Monday, September 22, 2014

UK's Financial Reporting Council Issues New UK Corporate Governance Code

Better Corporate Governance and Risk Management Through Shareholder Engagement

The Financial Reporting Council (FRC), UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment, has issued a revised UK Corporate Governance Code.  The changes to the Code are designed to strengthen the focus of companies and investors on the longer term and the sustainability of value creation. One aspect of this refocusing is shareholder engagement.  The revised code seeks to ensure better communication between boards and shareholders by improving disclosure and transparency on proxy voting issues.  

Wednesday, July 23, 2014

Does Mandatory Shareholder Voting Prevent Bad Acquisitions?

Paper studies how much power shareholders should delegate to the board of directors.

In the United Kingdom, corporate acquisition deals larger than 25% in relative size are subject to a mandatory shareholder vote, while in most of continental Europe there is no vote, and in Delaware voting is largely discretionary. In a new paper by Marco Becht, Professor of Corporate Governance at the Université libre de Bruxelles; Andrea Polo of the Department of Economics and Business at the Universitat Pompeu Fabra and Barcelona GSE; and Stefano Rossi of the Department of Finance at Purdue University studies the effect shareholder engagement has on preserving shareholder value in these kinds of large-scale acquisition transactions. Their study concludes that mandatory voting makes boards more likely to refrain from overpaying or from proposing deals that are not in the interest of shareholders.

Sunday, June 15, 2014

Italy’s Mediobanca Equity Sell-off and Privatization Spark Renaissance in Corporate Governance

The Economist reports that Mediobanca, an Italian investment bank formed in 1946 assist in the reconstruction of Italian industry, has commenced a planned sell-off of $2.2 billion in equity holdings as part of an effort to refocus the firm on its core mission of providing medium-term financing in the Italian sector. Mediobanca’s sales of these shares as part of its unwinding of webs of cross-shareholdings and pacts among big shareholders, as well as the privatization of Fincantieri and Poste Itliane, have released large volumes of shares on to the markets, allowing institutional and other investors to add them to their portfolios. This sudden flow of Italian equities in to the hands of new investors has, it seems, increased participation in corporate governance.

Wednesday, May 28, 2014

ICGN Proposes Revised Corporate Governance Principles

On March 28, 2014, the International Corporate Governance Network (ICGN), an investor-led organization of governance professionals interested in international corporate governance practices, published its a proposed draft revision to its Global Governance Principles. The draft principles take into account the ICGN’s 2009 Global Corporate Governance Principles and other ICGN guidance, together with recent changes in corporate governance regulation and practice. This proposed revision is the first time the ICGN has produced a single set of governance principles which embrace the governance responsibilities of board directors and investors alike in one document.

Friday, April 25, 2014

Switzerland's Say on Pay Law Could Put Swiss Pensions in a Bind

Better Corporate Governance, But at What Price?

On March 3, 2013, Swiss citizens voted overwhelmingly to approve the Minder Initiative, giving shareholders far-reaching influence over the executive compensation and corporate governance matters of publicly traded Swiss companies. Though the first corporate elections under the new Swiss say on pay law will not occur until 2015, institutional investors are beginning to worry potential unintended consequences. For instance, the Minder rules require Swiss shareholders to vote on the aggregate compensation of directors and senior management for each of the equities in their portfolios. This requirement could cause problems for Swiss pension funds and other Swiss institutional investors who wish to engage in securities lending. Typically, when a security is lent out, the right to vote the share passes to the borrower. Will the new law requiring pension funds to vote at the annual general meetings of companies either headquartered or listed in the country effectively prevent them from lending their Swiss securities?
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