12 March, 2020
A large number of remuneration committees and boards of listed companies will be reviewing and updating the directors’ remuneration policy for shareholder approval at this year’s AGM.
Here is a summary of the recently issued voting policy guidelines for 2020 from the proxy voting advisory services, Glass Lewis and Institutional Shareholder Services (‘ISS’), as well as the key changes to the Investment Association’s (‘IA’) Principles of Remuneration for 2020. The points noted below relate primarily to remuneration and pension matters, however there are some broader points around diversity, independence, chair tenure that are not included here.
Institutional Shareholder Services
ISS updated guidelines will be effective for meetings from 1 February 2020.The main remuneration changes to the 2019 ISS Guidelines are:
The Investment Association
The IA published its revised guidelines on 1 November 2019, the key changes for which include:
The key changes for the 2020 voting season are:
GL will also review compliance with the Investment Association’s Principles of Remuneration when considering voting recommendations.
If you need more information please contact us at email@example.com
26 February, 2020
1 October, 2019
EMPLOYEE AND WORKFORCE REPORTING – 2019 ANNUAL REPORTS
As the reporting season approaches it is worth a reminder of the new requirements on workforce and employee reporting.Implementation of any reforms to address these new obligations may well be underway and it is important to ensure that the updated measures from the UK Corporate Governance Code 2018 as well as other corporate law and regulations are reported on appropriately.
The UK Corporate Governance 2018 Code (‘2018 Code’) states that the Board needs to understand the views of the company’s key stakeholders and report on how they have considered these in Board discussions and decision making.Engaging with the workforce can, as recommended by the Code, be achieved by having a director from the workforce; a workforce advisory panel; a designated non-executive director or combination of these.The Board Effectiveness Guidance 2018 explains that the overall aim is for meaningful and regular dialogue with the workforce.However, if the Board does not use one of these methods it should explain what alternative arrangements are in place and why.
As our January blog noted, The Companies (Miscellaneous Reporting) Regulations 2018 (the ‘ 2018 Regulations’) which came into force from 1 January 2019 requires all companies with 250 UK employees or more to detail in their annual report how directors have engaged with employees and the effect of their regard for employee interests on principal decisions made by the company in the financial year.
The 2018 Regulations requires certain companies to report on how boards have had to regard to s172 of the 2006 Companies Act being to promote the success of the company, and in particular to give details in the strategic report of how directors have had regard to employee interests as well as how they have built relationships with other stakeholders.
For quoted companies with more than 250 UK employees, there needs to be a pay ratios table in the upcoming report setting out the CEO:UK employees pay ratios, as well as explanations in the directors’ remuneration report.
The 2018 Code states that the Remuneration Committee should review workforce remuneration and detail how this, along with other factors, have been considered when setting the policy for executive director remuneration.As many companies will be putting their remuneration policy for approval at the 2020 AGM there could be increased scrutiny in this area.New provisions about aligning pension contributions with the workforce will also need to be addressed.
There are different reporting requirements depending on the type of company and should you require any further guidance of which parts apply please contact Anne-Marie Palmer (firstname.lastname@example.org; 07803 171 644) if you would like to discuss further.
1 August, 2019
AGM 2019 – PROVISION (4) 2018 UK CORPORATE GOVERNANCE CODE
As the main AGM season draws to a close, it can be easy to assume that with the meeting completed and resolutions passed, that general meeting matters can be parked until next year.However under the 2018 UK Corporate Governance Code (the ‘Code’) it is now a requirement for companies that received 20 per cent or more votes cast against the Board recommendation for a resolution to report within 6 months of the meeting and in the following annual report on actions taken in response to the vote received.(Provision (4) Code)
In the voting results announcement issued after the AGM, companies that comply with the Code, should have made a statement about any resolution that received a significant vote against.It is now appropriate for the Board to consider next steps on investor engagement, in readiness to report initially on its activities in the 6-month update statement.
Investment Association Public Register
The Investment Association set up the Public Register to track shareholder dissent at listed companies and records companies within the FTSE All Share that had received significant votes against resolutions at general meetings.The register is updated periodically, and it is likely that if a company is on the Register, they can expect additional scrutiny on all resolutions the following year.
6-Month Update Statement
Companies are required to provide an update on the views received from shareholders and actions taken and publish this update on the website, within 6 months of the meeting. The Investment Association has put together some guidance on what they expect to see in the Update Statements, namely that Statements should be standalone, describe the engagement undertaken and what actions have been taken and what future actions are intended.
Whilst the Statement should provide a meaningful update, companies are required to provide a final summary of what feedback it received and the actions and taken within the next annual report, or if applicable in the explanatory notes to the resolutions for next year’s meeting.It is not expected that everything will have been completed within 6 months.
There are some common actions that companies can undertake in readiness for preparing their 6-month statement, whatever the subject matter of the resolution that received the votes against:
Please contact Anne-Marie Palmer (email@example.com; 07803 171 644) if you would like to discuss further.
4 April, 2019
AIMING TO BE AGM READY
As the 2019 AGM season is now underway, boards of directors should be briefed on the voting guidelines and principles recently published by proxy advisors and investment groups.These are followed by many investors and raise a number of new governance issues that may not have been formally reported on yet, as well as give updates on issues covered in previous years.
Investors and proxy advisors will be analysing reports and company announcements for statements and indicators of how companies are attempting to address these topics.Whilst the requirement to report against the 2018 UK Corporate Governance Code is not expected until next year, companies should be ready to respond either during results calls, in investor meetings or at the AGM itself on the company’s approach to a particular matter and any steps being taken in readiness for next year.AIM companies should also take appropriate note of the guidelines and principles published as they cover many of the topics that they will have been assessing recently following adoption of recognised governance code.
Whether the matters have not been formally disclosed or indeed are issues that have been addressed in the annual report but would benefit from further explanation, directors may want to be proactive in contacting investors to discuss these matters in advance of the AGM during the proxy voting season. This may assist in ensuring the smooth running of the AGM itself.
Bruce Wallace Associates can assist in preparing for your AGM, either in relation to governance matters or in terms of preparation and running of meetings.
Please contact Anne-Marie Palmer (firstname.lastname@example.org) if you would like to receive further details on each of the guidelines and principles which have been published for the 2019 AGM season, including:
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