Governance Readout

Global executive search firm Spencer Stuart published the results of their survey looking into the board-CEO working relationship. They spoke to 787 CEOs and over 1,600 directors within their network across all major industry sectors.

One of the key takeaways was an understanding of what CEOs want from boards (i.e., the non-executive directors) in the way of support. Another was the difference in the perceived levels of support, between NEDs and CEOs, being provided.

CEOs reported they were looking for:

• Partnership – 60% of respondent CEOs wanted the boards to act as partners to help them solve complex problems. 80% of non-executive directors agreed they should serve this role.
• Personal support – half of the CEOs wanted to feel that the boards would ‘have their back’ even during challenging situations.
• Strategic discussion – more than half of all respondents - want more time devoted in meetings to strategy.
• Expertise – 53% of CEOs want board members to have subject matter expertise relevant to the challenges the company is facing. Respondents were also aligned that the expertise needed to support many companies’ future plans over the next three years include technology, AI, cyber security, regulatory and government expertise.

Those CEOs who reported feeling supported also reported more positive outcomes including company growth and industry peer performance.

The report published by Spencer Stuart also provides some recommendations for how CEOs and NEDs can improve their relationships by:

• As a board, be proactive, explicit and dynamic in setting expectations for the relationship – have discussions regularly and align on the organisation’s vision and mission, how the board will support key areas of risk/opportunity, and how the CEO’s performance will be evaluated.
• Ensure the board has the relevant expertise for the future of the organisation – this may not be someone who only has expertise in AI, for example, but could be a board member who has expertise in transforming businesses in the face of technological change.
• Create conditions for long-range thinking – CEOs, NEDs and the management team must be empowered to have broad and deep conversations on big issues facing the organisation, and board meetings should allow enough time for future-oriented discussions.

Computershare’s views

There are of course any number of ways that boards can look to improve. What’s interesting about this survey is the nature of the support that CEOs are looking for; the NEDs’ primary role is to provide oversight and challenge with an ‘eyes on, hands off’ approach. This should be at the forefront of both the NEDs and EDs minds when considering what additional support, the board can offer to CEOs. Interestingly, many board effectiveness reviewers recommend that boards “go back to basics”, checking in that the EDs and NEDs know at a basic level what they are there to do. Over time, lines can become blurred, relationships challenging and board information becoming not quite the enabler it was intended to be.

Future-proofing boards is tricky – getting the optics right around competency matrices is a must, or hares can be set running. And the nomination committee has a pivotal role to play in ensuring a rich pipeline of talent, that can add value as landscapes change, is coming through the ranks.

Some suggestions:

Whilst we support boards in a number of areas, including the operation of effective board governance frameworks, perhaps it would be useful for chairs to incorporate the findings of this survey the next time they are scoping the annual board review – but not necessarily wait until then to address any concerns.

Review the agenda; does it allow time for flex? And look at the board pack – are the board papers help or hindrance?

The Financial Conduct Authority (FCA) has published the final rules for the Private Intermittent Securities and Capital Exchange System sandbox (PISCES). The final rules have been changed slightly from those within the consultation to reduce the burden on companies who opt to use PISCES, particularly around disclosure obligations.

Core disclosures will need to be made by operators (an FCA approved entity who can provide the trading facilities needed to participate in PISCES) in relation to participating companies ahead of the trading window and these are to include:

• a business and management overview,
• a financial statement and audit report (only where such a report has been produced),
• disclosures related to all grants of employee share scheme rights made to directors,
• director trading intentions,
• material contracts,
• major shareholders, and
• key material risk factors.

The rules also identify that core disclosures may not always be sufficient for investors to make a trading decision; therefore, operators must seek to fill the gap through part of an overarching obligation to ensure that their disclosure rules are appropriate for their market. The FCA has retained flexibility on how this can be achieved which in the consultation saw two models suggested

• Sweeper – requiring disclosure for any further information the board of directors of a PISCES company considers relevant.
• Ask – the operator would design a Q&A function that investors could use to request further information from a PISCES company.

Other rules make clear that operators are to oversee their markets and that the UK Market Abuse Regulations for listed firms will not apply. Operator rules must also enable PISCES companies to set price parameters (floor/ceiling prices) and allow only permissioned trading events thus only allowing certain investors to participate.

Apart from the FCA rules, regulations have also been enacted to exempt transfers of PISCES shares from stamp duty or stamp duty reserve tax.

The PISCES sandbox in now open and prospective operators can start applying to the FCA, with the hope that trading on PISCES may start later this year. 

Computershare’s view

For private companies who may be interested in participating in PISCES, our experts will be able to assist you with reviewing the options including how you may be able to make stock eligible within CREST to support the settlement of trades executed on the PISCES system.

Following its recent consultation the Financial Reporting Council (FRC)  has published the updated and streamlined UK Stewardship Code (the Code). The FRC saw over 1,500 responses to the consultation and this revised code will take effect from 1 January 2026 with the aim of supporting long-term sustainable value creation while also reducing the reporting burden for signatories to the Code.

The new Code includes several key features:

• Improved definition of stewardship – which focuses on the principle of stewardship as the creation of long-term sustainable value for investors and beneficiaries.
• Reduced reporting – with fewer principles and shorter ‘how to report’ prompts instead of detailed expectations, with a view to eliminating ‘box-ticking’.
• Flexible reporting structure – permitting separate policy and context disclosures (disclosures about the organisation, its governance and resourcing) and activities and outcomes reports (explanation of how signatories have applied the principles through their activities and the outcomes of said activities) or signatories can combine them. The policy and context disclosures only have to be submitted every four years.
• Focused principles – dedicated principles for different types of signatories and new principles just for proxy advisors, investment consultants and engagement service providers.

2026 will be used as a transition year to support signatories with adopting the Code, therefore during this period no existing signatories will be removed.

To accompany the new Code, the FRC has also published some draft guidance to assist  applications who wish to become signatories (asset owners, asset managers and service providers). The FRC is asking for feedback on the guidance by 31 August and aims to release finalised guidance in the autumn.

Computershare’s and Georgeson’s views

Gaining insight and establishing strong communication lines between investors, advisors and issuers is an ongoing challenge and of course insight doesn’t come from ticking boxes. While the Stewardship Code is designed to support long-term sustainable value creation, the reporting burden of signatories has often been raised as a concern which the FRC has attempted to address. Signatories will be keen to ensure that a reduction in reporting doesn’t lead to a dilution of its importance and a retreat from the publicly perceived purpose of stewardship. Volume shouldn’t equate to quality. It will be interesting to see how the focused principles will affect the relationships between proxy advisors and issuers.

As part of the changes introduced to the Companies Act 2006 and the increased powers of Companies House through the Economic Crime and Corporate Transparency Act 2023, the UK government has released the draft regulations that will grant individuals scope to request that more of their personal information be made unavailable for public inspection.

The Protection and Disclosure of Personal Information (Amendment) Regulations 2025 will allow:

• Individuals to apply for their day of birth, signature and, in the case of directors of companies, their business occupation to be protected from public inspection.
• Any individual can apply to have their usual residential address made unavailable for public inspection.

Once the draft regulations are in full force, subject to certain exceptions, an individual can apply to have this information protected, without needing to justify the application or meet any qualifying criteria.

It is intended that the regulations will come into force on 21 July 2025.

Computershare’s view

The basis of ECCTA is to improve corporate transparency and so the removal of aspects of individual information may seem to be contrary to its overarching aims. It is not, however, surprising that there would be a desire from directors to have information such as signatures and day of birth protected from public inspection given the ever-growing risk of abuse of personal information by bad actors. The soon-to-be compulsory director identity verification (IDV) might be argued to be the counter measure to this, with stakeholders taking comfort in a ‘verified’ director.

Some suggestions:

Think about your corporate structures: it may be time to consider whether all the entities in your corporate structure are required or whether there could be any rationalisation. This may reduce the number of directors required to undergo IDV and potentially apply for the protection of personal information.

Review your data handling policies: audit your current ways of collecting, storing and publishing personal information and ensure that the various items of personal information are not unnecessarily disclosed in public filings.

Inform affected individuals and update filing procedures: Notify directors, PSCs and LLP members of their new rights to request the suppression of personal data and ensure your secretariat ream is aware of the new application rights and how to process them.

Following the publication of the changes to the Companies (Directors’ Remuneration and Audit) (Amendment) Regulations 2025 and evolving best practice, the GC100 together with Investor Group have published an updated version of their Directors’ Remuneration Reporting Guidance.

The guidance last updated pre-pandemic aims to help companies satisfy reporting requirements found within the regulations and to suggest disclosures that go beyond those requirements thus prompting effective engagement between investors and companies.

The updated guidance includes:

• Engagement with shareholders and consideration of shareholders’ views,
• Environmental, social and governance measures in variable pay,
• Consideration of general workforce pay, and
• Potential windfall gains in long-term incentive schemes.

The updated guidance is also reflective of the 2024 UK Corporate Governance Code.

Guidance has been released by the UK government on the Companies (Directors’ Remuneration and Audit) (Amendment) Regulations 2025 that provides clarity as to when the changes within the regulations apply from.

The regulations came into force on 11 May 2025 and have removed some of the requirements found in the Companies Act 2006 and the Large and Medium-Sized Companies and Groups (Accounts and Report) Regulations 2008 in relation to directors’ remuneration.

Changes will impact the remuneration reports and policies and so the guidance provides for how companies should transition to the new regime.

• Directors’ remuneration reports – amendments apply to financial years starting on or after 11 May 2025, so for those companies with a 30 June year end, the streamlined reporting requirements will apply to the report published for financial year ending 1 July 2025. For those companies with a 31 December year end, the streamlined reporting requirements will apply from January 2026 therefore the first remuneration report reflective of the changes will be the one published in 2027, covering the financial year ending 31 December 2026.
• Directors’ remuneration policy – any policies approved prior to the regulations coming into force will continue to be applicable until a new policy is approved by members. However, any policy put to members on or after 11 May should be drafted in accordance with the new regime.
• Payments outside an approved remuneration policy – regulations permit payments outside an approved policy to be approved by shareholder vote rather than requiring a revised policy to be approved and this change applies from 11 May.
• Website publication – from May 2025 there is no longer a requirement to ensure remuneration reports are kept on a website for ten years and instead they just need to be available online until the annual report and accounts of the next financial year is made available.

The Financial Reporting Council has published the findings of its latest review of digital reporting and sets out recommendations for companies on best practice.

Under the Disclosure Guidance & Transparency Rules, listed companies have been required to ensure that their annual reports are created in XHTML, in a structured electronic format and to tag their financial statements in accordance with an approved taxonomy.

The FRC’s report notes that several basic errors and issues identified by them in previous reviews have now been resolved, but there remain areas of concern:

• Use of custom extensions – many companies are creating extensions unnecessarily, when items could have been adequately covered by a tag within the taxonomy, and this then makes it harder for users to compare data.
• Anchoring of extensions – when extensions are created, they need to anchor back to an item in the approved taxonomy (thus connecting the extension to an IFRS concept), but there are inconsistencies in anchoring which again makes it harder for users to compare data.
• Missing tags and granularity with tagging notes – companies have been using block tags in the accounting notes, where a single tag is used to cover a section or paragraph which may cover multiple topics, rather than detailed tagging used in the figures of the financial statements. Companies are not therefore tagging the accounting notes with sufficient granularity.

The FRC have said in future where they identify issues they may write directly to the company in relation to the issues.

Companies House have announced that by 1 April 2027 all companies on their register will have to file their accounts (including dormant accounts) as part of their efforts to modernise and digitise under the Economic Crime and Corporate Transparency Act.

Where a company doesn’t already file in digital format they are being encouraged to find a suitable software provider now, ahead of April 2027 when web and paper-based filing will cease to be available. All companies on the Companies House register will have been notified to their registered email address.

The UK Government has issued three consultations:

• New UK Sustainability Reporting Standards – UK SRS 1 and 2 which are based on the standards published by the International Sustainability Standards Board (ISSB);
• Introduction of mandatory disclosure of climate transition plans by companies; and
• The development of a voluntary registration regime for the providers of assurance of sustainability reporting.

Back in 2023 the ISSB released final versions of new sustainability reporting standards. IFRS S1 set out some general requirements for sustainability-related disclosures, and IFRS S2 included specific climate-related disclosure requirements which are like those covered by the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. These new standards are voluntary and only have legal effect if implemented into domestic legislation.

The standards within the consultation are close to those released by the ISSB, other than a few minor amendments, which are mostly technical in nature, such as not including a longer transitional period as found in IFRS S1. Reporting on wider sustainability risks and opportunities that go beyond climate are only required from year three onwards.

The consultations close on 17 September and following which it is expected that the FCA will consult during the summer on updating the UK Listing Rules, and the UK Government has said they will consult on whether to mandate disclosures under the Companies Act in due course.

The memo provides an update on recent developments and a preview of the data to be included in our European AGM Season Review, which will cover the 2025 AGM season (1 July 2024 to 30 June 2025). It includes an overview of the how this season compares to the previous four AGM seasons, outlines investor expectations and their influences on companies, and details the approaches of ISS and Glass Lewis towards Say on Climate proposals.

You can request access to the memo here.

The memo published by Georgeson looks at shareholder opposition to remuneration reports across the FTSE 350 from January to the end of May.

As of the end of May, 55% of FTSE 350 companies had held their AGMs. This memo looks at the number of remuneration reports that received over 10% opposition, 20% opposition, and those that received negative recommendations from ISS. The number of companies that saw their remuneration reports receive over 20% opposition has more than tripled since 2024.

You can request access to the memo here and also discussed in Georgeson’s recent article in Board Agenda here.

Georgeson has published its 2024 Global Activism Report.

Key insights:

• Analysis of data from Georgeson and Diligent covering campaigns at publicly listed companies in 2024.
• Insights into how companies of all sizes are experiencing shareholder activism, with large-cap companies having the largest portion of activist campaigns in the US.
• Highlights on the popularity of small-cap companies as targets for activists.

You can download the report here.

Georgeson has published its 2025 early season proxy report which includes some of the following key insights:

• Notable decline in environmental and social proposals, alongside a rise in anti-ESG submissions and governance-focused proposals.
• Record number of SEC ‘no action’ relief requests granted, driven by updated guidance under Staff Legal Bulletin No. 14M.
• Continued strong support for Say on Pay and director elections, with average approval rates exceeding 90%.
• Increased success rate for activist nominees under Universal Proxy Card rule, despite fewer contested board seats.

You can download the report here.