Key Governance Developments - December 2019

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Institutional investors criticise UK dual-share class proposals


Rupert Krefting, head of corporate finance and stewardship at M&G, Euan Stirling, head of stewardship at Standard Life Aberdeen, and Edward Park, deputy chief investment officer at wealth manager Brooks Macdonald, have criticised proposals by the UK government to alter listing rules to allow dual-class share structures. The government wants to encourage more high-growth companies to list on the London Stock Exchange after Brexit, including tech companies whose founders often favour such share structures in order to retain control after an IPO. However, investment managers believe the structures are not compatible with good corporate governance and the principle of one share, one vote.

Best source: Financial Times (subscription required)


Irish accounting regulator to rate largest audit firms

The Irish Auditing and Accounting Supervisory Authority is to rate the work of the country’s eight largest auditing forms, based on a sample of statutory audits undertaken in 2018. The report will grade the work of EY, Deloitte, KPMG, PwC, Grant Thornton, BDO, Mazars and EisnerAmper. The audit companies will be given one year to rectify issues and deficiencies. If they do not, they face additional investigation and potential fines of €100,000 per partner and mandatory disciplinary panels for firms or individuals.

Best source: Irish Times


Commission report sees conflict of interest for Czech premier over EU grants

A legal opinion provided to the European Commission says that Andrej Babiš, prime minister of the Czech Republic, had conflicts of interest over €82m in EU grants paid to his company Agrofert in 2018 under EU rules stating that public officials and politicians should not benefit from EU funds they control. The Commission is also investigating other structural and investment grants received by the conglomerate since 2013, when Babiš was the country's finance minister. The Czech Republic government could be asked to reimburse some of the €82m paid to Agrofert last year.

Best source: The Guardian

ECB demanded remedial measures after Bank of Valletta money-laundering failures


A report adopted by the European Central Bank last summer found that Bank of Valletta had failed to remedy its risk management and anti-money laundering failures, despite warnings by the ECB since 2015. The report called for remedial measures, including a reassessment of the Maltese bank’s senior management’s fitness for their responsibilities and a reduced exposure to foreign client risk. Bank of Valletta says it has improved its risk, governance and anti-money laundering procedures and structures, noting that corporate clients in the gaming sector would be most at risk from remedial measures.

Best source: Reuters


M.M. Warburg chairman and former CEO Olearius forced out over cum-ex deals

M.M. Warburg chairman Christian Olearius and his deputy Max Warburg, who are both also major shareholders in the Hamburg-based private bank, will step down at the end of the year after almost four decades in charge due to a demand for their departure by German financial regulator BaFin over their alleged involvement in cum-ex transactions. Olearius will be succeeded as chairman by fellow board member Bernd Thiemann, a former CEO of Norddeutsche Landesbank and DG Bank.

Best source: Handelsblatt (in German)

See also: Süddeutsche Zeitung (in German)