​Welcome to your December round-up, where we bring you key dates and the latest industry highlights from the world of registry along with a market update provided by Geor​geson.


This month we cover:

Industry update

  • AGM Temporary Legislation
  • Climate Related Disclosures 
  • Voting Guidelines
  • Listing Review
  • LGBTQ+ Progression
  • National Security & Investment Bill
  • Corporate Governance Code Reporting
  • Global News
    • German Board Diversity Proposals
    • Virtual Meeting 101
  • Wirecard webinar - Dan McCrum from FT shares his story
  • ISS 2021 Policy Updates
  • Part II of the US Annual Corporate Governance Review
  • UK
    • Billionaire Investor to force action on climate
    • Fund Managers reduce investment due to diversity failings
  • International
    • Integrating ESG into Executive Compensation
    • ASX leads way in climate risk reporting

DMJ Hot 100 – it’s time to nominate
 
The DMJ Hot 100 celebrates the UK's most innovative, influential and creative governance professionals, and we are proud to be sponsoring it for the second year running. Nominations only take five minutes and can be made online up until 8 January – to find out more and nominate click here.

Industry update

​Towards the end of November, the UK Government announced that the temporary AGM provisions found within the Corporate Governance & Insolvency Act will be extended until 31 March 2021. The legislation can only be extended by the Secretary of State in three-month intervals and only up until the 5 April 2021. Therefore, it is unclear if anything will be done to provide for an amended legal framework for meetings beyond the end of March 2021. For those companies with meetings during what is often regarded as the height of the AGM season in April and May, this will require careful consideration and planning.  

We understand that the FRC, together with the Department of Business, Energy and Industrial Strategy, are looking to establish a working group to discuss the environment for company meetings beyond March and collaborate with interested parties in finding practical solutions.

​The Financial Conduct Authority have given a speech titled ‘Building Trust in Sustainable Investments’ where their Director of Strategy discussed the steps organisations can take to improve the flow of data and information into the investment process. 

Part of the speech focused on a recent consultation regarding premium listed companies and how they can make better disclosures regarding climate change effects on their business. The authority is reviewing the consultation responses and will be aiming to publish a policy statement in the coming months. 

The consultation suggested disclosures on a ‘comply or explain’ under revised listing rules were being considered, as was expanding the scope of listed issuers caught by the requirements. 

Should you wish to discuss annual reporting requirements or best practice our Company Secretarial team will be happy to discuss this with you further.

​ISS have published their 2021 voting guidelines for the UK and Glass Lewis have published their Proxy Paper Guidelines.

  • ISS

There are several key changes which are laid out in their policy update document, they include:

    • Board Gender Diversity – the general recommendation will be to vote against the chair of the nomination committee, or other directors if the board of the FTSE350 company doesn't comprise of 33% women. A similar recommendation may be applied to AIM listed companies with a market capitalisation over £500m or that fall within the FTSE Small Cap if there isn't at least one woman on the board.
  • Glass Lewis

The key changes laid out by Glass Lewis include:

    • Board Gender Diversity – a similar approach has been taken to that stated by ISS, however they have also included updates that FTSE350 companies should provide meaningful disclosures against the targets of the Parker Review.
    • Hybrid and Virtual Shareholder Meetings – the guidelines set out expectations regarding article changes to permit hybrid or virtual meetings, and also the convening of meetings where attendance may be limited.

Our Company Secretarial team will be happy to discuss institutional voting guidelines with you further, including ensuring appropriate disclosures. Furthermore, Georgeson, our strategic shareholder, proxy solicitation and governance consultancy service will be glad to discuss any institutional investor reports and shareholder engagement with you.

​A call for evidence has been released by HM Treasury which is reviewing the UK's listing regime. The review is looking at "how to boost the UK as a destination for IPOs and optimise the capital raising process for companies seeking to list on the UK market".

The review is calling for views on several matters including free float requirements, dual class structures, prospectuses and dual/secondary listings. There are questions including whether dual class structures should be permitted in the premium listing segment of the LSE and whether the free float requirement of 25% be changed.

If you are considering an IPO, our Company Secretarial and Registry teams will be glad to discuss this, and how we could support you on your journey.

​New research commissioned by the Financial Reporting Council has investigated the personal experiences and extent of discrimination faced by members of the LGBTQ+ within the business community.

The research has identified  barriers to progression and the extent of discrimination has often been significant. It found that corporate culture has often been unwelcoming to members of the LGBTQ+ being themselves. As individuals progress into more senior roles within business, interviewees reported often being faced with discrimination, making personal sacrifices, or even choosing to not to disclose their identity until late in their careers. 

Despite this, many of the individuals interviewed with support from allies have made inspiring progress that has helped future employees face far fewer challenges. However, the report does demonstrate that many companies need to go much further to foster inclusivity, embed inclusive practices and ways of working. They also identify that without transparency on progress, commitment to equality could remain aspirational.

​The UK Government has introduced the National Security & Investment Bill, which sets out significant legislative reforms to  overhaul the review of transactions and investments on national security grounds in the UK, while factoring in foreign direct investment regimes operating globally.

If it passes through Parliament, it will represent a major change to the regime and standalone powers for the review of foreign direct investment in the UK, replacing the current measures found in the Enterprise Act 2002.

The bill follows on from Government's 2018 white paper but has departed from the original proposals in several major ways including introducing a mandatory notification obligation in 17 specified sectors.

The bill defines a set of triggers, to allow the Government to scrutinise transactions, these include:

  • Where a person acquires more than 25%, 50% and 75% of votes or shares in an eligible entity;
  • Where a person's shareholding or voting rights increase above 15%.

The 17 sectors that fall under the scope of the bill include:

  • Communications
  • Data Infrastructure
  • AI
  • Computing Hardware
  • Quantum Technologies
  • Critical Suppliers to the Government and Emergency Services
  • Satellite and Space Technologies

Our Company Secretarial team commented; 'Many Companies will already be appropriately tracking significant shareholdings to comply with disclosure Guidance and Transparency announcement requirements for listed entities, as well as Persons of Significant Control filings at Companies House. This new bill highlights the importance of having access to timely and accurate data and the use of technology to support this.' Our Company Secretarial team will be happy to discuss managing corporate data, including the use of technology such as GEMS with you.

The Financial Reporting Council have released their annual review of reporting against the Corporate Governance Code. The report considers the quality of reporting against the Code and lays out the Council’s expectations for 2021 reporting.
 
The report reviewed approximately 100 companies from the FTSE 350 and FTSE Small Cap. The companies would have been reporting against the updated 2018 code for the first time and the Council has found that companies haven’t demonstrated the high quality of governance that it would expect. It found that reporting was often formulaic and more box ticking than displaying effective governance.
 
Companies should move away from boilerplate statements to provide more meaningful narratives of the application of the Code.
 
Other key messages from the Council include:
 
· Compliance
Many companies expressed that they fully comply but were only able to demonstrate such compliance in their report, the Council expects companies to be clear and transparent about provisions of the Code that they are complying with.
 
· Purpose, Culture and Values
Many companies seemly conflated purpose statements with marketing slogans, mission statements or vision statements. The FRC expects a more rigorous approach to culture and the establishment of appropriate monitoring of the culture and its alignment to the organisations purpose, values and strategy.
 
· Stakeholders
The FRC has reiterated that companies should identify their key stakeholders, explain their relevance in connection with the organisations strategy and identify key issues relating to each group. Reporting should include discussions on feedback received from stakeholders and how it has informed strategy.
 
· Succession Planning
There seems to have been little improvement in the quality of disclosures on this matter based on the minimal insight provided in the reports reviewed. Many appeared to simply focus on the appointment process rather than the plans for succession.
 
Our Company Secretarial team will be glad to discuss annual reporting requirements, including how we could support you further.

German Board Diversity Proposals

The German government have announced several proposals regarding gender diversity of company boards. Where the German government is a majority shareholder, the supervisory board must contain at least 30% female directors. More generally, listed companies will need to have at least one female director on the management board where the board contains four or more directors.

Media reports in English are available, however the full ministerial announcement is only available in German.

Virtual Meeting 101

Covington have released a ''Virtual Meeting Playbook" which addresses all of the basics in a readable Q&A format. The playbook covers 7 key areas.

  • Getting Started (pros and cons, board approval requirements)
  • Virtual Meeting Services
  • Attendance and Access
  • Conduct of Meetings
  • SEC Disclosure Implications
  • Other Considerations (e.g. proxy advisors)
  • Key Contacts

It also provides within the annex sample meeting scripts along with other supporting material.

If you are considering a virtual meeting, our Company Secretarial and Registry teams will be glad to discuss our experiences and the key considerations with you further.

Georgeson market update

Georgeson is a leading Corporate Governance advisory and Shareholder Engagement company, and part of the Computershare group


Upcoming Webinar 

Wirecard – Dan McCrum from FT shares his story 

Monday, 14 December 2020
2pm GMT | 3pm CET | 9am ET

Join us for our webinar, with Dan and Cas Sydorowitz, our Global Head of Activism and M&A, to recap his investigative journey over the last six years and discuss what takeaways the Wirecard story holds for issuers, investors and the market in general.

Register here.

ISS 2021 Policy Updates

In mid-November, ISS announced the update of their benchmark policies for the 2021 AGM season. Georgeson have put together a memo highlighting the most important changes in the UK and Europe. 

ISS has strengthened its expectations regarding board oversight of environmental and social issues. In the UK, the focus of changes concern board gender diversity as well as executive remuneration (pension contributions and post-employment shareholdings). In Europe, gender diversity is also a key issue as well as board term length and the composition of board committees. 

Part II of the US Annual Corporate Governance Review 

Following the release of Part I of our Annual Corporate Governance Review in September 2020, we are pleased to present Part II of the report. Part II offers an expanded analysis of institutional investor voting decisions on key shareholder proposals, as well as say-on-pay proposals and director elections. It also contains a critical review of M&A, proxy contests and investor activism trends from the 2020 proxy season for all U.S. companies. 

Read the full report here.


UK

​Reuters reports that Billionaire UK investor aims to force hundreds of companies to act on climate.

"British billionaire Chris Hohn is aiming to force hundreds of U.S. and European companies to slash their greenhouse gas emissions by enlisting global investors to demand an annual vote on their climate plans at shareholder meetings."

​Professional Pensions reports that Two-thirds of fund managers reduce investments in companies failing on diversity and inclusion.

"63% of UK investors say their firms are actively applying exclusionary screening based on diversity and inclusion metrics, while 64% have started to put portfolio investments that do not meet their diversity and inclusion thresholds on 'watch lists'."

​International

​The ICGN has issued a viewpoint on Integrating ESG into Executive Compensation Plans.  

"Even prior to the current crisis, many capital market participants were questioning whether there was excessive reliance on short-term financial metrics in remuneration plans.  In this ICGN Viewpoint we consider afresh such questions. How can remuneration plans of senior executives be structured to promote sustainable value creation? Can this be achieved through including ESG (environmental, social and governance) metrics within their long-term incentive structure?"

​The Australian reports that ASX 100 leads way in climate-risk reporting and disclosure.

"Australia's top 100 companies are leading the way in climate-risk reporting and disclosure, with the ASX 100 outperforming the world's largest 250 businesses on multiple criteria despite trailing behind them just three years ago."

Our Company Secretarial team commented; 'these reports highlight the growing focus and importance of ESG matters and appropriate disclosures and how they can impact your business. There is a growing expectation for ESG matters to be considered as a remuneration metric and Remuneration Committees should carefully consider if appropriate for themselves and, if so, ensure any metric is appropriately challenging.'

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