UK: IoD publishes corporate governance manifesto

With the UK general election underway, the Institute of Directors has published a manifesto for corporate governance: see here (pdf). Amongst other things, the IoD calls for the establishment of an independent corporate governance commission, with oversight of the UK corporate governance and stewardships codes, and separate from the organisation - the Audit, Reporting and Governance Authority - that is to replace the Financial Reporting Council.

South Africa: draft King IV report and code on corporate governance published

The Institute of Directors and King Committee have published for public comment a draft version of the latest King Report and Code on corporate governance in South Africa (King IV): see here (pdf). The report sets out the philosophy, principles, practices and outcomes that provide the benchmark for corporate governance in South Africa.

The draft version states that no significant departures are proposed from the philosophical underpinnings of King III; a refining of concepts is instead outlined. This said, King IV is based on 'apply and explain', whereas King III was based on 'apply or explain'. The report makes clear that it is expected that companies will apply all of the principles in the King IV Code, with explanations provided of the practices that have been adopted in doing so. Whilst the principles are described as aspirations or ideals, they are regarded as basic to good governance.

South Africa: King IV code - progress report

An update on the work being undertaken in South Africa to produce a new corporate governance code - to be known as King IV - has been published by the Institute of Directors: see here (pdf).

UK: IOD asks - what is good corporate governance?

Earlier this week the Institute of Directors, in conjunction with Cass Business School, published a report titled The Great Governance Debate – Towards a Good Governance Index for Listed Companies: see here (pdf). The report sets out a new framework for measuring good governance and is intended to be the first step in the creation of a Good Governance Index for ranking companies that is intended to capture factors beyond formal compliance with governance codes.

UK: women on company boards review and gender pay gap disclosure

The Department for Business, Innovation and Skills announced yesterday that over 2,600 responses were received in respect of the call for evidence forming part of Lord Davies of Abersoch’s review into the low proportion of women on company boards: see here. The Institute of Directors published its response a couple of days ago (see here) and came down firmly against the use of quotas to increase the proportion of female directors.

The Government also published its equality strategy yesterday - see here (pdf) - and expressed the preference for "business-led measures to promote more women on to the boards of listed companies" (p. 15). The strategy document also explained the Government's preference for voluntary gender pay gap reporting by companies and, given this position, it is not surprising to learn that the Government has decided not to introduce mandatory gender pay gap reporting under Section 78 of the Equality Act 2010.

UK: Corporate Governance Guidance and Principles for Unlisted Companies

The Institute of Directors has published Corporate Governance Guidance and Principles for Unlisted Companies: see here (pdf). The publication is the UK edition of the pan-European guidance developed by the European Confederation of Directors’ Associations (ecoDa) and published earlier this year (see here, pdf).

UK: directors' pay - IoD survey results

Following on from last week's report on FTSE100 directors' pay by IDS, the Guardian newspaper is reporting the findings of the Institute of Directors' latest survey of directors' rewards in small and medium sized enterprises: see here. According to the Guardian report, published yesterday evening on the newspaper's website:

The Institute of Directors tonight defended executive pay, saying that the average pay rise for the 54% of UK company directors who received one this year was just 2.5%. The IoD said that 46% of directors either had their pay frozen or cut, when adjusted for inflation ... The IoD said average basic pay of a managing director in a small company, with turnover of up to £5m a year, was £70,000; in a medium sized company, with annual turnover of up to £50m, it was £100,000; and in a large company with a turnover up to £500m a year it was £128,000. The directors' organisation insisted that pay cuts for directors were not being offset by better bonuses, which it said remain modest relative to big private sector bonuses. According to its survey, 23% of directors said their bonus had been cancelled or postponed this year. Where bonuses were awarded, the average amount was down nearly 20% on last year. The average bonus for a director in a small company was £10,000; £12,600 in a medium company; and £17,200 in a large company".

UK: financial regulation reform consultation - IoD response

The UK's Institute of Directors has offered its views on the proposed changes to the financial regulatory framework: see here. The IoD believes that it does not make sense to separate the UK Listing Authority from the regulatory body that will be responsible for regulating and supervising wholesale capital markets. The IoD also states that the Financial Reporting Council is "currently making an effective and independent contribution in its existing areas of responsibility. Consequently, until there is greater clarity in the overall financial regulatory structure, we do not advocate any changes to the position of the FRC in the regulatory system".

UK: FRC review of the Combined Code - IoD responds to final report

The Institute of Directors has published its response to the final report report published by the Financial Reporting Council as part of its review of the Combined Code on Corporate Governance: see here (pdf).

The IoD is broadly supportive of the proposed changes but states that greater attention should be given by policymakers and market participants to the way in which the Code is implemented. With regard to the Stewardship Code for Institutional Investors, the IoD argues that its likely impact should not be overplayed because institutional shareholders' preference for 'exit' rather than 'voice' is likely to persist where holdings in individual companies remains small.

UK: IoD responds to Walker Review consultation paper

The Institute of Directors has published its response to the consultation paper published by Sir David Walker as part of his review of the governance of banks and other financial institutions. The IoD comments on each of Sir David's recommendations in its response and observes: 

Our overall observation is that the Review provides an informed and reasoned response to a number of important corporate governance issues. To its credit, it has not been unduly influenced by populist demands to overthrow the overall UK model of corporate governance (which is based on a distinctive mixture of hard and soft law) in favour of a heavily regulated approach. Equally, the Review has recognised – given the magnitude of recent governance failures – that an unthinking defence of the status quo is untenable. Reflecting this, it has made a number of significant recommendations for reform.

... In our view, a number of the Review’s recommendations – although potentially relevant to systemically important financial institutions – would not be desirable governance standards for non-financial companies (or for smaller listed and unlisted companies). Consequently, incorporation of the Review’s recommendations into the Combined Code would imply a split of the Code between provisions that apply to financial firms alone, and those that apply to all companies. This is not a step that we would support. In our view, the Combined Code should consist of high level best practice principles for all listed companies. It should not be carved-up on a sectoral basis. A move towards incorporating sectoral provisions into the Code would represent an excessively prescriptive approach to the overall corporate governance framework, and an unwarranted presumption on behalf of regulators regarding how specific industries and sectors should structure their activities".

UK: Institute of Directors responds to the Walker and FRC reviews of corporate governance

The Institute of Directors has published its submissions to the Walker Review and FRC review of the Combined Code: see here and here. The IoD's submissions contain seven proposals:

[1] A standardised boardroom appraisal process should be endorsed by the main stakeholders of the UK corporate sector (i.e. regulators, investors and boards). Listed companies should be encouraged to undertake this appraisal process on an annual basis, and disclose the outcome in their annual report.

[2] Chairmen should encourage a greater presence of Chartered Directors on company boards. The Combined Code should include a provision to support this objective.

[3] The non-executive directors of large, complex companies should have greater access to significant in-house administrative support, coordinated by the company secretary.

[4] The Combined Code should provide guidance on the maximum number of board positions that should be held by directors of listed companies.

[5] Shareholders should have an advisory vote on risk at the Annual General Meeting of all listed companies.

[6] Investors should be subject to their own combined code, with regard to which they should either “comply or explain”.

[7] The FRC should produce guidance on remuneration to assist in the implementation of the principles and provisions of section B of the Combined Code.