​Welcome to your January round-up. We are bringing you highlights from the registry world, key dates for you to be aware of, all current and relevant industry updates and a market update provided by Georgeson.
We will be launching our annual client satisfaction survey soon so please look out for it.

This month we will cover:

Industry update​

  • Significant Shareholder Opposition Register
  • Virtual Meetings
  • Listing Regime
  • AIM Rule Changes
  • Growth Company Corporate Governance
  • European Single Electronic Format
  • Takeover Code
  • Global News

Georgeson market update​

  • UK Activism
  • International Activism




The latest on the blog


Paying dividends using CREST

We are looking to expand the dividend payment service for all eligible CREST securities. ​​

Industry update

  • The Investment Association (IA) has launched the public register of FTSE All-Share companies which have received votes of 20% or more against any shareholder resolution, or which withdrew a resolution prior to a shareholder vote. The register can be found here.

    The register is being hosted in an Excel format on the IA website and included on the register is:
    • Resolution number and type of resolution
    • Meeting date and type
    • Percentage results of the shareholder vote
    • Links to further announcements in response to the dissent, including shareholders' views and the company's actions
    The register is able to be filtered by category of resolution and covers shareholder meetings from and including those held in 2017. Nearly a third of companies already listed on the register have provided further public updates addressing their shareholders' concerns.

    The IA has expressed that a fifth of FTSE companies are already recorded on the register and that the aim of the register is to increase transparency and accountability of listed companies by their members, the media and other stakeholders.
  • The Investment Association (IA) has issued a public position statement on virtual-only shareholder meetings (found here). They express that their members' views are that virtual-only meetings should not be used by companies as they are not in the best interests of all shareholders and could be detrimental to board accountability.

    The IA recognises and supports the use of technology as long as it is used in parallel to complement a physical meeting. Therefore, the IA will not support any resolutions that seek to amend a company's articles to allow for virtual-only meetings; they expect that any amendments will be clear enough to express that physical meetings will be held alongside an electronic meeting.

    The IA's view is in line with those recently expressed by the Institutional Shareholder Services (ISS) in their 2018 proxy voting guidelines.
  • The Financial Conduct Authority (FCA) has published their quarterly Consultation Paper (found here) and in this quarter they are proposing to make two minor technical changes to the Listing and Transparency Rules.

    The changes concern the following:
    • Premium listing principle six – where the rule currently talks about companies communicating information in a way so as to avoid the 'creation of a false market', the proposal looks to amend this principle to expressly refer to the 'continuation' as well as the creation of a false market. This is to ensure clarity of the principle's meaning.
    • Diversity reporting – this amendment is to make clear that under Disclosure and Transparency Rules (DTR) 7.2 a company's Board Diversity Policy must be included in either their corporate governance statement or set out in a separate report included within the annual report or on their website.
    The consultation closes on 1 February 2018.
  • ​The London Stock Exchange (LSE) has applied to have AIM registered as an SME Growth Market under MiFID II and therefore have published minor changes (found here) to the AIM Rules to reflect the growth market requirements.

    AIM Rule 26 will be amended to require companies to keep the following documents on their website for a period of five years.
    • Any prospectus published
    • Annual and half yearly financial reports
    • Any announcements containing inside information
    The changes will not apply retrospectively to documents or announcements published before 3 January 2018.
  • The Quoted Companies Alliance (QCA) together with UHY Hacker Young has published their annual Corporate Governance Behaviour Review (found here), which claims that there have been clear improvements in the corporate governance of growth companies.

    This review benchmarks the disclosures of a random selection of 100 small and mid-size quoted companies from the London Stock Exchange Main Market, AIM and NEX Exchange. It then compares these disclosures against minimum disclosure requirements in the QCA's Corporate Governance Code. From this, the following top five recommendations for improving disclosures were established:
    • Describe relationships between strategy and governance arrangements, explain the board's role in realising objectives
    • Articulate the company story in an engaging way and avoid 'boilerplate' disclosures
    • Clearly explain how board performance is evaluated
    • Provide a single total remuneration figure for each director
    • Be transparent on directors' roles to demonstrate sufficient skill and experience
    While the QCA claim to have detected clear improvements against previous years; the review's own figures indicate compliance with the QCA Code has actually decreased over the last year. 
  • Under the EU Transparency Directive, from 1 January 2020 all annual financial reports published by companies listed on an EU regulated market must be published in a European Single Electronic Format (ESEF), therefore the European Securities and Markets Authority (ESMA) has published their final report and draft technical standards.

    Companies will have to issue their annual reports in Extensible Hypertext Markup Language (XHTML) and consolidated statements contained in annual reports will be required to be marked-up using eXtensible Business Reporting Language (XBRL), which allows for electronic and human reading of information in a single document.

    ESMA has also published a reporting manual and some detailed instructions to aid issuers in implementing the technical standards. All information on ESEF can be found on ESMA's dedicated website here.

    The Financial Reporting Lab has also published a report (found here) looking into the nature of XBRL which considers its impacts and issues relating to its development and use. It also considers if a committee should be formed in the UK to progress the benefits of digital reporting and work towards the adoption of ESEF.
  • Following two consultations issued earlier in 2017, the Takeover Panel has now published their response statements and made changes to the UK Takeover Code regarding statements of intention and assets sales in competition with an offer (found here). The rule changes take effect on 8 January 2018.

    The changes include:
    • Bidders to address specific additional matters about the target within their intention statements
    • Bidders' intention statements to be included in the announcement of a firm intention as well as the offer document
    • Offer documents cannot be published within 14 days of its Rule 2.7 announcement without the targets' consent
  • Spanish Corporate Governance
    The Comisión Nacional del Mercado de Valores (CNMV) has published their reports on corporate governance and directors' remuneration (found here and here respectively). A summary of the reports in English can be located here.

    Companies' compliance with the Good Governance Code of Listed Companies (found here) is of particular interest as there are some recommendations which appear to be widely unfollowed. These include live broadcasting of shareholder meetings, formation of separate appointments and remuneration committees for large companies.

    2018 Annual Meeting Season
    Skadden has published a global report entitled Matters to Consider for the 2018 Annual Meeting and Reporting Season. While the report found here focuses on the US region there are some crossover areas which may be of interest to EU listed companies such as pay ratios, cybersecurity disclosures and board diversity.

    Glass Lewis 2018 Policy Guidelines
    Glass Lewis has now released their 2018 policy guidelines for a number of countries (found here) and there are two noteworthy policy changes that appear across several markets:
    • Board diversity – From 2019, Glass Lewis will generally recommend voting against the nomination committee chairs where the boards have no female directors unless there is sufficient rationale for not having any female board members or have a disclosed plan to address the lack of diversity.
    • Virtual-only meetings – From 2019, Glass Lewis will generally recommend voting against board members if the company plans to hold a virtual-only meeting and that the notice of meeting doesn't include robust disclosures assuring shareholders have the same rights and opportunities to participate as they would at a physical meeting. 

Georgeson market update

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

​UK Activism
  • ​Spencer Stuart has published its UK Board Index 2017.

    “A number of highlights emerge from our 2017 research on the top 250 companies: 
    1. The average age of non-executives has broken through the 60-year threshold for the first time
    2. 34% of newly appointed directors are serving on a board for the first time
    3. Female representation on boards of directors has risen from 10.6% to 25.5% in the decade since 2007
    4. 34.7% of all non-executives are women, up from 16.7% a decade ago
    5. 24.5% of directors are non-nationals
    6. The average retainer for non-executives has grown 41% since 2007 to £67,655”
  • Bloomberg reports that EasyJet reports gender pay gap at 52%.

    "EasyJet Plc, Britain's biggest discount airline, has revealed that men at the company earn on average 51.7 percent more than women, one of the highest gender pay gaps reported so far in the UK  as part of government transparency requirements. Under the new rules, businesses with more than 250 employees have to report the extent of the pay gap by April 2018. So far 263 firms have responded out of an expected 9,500 eligible. In its report, EasyJet, which in Carolyn McCall has had a female chief executive officer for the past seven years, wrote that the discrepancy is 'strongly influenced' by the salaries and gender make-up of its pilot community, which accounts for more than a quarter of its UK employees."
  • ​The Financial Times reports that Smaller UK listed companies found wanting on pay disclosure.

    "Study finds small UK-listed companies are not explaining how directors are evaluated. Small and medium-sized companies listed in the UK are failing to adhere to important corporate governance principles that are meant to shore up investors' confidence in the stock market. According to a review of the disclosures made by 100 small companies listed in the UK, nearly half failed to explain to shareholders how their pay policy was aligned with their growth strategy in 2017. Last year only a third of companies failed to provide this information. Meanwhile, more than three-quarters of the companies assessed did not describe how the performance of their directors and board members was evaluated, up from 56 per cent in 2016."
International Activism
  • The Cincinnati Business Courier reports that P&G names Peltz to board.

    "Procter & Gamble Co. revealed Friday after the stock market closed that it has appointed activist investor Nelson Peltz to its board of directors – even though he didn't win election to a seat in the biggest proxy battle in the history of a public company. Peltz, the CEO of Trian Fund Management, will take a seat on the board of the Cincinnati-based maker of consumer goods such as Tide detergent on 1 March. David Taylor, CEO of P&G and chairman of the board, said Peltz had agreed to not advocate for a breakup of the company. The New York hedge fund manager also agreed that P&G shouldn't be moved out of Cincinnati, Taylor said."
  • ​The Deal has published their Activist Spotlight: Insurgent Rankings for 2017.

    "Proxy season 2017 was busier than ever for activist investors, with more campaigns launched so far this year than for all of 2016. Overall, there were 803 activist campaigns so far, up from 737 for all of 2016, FactSet reports. Boardroom battles that went the distance still favoured management. Of 82 proxy fights that were launched in 2017, 30 went to a vote, and 17 went for management. […] A big surprise for 2017 - settlements were down. According to FactSet, there were only 25 deals to bring dissident directors onto boards in 2017 so far, down from 50 in 2016. All this suggests companies are more willing to fight to the finish, and in many cases, they are winning. With that in mind, The Deal looks back over the field and the year and choose the winners, losers, and also-rans among major activist fund managers."
  • ​Bloomberg reports that Norway's $1 trillion wealth fund steps up 'no' votes on CEO pay.

    "Since releasing a position paper in April, the world's biggest wealth fund has increased the number of votes against management compensation proposals in the companies it invests in, Carine Smith Ihenacho, its global head of ownership strategies, said in an interview in Oslo. It has this year voted against pay plans at Alphabet Inc., Google's holding company, offshore driller Noble Corp. and media company Liberty Global Plc, among others. The fund was unable to provide aggregated statistics on its publicly available votes, but plans to do so in connection with its annual report on responsible investment, due in February."
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    New wave of EU regulation

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