Views on improving the integrity of global capital markets
06 January 2015

Corp Gov Roundup: European, Global Economic Risks; Two Take Whole Foods’ Tack on Proxy Access

It’s time to span the corporate governance globe to review important developments in December, among them new voting guidelines in Switzerland, a report from UK insurer Aviva on potential risks to European and global economic growth, and two more companies follow the lead of Whole Foods Market on the issue of proxy access in the United States.


In Brazil, Petrobras keeps giving us good corporate governance stories. In early December, the Brazil market regulator (CVM) fined the company’s CFO $98,000 for compromising the rights of the its minority shareowners. The CVM found that the company used a state pension fund and development bank to vote in directors with government ties to slots reserved by law for minority investors. (The Brazilian government is a controlling shareowner at Petrobras.) This follows the arrest in November of 18 individuals related to longstanding corruption allegations at the company.


French fund PhiTrust has launched an engagement effort asking CAC 40 firms to retain a one-share, one-vote standard (link in French). The efforts are meant to forestall legislation passed early in 2014 that provides some investors with double voting rights starting in 2016. PhiTrust claims the law would act as an entrenchment tool for management and boards, making it harder for investors to force change at poorly performing companies.

The planned law would especially harm the rights of foreign shareowners as it applies only to registered shareowners that hold stock for two years, and many foreign shareowners own bearer shares that would not qualify for the special voting rights.


For those of you waiting for an English translation to Japan’s recent corporate governance code — yes both of you — your wait has ended. The English version of the code can be found at the Japanese Financial Services Agency (FSA) website, here. The code calls for issuers to respect shareowner rights, especially those of foreign and minority owners, and to increase engagement outside the annual general meeting.

Of the many issues covered, the code calls for companies to: engage with shareowners, make it easier for foreign shareowners to vote their shares and attend meetings, provide more transparency about cross-shareholdings, and have at least two independent outside directors and independent directors. The Tokyo Stock Exchange will adopt the code as its listing standard starting in June after an FSA consultation period.

Any comments are requested by the end of January.


In Switzerland, the Ethos Foundation published its voting guidelines for 2015. According to the guidelines, a “no” vote recommendation will now be issued when certain governance rules are not followed. In the future, Ethos will oppose the discharge if the board of directors does not include at least four members, and it will refuse the election of the chairman if he also serves as CEO.

United Kingdom

UK insurer Aviva recently published what it has called a Sustainable Capital Markets Union manifesto in response to the European Commission’s Capital Markets Union proposals. The report states that over the coming decades Aviva sees a new strategic risk to European and global economic growth from two sources:

  1. Unsustainable economic activity that assumes unlimited natural resources. This creates a fundamentally flawed pricing system in capital markets.
  2. Capital markets that are systematically short term. This magnifies the problems associated with a flawed pricing system.

To tackle these challenges there are four broad areas of policy action required, according to Aviva:

  1. Better information, better companies, better growth — the more the right kind of information is available to investors about companies, the better the investment decisions.
  2. Reward for long-term success not failure — short-termism remains in incentives for those in the financial sector. We need to align incentives with long-term performance and sustainability.
  3. Capital for sustainable growth — Aviva believes growth has to be robust and sustainable. Policymakers can help create that environment.
  4. Improving responsible ownership — Increasingly, we are all owners of companies through our pensions. It is crucial we all understand how our money is used to influence and encourage responsible investment.

United States

Not long ago, we reported on the decision by SEC staff that allowed Whole Foods to exclude a resolution for proxy access from its upcoming shareholders meeting. The SEC agreed that a Whole Foods Market shareowner proposal conflicted with its proxy access proposal. The shareowner proposal in question called for proxy access if a shareowner owned 3% of the company’s shares for three years.

The proposed Whole Foods Market proxy access proposal that “conflicts” with the shareholder proposal requires a shareholder to hold 9% of the company’s shares for five years. Companies have wasted no time in following the lead of Whole Foods, as Marathon Oil and Cabot Oil are among the 10 companies that have requested no-action letters from the SEC to exclude shareholder proposals on proxy access due to plans to include conflicting management proposals on the proxy ballot.

Both companies received proposals from the New York City Comptroller requesting proxy access rights for shareholders holding 3% of shares for three years. Marathon Oil’s proposal aims to provide proxy access for any shareholder owning 5% for five years (for one director or 10% of the board, whichever is greater). Cabot Oil’s proposal would provide proxy access for any shareowner owning 5% of the company’s stock for three years (for up to 20% of the board).

Photo credit: iStockphoto/YinYang

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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.

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