Wednesday, May 28, 2014

ICGN Proposes Revised Corporate Governance Principles

Author: David Schwartz

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.

The proposed framework applies predominately to publicly listed companies and lays out investor expectations for good corporate governance, and the document is intended to enhance dialogue between both parties and help inspire good corporate governance practice amongst all market participants. The framework is also relevant even to non-listed seeking guidance on establishing high standards of corporate governance practice and are aimed at all types of board structures. 

ICGN understands that legislative frameworks for corporate governance varies amongst jurisdictions.  Nonetheless, the Principles are intended to be of general application, with adaptations as necessary to conform to jurisdictional differences. 

The Principles are intended to be of general application, irrespective of national legislative frameworks or listing rules. As global standards, they should be read with an understanding that local rules and cultural norms may lead to different approaches to governance concepts. National codes should reflect local standards and companies and investors are encouraged to explain divergence from the ICGN’s Principles against this framework. Members of the ICGN support the flexible application of these standards (comply or explain), and the Principles should be applied in 
a way that recognises the specific circumstances of individual companies, investors and the market within which they operate. 

So far as board members are concerned, the Principles cover the following areas:

  • responsibilities;
  • leadership and independence;
  • nomination, election and evaluation;
  • integrity, ethics and conflicts;
  • risk oversight;
  • remuneration;
  • reporting and audit; and
  • facilitating general meetings.

So far as investors are concerned, the Principles cover the following areas:

  • responsibilities;
  • independent oversight;
  • conflicts, ethics and compliance;
  • remuneration;
  • capacity and collaboration;
  • monitoring investee companies;
  • engagement and dialogue; and
  • informed voting practice.

The comment period for the draft language closed on April 28, 2014, and a final document is expected this summer.