Corporate Governance Trends - July 2015

Corporate Governance Trends: The Board Matrix is here, 30% Club launches in Australia, Two Strikes Law exposing boards to shareholder activists

July 2015

GPS Governance

Corporate Governance Trends:The Board Matrix is here, 30% Club launches in Australia, Two Strikes Law exposing boards to shareholder activists

July 2015

The Matrix Is Here

Get ready to down the red pill,

because the 2015 shareholder voting

season will see the introduction of a

Board Skills Matrix, which has been

included as a new recommenda-

tion under the 3rd edition of the ASX

Corporate Governance Council’s

Principles and Recommendations.

It has been notoriously difficult for

corporate governance stakeholders

and shareholders alike to assess the

quality of Australia’s board directors,

whereby current company disclosure

is limited to individual director

biographies and annual meetings

attendance records.

2 Corporate Governance Trends: July 2015

On this basis, the inclusion of a Board

Skills Matrix will act as a tool for share-

holders, companies and advisers on

several levels, helping to:

Identify perceived gaps in the collective representation of board skills and experience

Evaluate how the composition of the board supports a company’s disclosed strategy

Facilitate the board’ssuccession planning through the identification of complimentary director nominees

Women Blast the Glass Ceiling with the 30% Club

The 30% Club, which campaigns for

30% of women on ASX200 boards

by 2018, has officially launched in

Australia in Q1 2015. On the back of

this initiative and amongst ongoing

pressure from shareholders, ASX-listed

companies will be asked to widen

the breadth of professional develop-

ment opportunities to focus on the

development of senior female talent

in response to prevailing concerns

around gender imbalances amongst

Australian senior management and

board directors.

The 30% Club was founded in the UK in 2010 with the initial goal of raising female

board participation in the UK to 30% by 2015. Its efforts, along with initiatives like the

Women on Boards Davies Review, have since served to almost double the

percentage of female board participation, from 12.5% in 2010/11 to 23.5% in early

2015.

The program is now active across several countries in Europe, North America, Asia

and Southern Africa.


The initiative does not believe in mandatory quotas and instead asks boards and senior executives for voluntary commitment to achieve meaningful and sustainable change.

Globally, Norway leads the way on women on board positions, with 35.5%

representation; other Scandinavian countries, including Sweden and Finland, were

also in the top 5. Australia currently features 19.2% women in board roles, on par with

the United States. Asian nations most notably lagged, with Hong Kong at 10.2%,

India at 9.5% and Japan at 3.1%*.

Source: Professional Boards Forum BoardWatch. Data kindly provided by BoardEx and The Female FTSE

*Source: 2014 Catalyst Census via http://www.catalyst.org/knowledge/2014-catalyst-census-women-board-directors

GPS Governance


Although it is oftentimes the focus

of shareholder activists to argue and

even prove that change is warrant-

ed at the board level, it is inherently

difficult for such groups to assert that

they (through their director nominees

or effective change in control) are

better suited to assume stewardship

of a company. A target company

that has a robust corporate

governance and disclosure regime is

well positioned to defend itself from

such scrutiny, which in some cases

may be unwarranted.

Executive Remuneration Exposing Boards to Shareholder Activists

Since the ‘Two Strikes’ say on pay

legislation was first introduced in

Australia in 2011, executive

remuneration has acted as the

primary catalyst for corporate

governance engagement between

boards and company stakeholders.

However, due to the considerable

improvement depicted in

remuneration practice and

disclosure (particularly amongst

ASX200 constituents), executive

remuneration is not expected to

influence considerable debate in

FY16.

The topic of corporate gover-nance is often regarded to be the foothold for which shareholder activist groups may leverage their campaign against a target company and expand the realm of

shareholder considerations beyond

simple value concerns.

But beware, it ain’t over yet:

Irrespective of this shift in focus, the current legislation remains prone to misuse by shareholder groups who seek to vote against the remuneration report to signal concern around non-remuneration related topics and to potentially force a spill of the board.

GPS Governance


What does this mean for you?

Think of these trends as an

opportunity to prove the value of

what you do, rather than bothersome

obligations and demands. Generally

speaking, the greatest risk a

company can assume in corporate

governance is regarding it solely as a

response to regulatory requirements

or recommendations, and not

perceiving such practice as forming

an integral part of a company’s duty

to protect the interests of its owners,

the shareholders. This ‘tick the box’

approach can lead companies into

paying lip service to governance

stakeholders and overlooking the

practical implications of proper

governance frameworks.

The implications for negligent

corporate governance practice

may result in cash flow or liquidity

risk, business interruption, or

reputational damage (to name a

few), all of which carry negative

implications over shareholder wealth

outcomes. It is therefore required that

all listed entities:

Adopt robust board practices

Promote functional and effective internal reporting and control structures

Provide thorough and transparent disclosure on a continual basis

How GPS Can Assist Boards

GPS is the only Australia-based,

independent corporate governance

advisory group that has in-house

staff who have worked at the world’s

leading proxy adviser firms. On this

basis, GPS is uniquely positioned to

provide insights into the perspectives

of governance-conscious institution-

al investors and their advisers, includ-

ing how proxy voting recommenda-

tions are formed and followed.

GPS Governance


Having worked with boards of Australia’s largest listed companies, and with the

support of continued engagement with many of Australia’s largest institutional

investors, GPS remains at the forefront of stakeholder perspectives in relation to

current and developing areas of corporate governance best practice.

Our governance offering is customised to the needs of each company and includes a variety of specialist services, such as:

Boards Skills Matrix

Executive and Director

Remuneration

Full Corporate Governance

ReviewTakeovers

and Mergers Activism

Board Skills, Remuneration,

Disclosures and

Reporting

$

Gaps analysis on

remuneration disclosures

and practices, full end-to-end

authoring of the

remuneration report

Governance review of pre-

publication documents,

detailed feedback and

reporting of potential disclosure

gaps, development

of proxy adviser

materials and assistance

with engagement

with governance stakeholders

Strategic corporate

governance consultation

to help defend a company against a

sharehold-er meeting requisition,

or to provide support to a requisitioning shareholder’s

campaign

Development and imple-

mentation of a board skills

disclosure that is appropri-

ately linked to a company’s

strategic direction, discretely manages

potential skills gaps, supports

the board renewal

process and is effective in withstanding

public scrutiny

GPS Governance

Copyright notice:

Complete or partial use subject to

copyright and prior permission from

Global Proxy Solicitation Pty Limited.

For more information, or to discuss

your Corporate Governance needs,

please contact:

Michael Chandler

P: 02 8022 7946

E: [email protected]

Corporate Governance Trends - July 2015

Documents

Transcript of Corporate Governance Trends - July 2015