Key Governance Developments - July 2020

Shareholder pressure prompts companies to action on transparency and ESG standards

As economies begin reopening following the Covid-19 lockdown and companies start to look beyond the pandemic, shareholders are continuing to hold executives to account over their behaviour, remuneration and commitment to environmental, social impact and governance goals. The transformation of dairy and food group Danone into France's first listed social benefit company, a status introduced last year, may prompt other multinationals to take formal steps to demonstrate their commitment to social and environmental issues.

Danone adopts health through food goal as social benefit company

Some 99% of shareholders in Danone have voted to change the company’s status to that of an entreprise à mission, or social benefit corporation, and adopted the objective of delivering health through food. The status was introduced into French law last year to enable companies to signal increased emphasis on social and environmental issues, and Danone is the first French listed company to adopt it. An external panel will report once a year on Danone’s progress towards delivering on the goals.

Best source: Financial Times (subscription required)

See also: Le Figaro (subscription required)


Swiss proposal on ethical corporate governance to go to referendum vote

A legislative proposal by Switzerland's Responsible Business Initiative that would make Swiss multinationals liable for breaches of human rights or environmental damage in their global supply chains, even at subsidiaries or third-party companies, will now go to a referendum vote after the proposal's sponsors rejected a compromise offered by members of parliament. The direct democracy initiative, which attracted more than 100,000 signatures, would require companies to prove that they had no responsibility for the breaches to escape liability. If parliament's compromise had been accepted by the backers of the initiative, it would have become law.

Best source: Financial Times (subscription required)

See also: SWI swissinfo


Landsec cuts new CEO’s pension after fund association warning

UK commercial property company LandSec has cut the pension allowance of new CEO Mark Allen to 10.5%, the same level as the rest of the company’s employees, and property manager director Colette O’Shea has also had her pension allowance reduced. However, the UK Investment Association's Institutional Voting Information Service has issued a red warning to fund managers and investors that LandSec has not reduced the pension package of finance officer Martin Greenslade sufficiently. His pension allowance was £132,000 in 2019, equivalent to 25% of his base salary. While it has been reduced to 20%, the level is still nearly double the average for the rest of the workforce.

Best source: The Guardian

See also: Pensions Age


Delistings from Singapore exchange continue over liquidity and reputation issues

Nine companies have delisted or are planning to do so from the Singapore Exchange this year, according to Dealogic. With only five new listings in 2020, this could become the second year in which more companies have quit than joined the exchange. Analysts say poor market liquidity, low valuations and frequent accounting and governance scandals are having a negative impact on investor sentiment.

Best source: Financial Times (subscription required)
See also: 
Business Times


Norwegian wealth fund manager focuses on corporate governance after Covid-19

Carine Smith Ihenacho, chief corporate governance officer at Norges Bank Investment Management, says Norway’s sovereign wealth fund will increase its focus on corporate governance and board diversity as the 9,000 companies in which it invests embark on recovery processes after the Covid-19 pandemic. Although most of the investment manager’s staff are working from home, it has voted on more than 45,000 shareholder resolutions so far this year and opened a dialogue with companies on ESG issues and boards' long-term strategies.

Best source: Financial Times (subscription required)


UK business group establishes corporate governance panel

The Institute of Directors has created a panel of executives to review corporate governance and work toward raising standards at UK listed companies. The group will include former Lloyd’s of London CEO Inga Beale and BlackRock’s stewardship head Amra Balic. The group will focus on issues including sustainability, emerging technology and stakeholder-orientated governance.

Best source: Financial Times (subscription required)


Commerzbank rejects Cerberus demand for board seats

The chairman of Germany’s Commerzbank, Stefan Schmittmann, has rejected the demand of US private equity firm Cerberus Capital Management for two supervisory board seats and a consulting mandate for its subsidiary Cerberus Operations Advisory Company. At present, Commerzbank sees no basis for changing the composition of the board, Schmittmann says, responding to Cerberus's criticism that the bank has lost direction.

Best source: Handelsblatt (subscription required, in German)

See also: Frankfurter Allgemeine Zeitung (subscription required, in German)

See also: Reuters


Zurich prosecutors open preliminary enquiry targeting former and current Julius Bär employees

Zurich prosecutors have started a preliminary enquiry involving former Julius Bär CEO Boris Collardi and several current and former employees of the private bank to determine whether there are any indications of misconduct and grounds to open criminal proceedings. The prosecutors have declined to provide details except that they are evaluating an anonymous tip received in February. Last week regulator Finma announced it was investigating whether the bank had followed anti-money laundering rules in its relationship with a former Argentine client. The regulator is already examining the actions of Julius Bär employees over poor AML controls in the bank's dealings with Venezuelan state oil firm PDVSA and leading figures of football governing body FIFA.

Best source: Bloomberg

See also: Le Temps (in French, subscription required)


KPMG to review corporate governance for UK supermarket chain

KPMG has been appointed by Wm Morrison, the UK’s fourth largest supermarket chain, to review its corporate governance, board processes and policies. Morrisons' corporate compliance and responsibility committee chairman, Neil Davidson, and remuneration committee chairman Tony van Kralingen resigned in March without explaining their reasons. One-third of the company's shareholders voted against the executive remuneration policy proposals at the group's AGM earlier this month.

Best source: Bloomberg (subscription required)