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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.
3 Corporate Governance Trends: July 2015
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
4 Corporate Governance Trends: July 2015
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
5 Corporate Governance Trends: July 2015
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
6 Corporate Governance Trends: July 2015
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