UK: directors' bonuses and gender differences

The UK's Financial Times newspaper has reported (online, 25 August), that "Female directors earn smaller performance-related bonuses than male counterparts, according to a new study that says the disparity reflects sexist attitudes. Researchers at Exeter university found that male executive directors in the best-performing companies were paid bonuses 263 per cent bigger than those working for the worst performers. For female directors the difference is a mere 4 per cent".

Belgium: corporate governance code - proposed changes

Belgium's Corporate Governance Committee has proposed several changes to the Belgian Corporate Governance Code. A consultation paper is available here (in Word format) and a draft of the new code is available here (also in Word format). The proposed changes address a wide range of areas including corporate social responsibility, the gender diversity of boards, board evaluation, directors' remuneration and the remuneration report. 

UK: women on the boards of listed companies

In response to a question asked yesterday in the House of Lords concerning women on public bodies and listed companies, Baronness Verma responded on the Government's behalf (Hansard, col 757 to 758):

... we have pledged to take action to promote gender equality on the boards of listed companies. However, we have more to do on the detail and in due course will be making an announcement setting out our future direction ... it is all about engaging with business and business organisations. We will engage with all relevant partners in developing our programme to fulfil the commitment in the coalition agreement. Head-hunters and recruitment companies will be aware of the stronger provision in the revised UK Corporate Governance Code, published on 28 May this year, on the importance of boardroom diversity ... we are working very hard to encourage people to work with us, rather than enforce an extra regulatory burden".

Elsewhere, the Guardian newspaper reports (see here):

The European Commission has warned companies that if they do not move voluntarily to ensure gender balance on executive boards, it will force them to. Fundamental rights commissioner Viviane Reding told the European Parliament: 'Equality in decision-making is not yet a fact ... I do not rule out the possibility of putting forward legislation in this area'.

According to her spokesman, Matthew Newman, the centre-right Luxembourgeois commissioner is giving companies a year to sort out imbalances. If they do not act, Brussels will consider legislation and other measures committing them to the sort of quotas that have recently been introduced in Spain and some German states".

Australia: the ASX Corporate Governance Principles and Recommendations

Earlier this year the Australian Securities Exchange Corporate Governance Council published for consultation proposed changes to the second edition of its Corporate Governance Principles and Recommendations. The submissions have been published (here) along with the Council's response (here, pdf). The majority of submissions provided strong support for the Council's changes, which address, for example, board structure and diversity and the remuneration committee.

A copy of those Principles and Recommendations which have been amended is available here (pdf). A comparative table showing the Principles and Recommendations before and after the changes is available here (pdf). An overview of the changes is available here (pdf).

Poland: WSE Code of Best Practice for Listed Companies - new edition published

The Warsaw Stock Exchange has published a revised edition of its Code of Best Practice for Listed Companies: see here (pdf). The revised Code comes into force on 1 July 2010. A summary of the revisions is available here (pdf) and further background information is available here. The amendments to the code concern, amongst other things, gender diversity at board level, remuneration policy and electronic communication.

Europe: the governance of financial institutions - Commission publishes green paper

The European Commission has published a green paper titled Corporate governance in financial institutions and remuneration policies: see here (pdf). The paper contains a large number of questions for consultation and sets out possible ways to:

• improve the functioning and composition of boards of financial institutions in order to enhance their supervision of senior management;
• establish a risk culture at all levels of a financial institution in order to ensure that long-term interests of the business are taken into account;
• enhance the involvement of shareholders, financial supervisors and external auditors in corporate governance matters;
• change remuneration policies in companies in order to discourage excessive risk taking.

Amongst the questions on which views are sought are:

• Should the number of boards on which a director may sit be limited?
• Should combining the functions of chairman of the board of directors and chief executive officer be prohibited in financial institutions?
• Should a specific duty be established for the board of directors to take into account the interests of depositors and other stakeholders during the decision-making procedure?
• Should cooperation between external auditors and supervisory authorities be deepened?
• Should supervisory authorities be given the power and duty to check the correct functioning of the board of directors and the risk management function?
• What could be the content and form, binding or non binding, of possible additional measures at EU level on remuneration for directors of listed companies?
• Should disclosure of institutional investors' voting practices and policies be compulsory? How often?

The paper makes clear (at p. 11) the Commission's view that there is a role for financial regulators to play:

The main challenge in seeking to improve existing corporate governance practices will be to ensure real change in the behaviour of the relevant actors. This cannot be achieved through new regulatory and non-regulatory requirements alone. It must also be backed up by effective financial supervision".

Interestingly, whilst the paper is concerned with financial institutions, it is noted (at p. 3):

... the Commission will soon launch a broader review on corporate governance within listed companies in general and, in particular, on the place and role of shareholders, the distribution of duties between shareholders and boards of directors with regard to supervising senior management teams, the composition of boards of directors, and corporate social responsibility".

For further information see: press release | press conference video | faqs | Commission consultation page | Commission staff working document: lessons from the financial crisis | other proposals announced: credit rating agencies : remuneration : financial services regulation |

Germany: draft of revised Code published

The Government Commission on the German Corporate Governance Code met last last week to recommend changes to the Code. The changes focus on gender diversity on supervisory boards as well as board training and education. For further information see the press release published following the meeting, available in English here (pdf). A draft of the new Code has not yet been published in English but a copy, in German, is available here (pdf).

Update (3 June 2010): a copy of the draft code, in English, is available here (pdf).

UK: boards and gender diversity

The Telegraph newspaper has published findings from its Executive Pay Report 2010 concerning board diversity: see here. The newspaper notes:

... the number of women in FTSE 100 companies dropped 5pc in 2009. There were just 29 female executive directors, down one from 30 in 2008. Across the FTSE 250 there were just 39 women directors out of 950, although the figure rose from in 2008".

France: recent developments

Freshfields Bruckhaus Deringer LLP has published a short newsletter highlighting developments in law, practice and the AFEP/MEDEF corporate governance code, with regard to female directors and board composition: see here (pdf). The newsletter notes an interesting development:

An increasing number of CAC40 companies that had previously adopted a system of management with a separate chairman and chief executive officer are now choosing to combine these roles under the authority of a single individual, while counterbalancing this concentration of power with the appointment of a 'senior independent director' (sometimes also referred to as a 'vice chairman' or 'reference director')".

Canada: gender diversity and corporate boards

Catalyst has published a report titled 2007 Census of Women Board Directors of the FP500: Voices From the Boardroom. In the accompanying press release, the following summary is provided:

The report found that women’s representation on corporate boards in Canada remains remarkably low. Women held 13.0 percent of board seats in the FP500, up only one percentage point since 2005. In 2007, just over 40 percent of FP500 companies in Canada still had no women board directors ... Census interviewees suggested several reasons why the overall representation of women on corporate boards remains frustratingly low. They said the positions, opportunities, and networks that had been so vital to their own success are still not available or accessible to most women in corporate Canada. Interviewees stressed that reliance on informal “old boys’ networks” continues to be a significant factor in how new board directors are recruited".

UK: election 2010 - women on company boards - more from the Conservatives

With election day fast approaching, the Conservative Party has today pledged to introduce "new rules" to "get more women onto boards of public companies". The Party is not proposing that a certain proportion of board directors should be female but is instead proposing - in its Contract for Equalities document, available here (pdf) - that:

We will require the long list for directorship appointments to include 50 per cent female candidates. This will help ensure that companies recruit from a diverse pool of candidates. It will apply to executive directors as well as non-executive directors. We will require all non-executive director positions to be advertised to ensure that talented potential candidates have the chance to apply for boardroom vacancies".

Some questions and observations: do the Conservatives mean public companies or listed companies? What form will these rules take (board diversity is something being considered by the Financial Reporting Council as part of its review of the Combined Code)? Main Principle A.4 of the Combined Code provides that "[t]here should be a formal, rigorous and transparent procedure for the appointment of new directors to the board". It does not, however, follow that board posts are advertised, a point recognised by Principle A.4.6:

A separate section of the annual report should describe the work of the nomination committee, including the process it has used in relation to board appointments. An explanation should be given if neither an external search consultancy nor open advertising has been used in the appointment of a chairman or a non-executive director".

UK: survey of FTSE100 companies: environmental, social and governance issues

Ethical Investment Research Services has published a report titled FTSE100 snapshot: Trends in ESG performance, which explores the progress FTSE100 companies have made on environmental, social and governance (ESG) issues over the past 5 years. The report states that "FTSE 100 companies are making good progress on ESG issues, however a small minority of companies continue to demonstrate poor performance" and highlights the following findings (to quote directly from the report):

[1] Greatest improvements have been seen in environmental policy development, as well as human rights and supply chain management

[2] Progress has been slower in areas such as environmental disclosure, equal opportunities and board diversity

[3] Responsible investment, has and will continue to be, a key driver for improved corporate social responsibility

[4] Other drivers for improved performance include increased regulation, continued shareholder and stakeholder pressure or a recognition that proactive management of ESG issues can lead to competitive advantage

[5] The future trend is for continued improvement in management response and a widening of scope as ESG issues are increasingly viewed as business critical risk issues

The report is available here and a press release is available here.

Australia: Corporate Governance Principles and Recommendations - proposed amendments

The Australian Securities Exchange Corporate Governance Council has published an exposure draft containing proposed amendments to the Corporate Governance Principles and Recommendations (2007): see here (pdf).

Many of the proposed changes concern diversity at board level and throughout the company. For example, proposed recommendation 3.2 provides that "Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy" and that this policy "should include measurable objectives for achieving gender diversity". In this regard, diversity includes gender, age, ethnicity and cultural background.

Australia: ASX Corporate Governance Principles and Recommendations - proposed changes

The Australian Stock Exchange has published a communique in which it sets out a proposal to amend the Corporate Governance Principles and Recommendations to require listed companies, on a comply or explain basis, to adopt and disclose a diversity policy which includes measurable objectives relating to gender. This will require, inter alia, companies to disclose the number of women employees in the whole company, in senior management and on the board. 

UK: election 2010 - the Green Party manifesto

The Green Party published its election manifesto yesterday: see here (pdf). A permanent tax on bankers' bonuses is proposed along with the pledge that no one in a bank wholly or partly owned by the State should receive a bonus of more than £ 25,000. With regard to corporate governance, the manifesto contains the pledge to "[r]equire 40% of board members of larger companies to be female within five years". No definition of "larger companies" is provided and, presumably, the intention is for 40% to be a minimum threshold.

US: CalPers: Global Principles revised

The California Public Employees’ Retirement System (CalPERS) (the largest US pension fund) has revised its Global Principles of Accountable Corporate Governance. In a press release issued to explain the changes, CalPERS announced:

"The CalPERS Board today signaled the importance of environmental disclosure and diversity of corporate boards by expanding corporate governance guidelines for portfolio companies. The new guidelines will be added to the System’s Global Principles of Accountable Corporate Governance. These principles are used by CalPERS to vote proxies, engage management and boards of equity companies, and implement initiatives".

"The environmental guidelines are aimed at getting companies to disclose and act upon climate risks like carbon emissions that, if unaddressed, could diminish investment returns. The guidelines reference the 14-point "Corporate Governance Checklist" developed by Ceres, a coalition of investors, environmental groups and investment funds".

The revised Principles are available here. CalPERS has a corporate governance website: see here.

The role of public pension funds in corporate governance has recently been explored in Choi, S. and Fisch, J., "On Beyond CalPERS: Survey Evidence on the Developing Role of Public Pension Funds in Corporate Governance" (August 27, 2007), NYU Law and Economics Research Paper No. 07-30, available on SSRN here.

UK: Women in the City - Treasury Committee report published

The Treasury Committee has published its report Women in the City: see here (html) and here (pdf). Chapter two deals with women on boards. The Committee does not support law to require boards to have a minimum proportion of female directors but nevertheless endorses increased gender diversity. Specifically, the Committee states:

Concern about the under representation of women on boards can be about business performance as much as fairness. There is a consensus that an effective challenge function within a board is required in financial institutions, and that diversity on boards can promote such challenge. While it is impossible to know whether more female board members would have lessened the impact of the financial crisis, the arguments for fairness, improved corporate governance, a stronger challenge function and not wasting a large proportion of talent seem more than sufficient to conclude that increased gender diversity is desirable".

France: gender equality on listed company boards

A report in the UK's Guardian newspaper states: "In a bill submitted to the French parliament this week, all companies listed on the Paris stock exchange would have to ensure female employees made up 50% of their board members by 2015. If passed, a gradual implementation of the law would see businesses obliged to have women in 20% of board seats within 18 months, and 40% within four years".

USA: female directors on company boards

The Corporate Library has published research exploring the proportion of women on the boards of companies in the Russell 3000 index. The report is available for download here (some personal information is required). The report notes (to quote from its executive summary):

Almost 90 percent of S&P 500 companies do have at least one woman on their boards, which accounts for the perception in some quarters that women’s representation is widespread. However, only 60 percent of companies comprising the Russell 3000 as a whole, and only half of Russell 2000 companies, have at least one female director".

UK: FTSE100 boards and female directors

Cranfield School of Management has today published its 2009 Female FTSE board report. The report notes that 12% of FTSE100 board directorships are held by women and one in four companies have exclusively male boards. An overview of the report's findings is available here.