative director, Governance Studio
France
‘Most shareholders feel pretty strongly about a one share, one vote approach to shareholding, and I think many shareholders were very disappointed with the Florange Act in France and the moves in Italy to promote multiple voting rights for long-term shareholders.
‘Such moves mean a company could more easily be controlled by those shareholders that hold two votes per share, and [shareholders] obviously feel very uncomfortable with that.’
– Robert McCormick, chief policy officer, Glass Lewis
Japan
‘In 2015, Japanese boards added outside directors at an unprecedented pace. In addition to including an outside director on the board, more than 200 mostly smaller companies changed their system of governance from Japan’s traditional two-board system to a one-committee system similar to that at US and [most] EU issuers.
‘We anticipate in 2016 that larger firms may continue to add outside directors and transition to the single-committee system of governance. Global investors are calling on Japanese firms to move to a one-third independent board member structure and in 2016 Japanese issuers can expect more votes against director candidates at firms with less than the required number of outside independent directors.’
– BNY Mellon spokesperson
South Africa
‘Investors are increasingly voting against remuneration. These votes are non-binding in South Africa but, of course, no company wants to have a majority vote against its remuneration.
‘The second issue that shareholders are becoming increasingly aware of concerns companies issuing shares without a good reason. That said, the majority of the big corporates in South Africa have net cash on the balance sheet because, unfortunately, they are not investing. I wouldn’t be surprised if shareholders start saying, If you’re not going to use that cash, start buying back stock.’
– Ilja Graulich, regional director for Johannesburg, CMi2i
US
The proxy access shareholder proposals [in 2015] have been highly successful: around 60 percent of the proposals that have gone to a vote secured majority support, and those that didn’t secure majority support averaged 42 percent. The proposals generally suggest a proxy access model with the same key ownership terms – 3 percent ownership for at least three years – set forth in the SEC’s now-vacated proxy access rule.
Most companies continue to take a wait-and-see approach as [2015’s] proxy access developments play out [but] long-term institutional investors that support proxy access maintain that the right should be in place at all companies – regardless of corporate performance or record on governance – so that it is there if needed.
– ‘Four takeaways from proxy season 2015’, EY, June 2015
This article appeared in the Winter 2015 issue of IR Magazine
