Posts Tagged 'Investors'

Investors fight for greater say on boards

by Stephen Foley for The Financial Times

A campaign to win shareholders a greater say over who sits on corporate boards has exposed a rift between some of the largest asset managers in the US.

Votes on so-called “proxy access” — the right for long-term shareholders to nominate directors — have passed at two US companies, but gone down to defeat at three others.

Over 100 US companies are facing votes on the proposal in the coming weeks, as proxy access has become the largest corporate governance cause of this year’s season of annual meetings.

Fidelity, one of the largest holders of US company shares through its popular mutual funds, is opposing the push for proxy access, even when a company’s management itself supports the idea.

But BlackRock, the world’s largest asset manager, has said it will support most of the proposals, while T Rowe Price and TIAA-CREF are among its most enthusiastic supporters.

Most of the proposals on the ballot this year have been put forward by large public pension funds, including the New York City retirement system and Calpers, the Californian public employees’ fund.

Vanguard, the $3tn asset manager whose stock market tracker funds hold a piece of most US companies, is voting against the bulk of the proposals, preferring a weaker form of proxy access than is on the ballot at most companies.

The public pension funds are pushing a plan that would allow a shareholder or group of shareholders who have held stock for three years, and who hold 3 per cent of a company between them, to nominate board directors. The Securities and Exchange Commission was originally going to make proxy access compulsory, but a legal challenge prevented it from doing so. Read more here.


Activist investors actually protect the status quo

by Eleanor Bloxham for Fortune

Shareholder activism can lull us into a false sense of security and make us forget that there are bigger corporate governance fish to fry.

The annual corporate shareholder-voting season is primarily a rite of spring. Although Apple, Disney, Deere, and Hewlett-Packard have already produced their voting materials, over 70% of Fortune 100 public companies that file these documents with the SEC send out their ballot notifications in March or April.

Although most votes by shareholders are not binding, the vociferous hyperbole around shareholder activism relies on war and sports analogies—lots of “them” and “us”—which sells newspapers and belies the very notion of “investor relations.”

But does this springtime ritual have any substance, as it does in the animal kingdom when males (or females,depending on the species) put on displays of strength, mark their territory, and secure dominance over their resources? And does the process really reform wayward companies and improve public trust in business and capitalism?

Robert A.G. Monks, co-author of the book Corporate Valuation and founder of Lens Governance Advisors, told me that there is a mythology around corporate governance and that the right questions don’t seem to be addressed amid the spectacle of proxy season. Consider the issues around corporate domicile or the responsibility of firms for the costs they impose on society, he says. Read more here.

Italy makes U-turn on loyalty shares

by Rachel Sanderson for The Financial Times

Italy has staged a U-turn on the issue of creating “loyalty shares” by Italian companies after pressure from some of the world’s largest institutional investors. The decision was seen as a sign of prime minister Matteo Renzi’s openness to foreign investment.

The step comes as Mr Renzi seeks to boost foreign investment to help pull Italy out of its triple-dip recession. It is also the 40-year-old reformist leader’s second strike against Italy’s corporate arcane governance rules in as many months as the government is already seeking a shake-up of its hidebound mutual banks sector.

The decision over so-called loyalty shares follows an open letter this week from more than 100 investors including Fidelity, Aviva, Threadneedle Investments, Schroders and UBS, academics and board members who had called on Mr Renzi to strike down a provision supporting the creation of multiple voting rights at Italian listed companies which they said made Italy hostile to foreign investment. Read more here.


For markets there is such a thing as too much information

by Philip Augar for The Financial Times

Two very different companies made significant announcements last week. National Grid, the UK utility company, said it would no longer issue formal quarterly reports — an important piece of news for its investors, who took it in their stride. The next day, Apple gave its regular quarterly update. Investors sent the company’s share price soaring after learning that strong holiday sales pushed it to the largest profit of any public company in history.

The investors’ reactions raise two questions. Is the economy better served by frequent corporate reports, or by statements when meaningful events occur? And does the timing of reports contribute to short-term attitudes among investors and corporations? Read more here.


Corporate governance in Latin America – A guide for investors


BNamericas Report

As part of their Financial Services Intelligence Series, BNamericas has launched the publication “Corporate governance in Latin America – A guide for investors” by Andreas Grimminger.

“The inherent potential conflicts between the different stakeholders in a corporate structure manifest the need for corporate governance. Over the past decade, the major Latin American markets have seen various reforms in law and regulation, along with the issuance of voluntary corporate governance codes and the setup of institutes dedicated to the advancement of corporate governance. Nevertheless, critical issues still remain, many of which have great relevance for investors in Latin American companies. At the root of corporate governance issues in Latin America lies the concentrated ownership structure of corporations and lack of market depth in the region. Consequently, shareholder rights, especially for minorities, the handling of related-party transactions, the disclosure of company information, and nomination procedures for the board of directors all gain additional importance to align the interests of majority owners and external minority investors. This report addresses these issues and points out trends in corporate governance and challenges for investors.”

The report includes quotes and contributions from Latin American corporate governance experts Sandra Guerra, Santiago Chaher, Francisco Prada, among others.

Santiago Chaher, managing director of Cefeidas Group, points out that “in countries like Argentina where investors face the additional challenge of a more actively involved public sector, corporate governance becomes of great value—for example through strategy and effective controls—as a way to better articulate the public-private sector relationship.”

To access the report you must click here and be a BNamericas subscriber.

Raising the Bar on Corporate Governance: A Study of Eight Stock Exchange Indices

2013, IFC

Study Finds Corporate Governance Indices Could Have Positive Benefits in Emerging Markets

A new report from IFC and the World Bank finds that Corporate Governance Indices (CGI) can raise a country’s overall corporate governance standards and can offer companies possible financial and investment benefits from corporate governance improvements.

The following are six key findings of the study:

1.  Corporate governance indices can be an effective market solution in addressing legal and regulatory gaps, and in enhancing corporate behavior and company’s visibility.

2. Evidence suggests that indices based on binding listing rules allow greater access to capital than those based on corporate governance codes or other scoring mechanisms.

3.Investors recognize the importance of corporate governance in their investment decisions, and the difficulty in gathering related information, especially in emerging markets. If set up correctly, CGIs can address that information gap.

4.Given the qualitative nature of CGIs, investors need to properly understand the building blocks and methodology an index is based on, as information and expectation asymmetry may pose unforeseen risks.

5. In most CGIs, key challenges for investors remain: access to index information and rating methodology is limited, and company evaluations are rarely made public.

6.Virtually all CGIs have had strong constituent growth. However, most are struggling to beat the benchmark index.  This often reflects the overlap of constituent companies and a lack of depth in the capital markets. Continue reading…

Big investors should follow code of conduct, advocate says

By Janet Mcfarland, June 18th 2013, The Globe and Mail

The world’s largest investment funds – including pension plans and mutual funds – should adopt a code of conduct to ensure they will wield their growing power appropriately in a new “age of the institutional investor,” according to Stephen Davis, a leading governance advocate.

The Harvard University professor spoke Tuesday at the annual meeting of the Canadian Coalition for Good Governance (CCGG), telling Canada’s largest institutional investors that governments have increasingly shifted power to major investors in the hope they will police the capital markets.

The problem with this “big bet,” he said, is that most funds are not equipped to do so.

“We have to make ownership meaningful,” Mr. Davis said. “We’ve spent years on reform of governance of public corporations. Now we need to turn those energies to mobilizing prudent ownership among institutional investors. Continue reading…

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Cefeidas Group



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