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

Corporate Governance Roundup: IIRC Seeks Integrated Reporting Input, Hong Kong Keeps Company Director Details Public, and More

From the state of corporate governance in Asia and integrated reporting globally to the United Kingdom’s launch of two new regulators in place of the Financial Services Authority (FSA), it’s time to span the corporate governance globe to review important developments from the month of April.


Integrated reporting.

Don’t worry if you don’t know what it is yet — you’ll definitely be hearing more about it in the future.

Following early initiatives by the Global Reporting Initiative (GRI) and various other bodies that take linked-up narrative, sustainability driven reporting seriously (UNPRI, ICSA, etc.), the latest offering for comment in this space emanates from the International Integrated Reporting Council (IIRC), whose website states:

At the heart of <IR> (integrated reporting) is the growing realization that a wide range of factors determine the value of an organization — some of these are financial or tangible in nature and are easy to account for in financial statements (e.g., property, cash), while many are not (e.g., people, natural resources, intellectual capital, market and regulatory context, competition, energy security). <IR> reflects the broad and longer-term consequences of the decisions organizations make, based on a wide range of factors, in order to create and sustain value.

In the meantime you can add your two cents and help shape what the integrated reports of the future may look like. Starting on 16 April, during the 90 days leading up to 15 July, the IIRC is asking for input and that all stakeholders across the world read the Consultation Draft of the International <IR> Framework. The IIRC asks you to understand it, challenge it, critique it, and give feedback about what parts you feel work and what parts don’t. The aim is to create a framework that will help businesses communicate value in the 21st century.


Singapore and Hong Kong lead Asia on corporate governance, while the Philippines and Indonesia bring up the rear according to a recent briefing on corporate governance in Asia by the Asian Corporate Governance Association (ACGA).

Asia as a whole lags other markets on corporate governance standards according to the report. However, the Philippines and South Korea showed the most improvement in corporate governance matters in the last two years. The presentation comes from ACGA’s biennial survey, which was released last September and includes country-by-country summaries of the 11 markets. We recommend you take the time to read any work put out by ACGA, as it is always thorough and informative, and this report is no exception.

Some highlights/lowlights from the report:

Northern Asia

  • Japan, Korea, and Taiwan share certain cultural, legal, and political similarities that, in combination, impede and undermine fundamental corporate governance reform.
  • The countries/regions are hierarchical and have relatively more closed corporate cultures.
  • An ongoing battle exists between regulators, conservative business interests, and legal scholars over company law and board reforms.
  • Weak governments lack consensus on corporate governance reform and show little leadership.
  • China is listed in a separate category as its issues are more political.

Southern Asia

  • Smaller economies, the Association of Southeast Asian Nations (ASEAN) integration, and more exposure to competitive forces may equal more national focus on corporate governance.
  • There are substantive differences between the ASEAN 3 (Singapore, Malaysia, Thailand) and North Asia. These include:
    • Clearer policies on basic aspects of corporate governance, particularly board reform and shareholder rights.
    • Fairly well-established eco-systems supporting director training and board development.
    • Stronger governments with clearer, more consistent corporate governance policies.
    • Leadership in the development of independent audit regulators.


An investor campaign led by Hermes Equity Ownership Services, Aberdeen Asset Management, and F&C Investments helped nominate board candidates for the state-controlled energy company Petroleo Brasileiro SA (Petrobras). Negotiations, which have been going on since late 2012, also resulted in the investors for the company’s audit committee putting forward two candidates.

In 2012, Petrobras investors complained after the government, which has a controlling stake in the company, placed directors with government ties in board slots reserved by law for minority shareowners.

The move is a first in Latin America’s largest economy and reflects an increase in activism by minority shareholders. However, information regarding the candidates was not disclosed in advance of the AGM, meaning investors often had insufficient notice to make informed decisions. Such transparency issues also affect companies in other Latin American countries.

Candidates for the Petrobras’s board of directors are Mauro Gentile Rodrigues da Cunha, CFA, and Jorge Gerdau Johannpeter.

Hong Kong

The government of Hong Kong decided to forgo proposed legislation that would restrict public access to the personal details of company directors after vociferous opposition from investors, unions, businesses, and journalists.

This is an issue we highlighted back in February, and it looks like things have come to a satisfactory resolution. Financial Services and the Treasury Bureau removed provisions obscuring company directors’ residential addresses and full identification numbers from an updating of Hong Kong’s companies ordinance.

Bloomberg journalists used the data last year to expose assets held by the families of Chinese leaders such as new Chinese President Xi Jinping. Hong Kong corporate governance activist David Webb also used it for his index of corporate directors, which he suspended in February after an inquiry by Hong Kong’s Privacy Commissioner for Personal Data.


The Tokyo Stock Exchange recently published and English version of A Handbook on Practical Issues for Independent Directors/Auditors. The handbook offers a refreshing exploration of why Japanese issuers need independent directors. The handbook points out that while all directors should consider the interests of shareholders, in practice Japanese boards are often beholden to a company’s CEO.

The move toward independent directors in Japan may be gathering steam and has been aided by proxy adviser Institutional Shareholder Services’ (ISS) new policy this year requiring an independent board member and by market leader Toyota’s recent decision to nominate three outside board members. We will have to wait and see whether other companies follow Toyota’s example in the June proxy season.

United Kingdom

The U.K. Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) both launched in April as the successors to the FSA. The PRA regulates the financial stability of banks, insurers, and investment firms, while the FCA oversees financial firm conduct toward retail and wholesale markets.

As prudential regulator, the PRA will promote the safety and soundness of financial firms, seeking to minimize the adverse effects that they can have on the stability of the U.K. financial system, and contribute to ensuring that insurance policyholders are appropriately protected.

The single strategic objective of the FCA will be to protect and enhance confidence in the U.K. financial system.

Its three operational objectives will be:

1.   Securing an appropriate degree of protection for consumers

2.   Promoting efficiency and choice in the market for financial services

3.   Protecting and enhancing the integrity of the U.K. financial system

United States (with prodding from U.K .and Netherlands funds)

We have all heard the old saying that the key to any healthy relationship is communication. Well, it seems that the same goes for the relationship between a board and its shareowners. The UK’s Railpen Investments and the Dutch fund PGGM Investments certainly think so, as they recently called on independent directors at U.S. companies to develop suitable strategies that address their responsibility to communicate with shareholders.

According to both fund groups, companies with significant governance concerns are increasingly recognizing the value of their independent directors engaging with shareholders. The funds are encouraged that some independent directors are actively seeking input from their shareholders to pre-emptively manage situations, while others are interested in understanding shareholder views on certain matters. They advocate for independent director meetings with shareholders to become a routine part of a board’s approach to outreach with its shareholders, rather than only in exceptional circumstances or in times of crisis.

We tend to agree as much of what is suggested by Railpen and PGGM echoes the communications recommendations we made in last year’s Visionary Boards report.

The funds claim that increased dialogue is needed for a number of reasons, most prominently:

  • To establish trust and understanding
  • To create a culture of no surprises
  • To assess the quality and independence of directors
  • More effective boards
  • More informed shareholders

We are already seeing more dialogue between boards and institutional investors in the U.S. due to mandatory “say-on-pay” votes and majority voting for directors at many companies. Here’s hoping that efforts to increase the communication between boards and investors continues.

Photo credit: iStockphoto/YinYang

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

Matt Orsagh, CFA, CIPM, is a senior director of capital markets policy at CFA Institute, where he focuses on corporate governance, ESG, and climate change analysis. He writes and speaks frequently on these topics on behalf of CFA Institute. His paper, Climate Change Analysis in the Investment Process was named “Best ESG Paper” by Savvy Investor in 2021.

1 thought on “Corporate Governance Roundup: IIRC Seeks Integrated Reporting Input, Hong Kong Keeps Company Director Details Public, and More”

  1. mohtavaclick says:

    I am genuinely delighted to read this blog posts which includes lots of useful facts, thanks
    for providing these kinds of statistics.

Leave a Reply

Your email address will not be published. Required fields are marked *

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.