Views on improving the integrity of global capital markets
01 April 2013

Corporate Governance Roundup: National Securities Regulation in Canada, Executive Pay in Germany and Greece

From plans to develop a national securities regulator in Canada and emerging executive-pay-plan voting rights in Germany to analyzing the independence of independent directors in Spain, it’s time to span the corporate governance globe to review important developments from the month of March.


The Canadian government plans to give it a go once more and try to set up a national securities regulator, regardless of whether all provinces sign on. The recently published 2013 federal budget provided details about the plan, which would continue funding for the Canadian Securities Transition Office — which has reached out to the provinces after the Supreme Court of Canada vetoed plans for one regulator.

The plan includes a comprehensive risk-management framework for Canada’s systemically important banks, including higher capital requirements and “bail-in” requirements for failing banks — under which a bank would be recapitalized through the very rapid conversion of certain bank liabilities into regulatory capital.


The German government is joining the growing number of markets allowing shareowners the right to vote on executive pay plans. The proposed law is meant to increase transparency around compensation, bring more pay practices to light, and does not include strict pay caps found in recent EU and Swiss legislation.


You’d think that Greece might have more pressing problems than reining in executive compensation, but they are jumping on the European bandwagon to address the issue nonetheless.

Revisions to the Greek corporate governance code proposed by the Hellenic Corporate Governance Council introduce new requirements on director independence and related-party transactions.


A recent meeting of the International Corporate Governance Network in Italy touched on a topic currently at the heart of proxy season in the United States — proxy access (see section on the United States). One session of the meeting focused on Italy’s slate voting law that allows shareowners to submit nominations for minority director candidates at a company’s annual meeting. The goal is to the protect minority shareowner rights against the shareowners with a controlling interest at the company, which is common at many Italian companies. Investors have gained a handful of directors on a few boards each year since 2007.


Director independence may not be what it is advertised to be. That is the conclusion of a recent paper, Stretching the Truth or Lying? The Independence of ‘Independent’ Directors. The paper analyzes the misclassification that firms give their independent directors. Researchers found that independent directors, as declared by firms, represented 32.5% of the board. A filter of eight criteria of “independence,” based on publicly available information for a panel of Spanish firms, reduces the proportion of strictly independent directors to 14.2%. Researchers found that manager-controlled firms, with a dispersed ownership, had misclassification rates significantly higher than firms with large controlling owners.

United Kingdom

The U.K. Institute of Chartered Secretaries and Administrators (ICSA) urged companies to meet more with key investors to discuss the firms’ strategies and long-term performance. The report suggests annual “engagement meetings” take place months after the company’s annual meeting and should include board and committee chairs and senior independent directors. Some of the recommendations sound similar to some of those endorsed in CFA Institute’s own visionary boards report issued in 2012, as well as others in the corporate governance world who have called for an increased dialogue between issuers and investors.

United States

Corporate Political Spending

2013 is not an election year in the United States. Nevertheless, the issue of corporate political spending still dominates the list of shareowner proposals in the U.S. this year. Such proposals linked to political spending or lobbying make up one-third of the 365 shareowner resolutions filed on environmental and social issues according to Proxy Preview 2013.

Proxy Access

Just fewer than 70% of Hewlett-Packard shareowners approved a management proposal that would grant shareowners the right to access the proxy at the company annual meeting in March — thus allowing shareholder nominations for board positions.

Here is the fine print:

  •   Shareowners must own 3% of the company’s shares
  •   Shareowners must hold the shares for three years
  •   The rule is only to nominate directors, who then must be voted on by all shareowners
  •   Shareowners can only place three directors on the ballot (the board currently has 14 members)

Seeing as only one investor (BlackRock) currently meets these criteria, we don’t expect any nominations to the Hewlett-Packard board anytime soon.

A number of companies have followed Hewlett-Packard’s lead and are offering their own proxy access proposals — with higher ownership and holding period requirements — in order to head off proxy access proposals by investors. Tune in at the end of proxy season in the U.S. (June) to see the results.

Photo credit: ©

About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a director of capital markets policy at CFA Institute, where he focuses on corporate governance issues. He was named one of the 2008 “Rising Stars of Corporate Governance” by the Millstein Center for Corporate Governance and Performance at the Yale School of Management.

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