Posts Tagged 'The Financial Times'

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.

 

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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.

 

 

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.

 

What if Europe’s problem isn’t a lack of liquidity?

by Ferdinando Giugliano for The Financial Times

Since the onset of the global financial crisis, the European Central Bank has been desperate to funnel cash into the eurozone’s financial system, in the hope this would boost investment and growth.

Yet, despite steep cuts to interest rates and several rounds of cheap loans to banks, the eurozone is still struggling to get enough investment projects off the ground. Last week, the ECB launched an ambitious programme of quantitative easing aimed at prompting banks to lend more by lowering the interest they receive on government bonds.

But what if Europe’s investment problem was not the result of a shortage of liquidity?

A new study by the Centre for Economic Policy Research, a research network, and Assonime, the Italian association of joint-stock companies, argues that Europe’s investment gap may actually be the consequence of widespread flaws in the governance of European companies and banks, rather than simply the result of insufficient financing. Read more here.

Long-serving non-executives are on the wane in the UK

by Alison Smith for The Financial Times

The UK’s biggest public companies are increasingly ready to say goodbye to long-serving directors.

The number of non-execs who have been in the post for more than nine years at FTSE 100 groups has dropped by more than a quarter since February. Analysis by the Financial Times shows that the total is 73, against the 97 identified in a report by Cranfield School of Management earlier this year.

Nine years as a non-executive is a critical period in corporate governance terms, since after that point the UK code says non-execs can no longer be assumed to be independent of the company. Read more here.

 

Alibaba shareholder disenfranchisement: worse than you think

by Donald Clarke for FT Alphaville

Alibaba shareholders are aware that they can’t elect a board majority even if they hold a majority of shares. But they might be surprised to learn that they can’t evennominate directors—any directors—let alone elect a few to a board minority, no matter how many shares they own.

By now everyone knows about Alibaba’s special governance structure. News reports and Alibaba’s own disclosures tell us that the founders, via an entity called the Alibaba Partnership, can appoint a board majority no matter how few shares they own. What seems to have escaped general notice, however —and is nowhere specifically stated in the prospectus —is how the rest of the board is selected. Remarkably, public shareholders have no right even to nominate directors, let alone elect one, no matter how much stock they own. Read more here.


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