Japan’s reforms push companies to unlock cash

by Jean-Christophe de Swaan for The Financial Times

Decades from now, if Abenomics turns out to be successful, economic historians will probably pinpoint Japanese prime minister Shinzo Abe’s corporate sector initiatives of 2014-15 as the era’s seminal reforms.

This set of self-reinforcing changes is fast gathering pace in pressuring corporate leaders to unlock their dormant cash. Few initiatives could be more effective in revitalising Japan’s economy.

The reforms are undervalued. Corporate governance reforms generally tend to be looked upon as peripheral to a government’s central policy thrust. Foreign investors have also lost interest in Abenomics, having seen the consumption tax rise erode growth and the initial laundry list of “Third Arrow” restructuring reforms peter out.

Rather than mandating change, Mr Abe’s corporate reforms forcefully nudge companies to focus on their capital efficiency by deploying one of the most effective tools in Japanese society — the threat to become, as the Japanese saying goes, the proverbial nail that sticks out and ends up being hammered.

The latest initiative, a new corporate governance code finalised on March 5, urges companies to engage with their outside shareholders, take on at least two independent board directors, and reconsider their cross shareholdings and anti-takeover measures. They can choose not to follow that advice, but will have to explain in detail why they are continuing to adopt policies the government is actively discouraging. Read more here.

 

 

UK’s Top Boardrooms Look Set To Hit 25% Women Target

by Dina Medland for Forbes

Women now make up 23.5% of non-executive director positions on the boards of Britain’s top FTSE 100 listed companies. Just 17 more female appointments to these boards are needed to reach the 25% female target by end-2015 set by Lord Davies of Abersoch four years ago in his review for the UK government on the under-representation of women on boards.

“The rate of change that we have seen in FTSE 100 companies over the last four years has been remarkable. The voluntary approach is working, boards are getting fixed” Lord Davies will say at the launch of his report in London today.

“FTSE 100 boards have made enormous progress in the last four years, almost doubling female representation to just shy of 25 per cent.  We must celebrate this outstanding achievement and the change in culture that is taking hold at the heart of British business. The evidence is irrefutable: boards with a healthy female representation outperform their male-dominated rivals” Vince Cable, the UK Business Secretary who commissioned the Davies Review, will say today.

The authors of the Female FTSE Board Report 2015 - who include Professor Susan Vinnicombe CBE, Dr Ruth Sealy and Dr Elena Doldor of Cranfield University’s School of Management -  say that if the appointment rate of one woman to every two men appointed is sustained over the coming months, the 25% target should indeed be met before the end of this year.

Women in leadership: An investing strategy that’s working

by Clare O’Hara for The Globe and Mail

While there are no investment products in Canada that focus exclusively on gender diversity, that doesn’t mean fund companies are turning a blind eye.

Fund families such as NEI Ethical Funds, OceanRock Meritas Funds and IA Clarington Inhance SRI Funds are starting to integrate gender diversity issues into their investment approaches as part of their socially responsible investing (SRI) strategies.

“The SRI fund companies have been successfully involved in engagement on gender diversity issues,” says Deb Abbey, CEO of the Responsible Investment Association. “They have been engaged in dialogue with many of the companies in their portfolios and have been actively voting their proxies in favour of gender diversity on boards.”

Last year, the Ontario Securities Commission implemented a new rule that requires companies to provide more transparency on their policies to add more women to their boards of directors and senior management ranks. Read more here.

Britain’s broken corporate governance regime

by Jeroen Veldman and Hugh Willmott for The Conversation

Just six days after Britain unveiled its improved flagship set of guidelines for good corporate governance there was a Tesco-shaped party pooper lurking around the corner.

The supermarket giant admitted to accounting flaws that wiped hundreds of millions off its stock price, graphically demonstrating that the flawed accounting and audit culture that provided the basis for the Cadbury Report in 1992 is still very much present.

It also shows that the claim to continuous “improvements” underlying the UK Code of Corporate Governance has, over the past 23 years, amounted to little more than a minor face-lift and offers no greater protection for shareholders, employees, suppliers and others exposed to such scandals.

Investor power

Of course, the UK is not alone in worrying about this. Major US investment house Vanguard has put its $3 trillion in assets behind a call for changes in corporate governance which adds to the pressures to revisit and reform relations between directors and stakeholders. The firm’s CEO, Bill McNabb is reported as saying: “What you hope it leads to is not a lot of short-termism but discussion about important long-term issues.” Read more here.

Germany Sets Gender Quota in Boardrooms

by Alison Smale and Claire Cain Miller for The New York Times

Germany on Friday became the latest and most significant country so far to commit to improving the representation of women on corporate boards, passing a law that requires some of Europe’s biggest companies to give 30 percent of supervisory seats to women beginning next year.

Fewer than 20 percent of the seats on corporate boards in Germany are held by women, while some of the biggest multinational companies in the world are based here, including Volkswagen, BMW and Daimler — the maker of Mercedes-Benz vehicles — as well as Siemens, Deutsche Bank, BASF, Bayer and Merck.

Supporters said the measure has the potential to substantially alter the landscape of corporate governance here and to have repercussions far beyond Germany’s borders.

In passing the law, Germany joined a trend in Europe to accomplish what has not happened organically, or through general pressure: to legislate a much greater role for women in boardrooms. Read more here.

The Morning Risk Report: Cybersecurity Responsibility Falling to Boards

by Ben Dipietro for The Wall Street Journal

U.S. regulators this year are emphasizing the importance for corporate boards to take responsibility for cybersecurity, saying directors and officers who fail to do so could be held individually liable for any lapses that occur, attorneys said Tuesday during a webinar on the subject. This means boards must put in place the proper teams and prepare plans to prevent any breaches and to respond to any that may occur. Particularly in the last three to four months there has been intense focus by regulators on this subject, largely directed to directors and officers, said John Failla, a partner in Proskauer Rose’s insurance group.

Regulators are “trying to articulate responsibilities to board to prevent, address, mitigate and transfer risks for this issue,” said Mr. Failla. In the webinar, he cited a speech from Securities and Exchange Commission Commissioner Luis Aguilar in June 2014 in which he “made it abundantly clear” the SEC views boards as being a critical part of risk management in this area. “Boards need to work with management to assess cyber controls, to make sure they match up with or exceed federal frameworks” and to make sure directors are educated about risk and technology and take the time to address these issues. The Financial Industry Regulatory Authority and the Federal Trade Commission also are focused on this topic, he said. Read more here.

Funds Learn to Say No as Boardrooms Challenged: Corporate India

by Santanu Chakraborty and Bhuma Shrivastava for Bloomberg

Money managers in India’s $1.7 trillion stock market are no longer giving rubber-stamp approval to the nation’s corporate boards.

Local mutual funds voted to reject 6.6 percent of the proposals presented to shareholders in the nine months ended December, up more than fourfold from the year to March 2013, India’s securities regulator said in an e-mailed response to questions from Bloomberg News. Their participation rate in shareholder votes jumped to 83 percent from 49 percent, spurred by new disclosure rules that require fund managers to provide a rationale for their decisions to investors.

The more assertive stance from minority shareholders prompted United Spirits Ltd. to modify plans to loan money to companies run by its former chairman and led Maruti Suzuki India Ltd. to put on hold a proposal to transfer a new factory to its parent. While India still lacks the type of activist investing personified by U.S. billionaire Carl Icahn, funds’ growing willingness to challenge management may help improve governance in a nation ranked 94th out of 144 countries for the efficacy of its corporate boards by the World Economic Forum. Read more here.


Blog coordinator

Cefeidas Group

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