Key Governance Developments - June 2019

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Forty-two countries sign global governance framework on AI development

OECD member states have agreed a global governance framework for artificial intelligence, a milestone in governments’ efforts to tackle the practical and ethical implications of the fast-evolving technology. The OECD’s non-binding principles are the first to be adopted by a significant number of countries including non-OECD members Brazil, Argentina and Romania. They focus on respect for human rights and democratic values in the development of AI, as well as providing protection for people affected by decisions made by AI algorithms.

Best source: Financial Times (subscription required)

Financial regulator warns on fund hosting governance and risk issues

The UK's Financial Conduct Authority says it has significant concerns regarding governance and risk management at companies offering regulatory hosting services to fund managers. The regulator says a sector review has uncovered weak or under-developed governance arrangements, as well as a lack of effective risk frameworks, internal controls and sufficient resources at hosting providers.

Best source: Reuters


ESMA to set out guidelines for MiFID II rules on periodic auctions

The European Securities and Markets Association does not intend to restrict periodic auctions, despite criticism that the technique of allowing fund managers to trade large blocs of shares while limiting order information violates MiFID II transparency rules. The regulator says it will only issue guidelines on how the auctions can comply with MiFID rules on price formation and transparency.

Best source: IR Magazine

Nissan and Renault settle governance dispute that blocked Fiat-Chrysler deal

Nissan Motor and Renault have found a solution to their differences over corporate governance at the Japanese carmaker. Nissan will now allow Renault’s CEO Thierry Bolloré to join its board and stop blocking merger talks between Renault and Fiat Chrysler. Nissan and Renault each hold significant shareholdings in each other, and the Japanese group had threatened to use its voting rights in Renault to block important decisions, causing the merger talks with Fiat to collapse and stalling management changes at Nissan.

Best source: Wall Street Journal (subscription required)

See also: Financial Times (subscription required)


International regulators examine big fund groups’ grip on corporate voting rights

The US Federal Trade Commission, the Department of Justice, the European Commission and competition commissioner Margrethe Vestager are examining the role of BlackRock, Vanguard and State Street Global Advisors in corporate voting rights. The three fund managers will soon hold four of every 10 votes cast at large US companies, partly as a result of the rapid growth of their exchange-traded fund ranges. There is concern that big shareholders will not drive companies to compete against other firms in the same market or sector in which they are also investors.

Best source: Financial Times (subscription required)