Governance Archives

”Thoughts on the Business Roundtable’s Principles of Corporate Governance”

2016-09-12 posted by Admin

Following the release of the ”Commonsence Principles of Corporate Governance ” by a diverse, twelve-member coalition of executives of major corporations, asset managers and one shareholder activist in America in July 2016, the influential Business Roundtable (“BRT”) recently released a set of corporate governance principles which are to provide guidance on governance disclosure.

Whereas the Commonsence Principles of Corporate Governance are mainly 8 recommendations on roles and responsibilities of the board, companies and shareholders, the BRT Principles extensively cover the key governance issues such as board responsibilities, roles of key corporate actors, committee responsibilities and other, elemental, governance concerns historically addressed by the organization.

In his article, Michael W. Peregrine, of McDermott Will & Emery LLP shares his thoughts on the BRT Principles that articulate these governance issues on long term value sustainability, shareholder engagement, board diversity, committee practices and succession matters.

Read full article here.

Source: Havard Law School Forum on Corporate Governance and Financial Regulation

Report: Investor Obligations and Duties in Asian Markets

2016-09-11 posted by Admin

By Peter Knight, President, Generation Investment Management, Fiona Reynolds, Managing Director, PRI, Nick Robins, Co-Director, UNEP Inquiry into a Sustainable Financial System and Eric Usher, Head, UNEP Finance Initiative

Executive Summary:

In China, Hong Kong, India, Malaysia, Singapore and South Korea there are compelling national interest reasons for policy makers to promote the incorporation of environmental, social and governance factors into investment practice. Issues include addressing air quality, improving citizens’ long-term health, reducing inequality, providing for an ageing population and attracting the international capital necessary to meet economic growth targets. Investing prudently requires ESG factors to be considered in investment decision-making and to be part of the dialogue between investors and companies. This is consistent with the legal framework in all the markets studied in this report.

However, despite growing awareness of responsible investment, many investors have yet to fully integrate ESG factors into their investment decision-making processes. Public policy and regulation are a key influence. Currently, these markets have few formal requirements to integrate ESG factors, but investor obligations and duties are dynamic concepts that continuously evolve as society changes.

By working together, policy makers and investors can shape investment frameworks to clarify the obligations and duties investors owe to beneficiaries – obligations to embed ESG factors into investment decision-making, ownership practices, and ultimately, the way in which companies are managed.

Principles of Corporate Governance 2016 by the Business Roundtable

2016-09-10 posted by Admin

”Foreword and Introduction

Business Roundtable has been recognized for decades as an authoritative voice on matters affecting American business corporations and meaningful and effective corporate governance practices. Since Business Roundtable last updated Principles of Corporate Governance in 2012, U.S. public companies have continued to adapt and refine their governance practices within the framework of evolving laws and stock exchange rules. Business Roundtable CEOs continue to believe that the United States has the best corporate governance, financial reporting and securities markets systems in the world. These systems work because they give public companies not only a framework of laws and regulations that establish minimum requirements but also the flexibility to implement customized practices that suit the companies’ needs and to modify those practices in light of changing conditions and standards.

Nicholas Benes : 「Whither Governance in Japan? Part 2- How the Code Is Intended to Function」

2016-09-08 posted by Admin

Executive Summary To me – the guy who proposed the code – the most important logic of Japan’s corporate governance code is: Japan needs committees even more than other countries, because there are so few outside directors to set the base for “committees”, Japanese companies must first appoint “multiple” independent directors Japan needs any and […]

”Can Abe’s third arrow reforms benefit investors?”

2016-09-03 posted by Admin

Although the “third arrow” in Japan still has mixed reviews, it can not be denied that with the shift to deliberate improved corporate governance, there is more shareholder involvement in Japanese companies.

In this article, Mr. Naoki Kamiyama of Nikko Asset Management, describes some of the positive changes that now benefiti nvestors.

Read full article here.

Source: FE Trustnet

”The Rise of the Independent Director: A Historical and Comparative Perspective” by Harald Baum

2016-08-15 posted by Admin

Abstract: The paper provides a historical analysis of the rise of the independent director in the US and the UK. These two jurisdictions are commonly credited with creating the concept of the independent director and exporting it around the world. In the first half of the twentieth century, a managerialist model of corporate governance dominated in the US. Inside directors, chosen and controlled by the CEO, dominated corporate boards. The concept of the independent director and the related model of the ‘monitoring board’ appeared only in the 1970s. Two watershed events sparked this dramatic change: First, the sudden collapse of the major railway company Penn Central in 1970; and second, Eisenberg’s influential book ‘The Structure of the Corporation’, published in 1976. According to Eisenberg, the board’s essential function was to monitor the company’s management by being independent from it. Today the reliance on independent directors as a panacea for various corporate governance ills has reached its zenith in the US. As in the US, the typical British board of the 1950s was an advisory board dominated by insiders. It was only in the 1990s, with the beginning of the British corporate governance movement subsequent to the publication of the Cadbury Report, that the concept of independent directors was embraced in the UK. Since the early 2000s independent directors have dominated on the boards of listed companies. From the UK, the concept of the independent director started to conquer the European Union as a fundamental corporate governance principle. The European Model Company Act of 2015 and, on the supra-national level, the OECD Principles of Corporate Governance of 2015 recommend assigning important tasks to independent board members. The empirical support for staffing boards with independent directors, however, remains surprisingly shaky given the ubiquitous reliance on independent directors. The global financial crisis of 2008 has added further doubts.

Read full research paper here.

”Boards in Europe – Accountability and Convergence” by Paul L. Davies Klaus J. Hopt

2016-08-15 posted by Admin

Abstract: Corporate boards play a central role in corporate governance and therefore are regulated in the corporate law and corporate governance codes of all industrialized countries. Yet while there is a common core of rules on the boards, considerable differences remain, not only in detail, but sometimes also as to main issues. These differences depend partly on shareholder structure (dispersed or blockholding), partly on path dependent historical, political and social developments, especially employee representation on the board. More recently, in particular with the rise of the international corporate governance code movement there is a clear tendency towards convergence, at least in terms of the formal provisions of the codes. This article analyses the corporate boards, their regulation in law and codes and their actual functioning in nine European countries (Belgium, France, Germany, Italy, the Netherlands, Poland, Sweden, Switzerland and the United Kingdom) in a functional and comparative method. Issues dealt with are inter alia board structure, composition and functioning (one tier v. two tier, independent directors, expertise and diversity, separating the chair and the CEO functions, information streams, committees, voting and employee representation) and enforcement by liability rules (in particular conflicts of interest), incentive structures (remuneration) and shareholder activism. The article finds convergence in these European countries due to the pressures of competition, a pro-shareholder change supported by government and institutional investors and, to a certain degree, the impact of the EU. This convergence shows more in the codes and the ensuing practice than in the statutes. On the other side considerable differences remain, in particular as a result of the failure to adopt a mandatory „no frustration“ rule for takeovers at EU level and diverging systems of labor codetermination. The result is an unstable balance between convergence and divergence, shareholder and stakeholder influence and European v. national rulemaking.

Read full working paper here.

”Insurance Is a Better Buffer Against Crises than Cross-shareholdings”

2016-08-08 posted by Admin

According to this recently-published discussion paper by the Foreign Non-Life Insurance Association of Japan, risk management provides a better barrier against crises than maintaining cross-shareholdings with friendly firms. The paper puts corporate governance in the wider context of economic growth and security and highlights the fact that management of Japanese companies is often not organized so as to to use risk management solutions that can be provided by insurance. An example mentioned is that only around 17% of the losses from the 2011 Eastern Japan earthquake were recoverable by insurance, as compared with 75% recovery in the case of the Christchurch, New Zealand earthquake the same year.

The paper proposes supporting stronger corporate governance, fostering a culture of risk management and leveraging best industry practices.

Read the discussion paper here.

Source: Foreign Non-Life Insurance Association of Japan Inc.

‘Discussion Between Two Outside Directors in Japan’

2016-08-05 posted by Admin

Increasing the number of outside directors, and fully using what they can contribute, is one of the areas emphasized by Corporate Governance Code introduced in Japan more than a year ago. Below is an insightful discussion between two outside Directors , Mr. Yoshiaki Ozawa and Mr. Noboru Kashiwagi at Daifuku, who share their views.

Read the discussion here.

”Will better corporate governance boost Japanese equity returns?”