Views on improving the integrity of global capital markets
05 February 2015

Corp Gov Roundup: US Flips Proxy Access Ruling, Norway Enhances Pension Fund Governance

Spanning the corporate governance globe this month, the important developments in January include a surprise decision in the United States that rescinds an earlier ruling on proxy access, and how one country is solidly managing its pension fund.

European Union

Based on news accounts, there is a healthy amount of disagreement among European leaders about what revisions to make to the Shareholder Rights Directive. Efforts by EU lawmakers to engender more long-term thinking among investors are tying up planned changes to legislation. Among the main issues under consideration:

  • Employee “say on pay.” Proposed changes to the law would set up a mechanism to allow employees to express their opinions on executive compensation policies before they are put to a shareholder vote.
  • Loyalty shares. Proposed changes would offer additional voting rights, special dividends, or other perks to investors holding shares for at least two years. Loyalty shares have come up now and again in recent years by a number of groups, but are usually frowned upon by corporate governance advocates who prefer a one-share-one-vote standard that treats all shares equally.
  • Increased disclosure from institutional investors and asset managers. Proposed changes call on asset managers to provide investors with more data on costs and conflicts of interest. Institutional investors and asset managers are also called upon to disclose more about the reasons behind their voting decisions.

The legal affairs committee of the European Parliament is scheduled to vote on the directive in late March.


CFA Institute and the CFA Society of Japan recently commented on the Japan corporate governance code proposed by the Financial Services Agency (FSA) and the Tokyo Stock Exchange (TSE).

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.


Norway has often been a leader in corporate governance, and recent events may further enhance that reputation. A new ethics panel was created recently by Norway’s Finance Ministry to ensure that politics are separate from investment decisions at the Government Pension Fund. The new council reports to Norges Bank, which oversees the fund, instead of to the ministry as was previously the case. The fund also is looking to increase voting transparency by making the fund’s voting intentions public before corporate AGMs. It will be interesting to see if such transparency around voting intentions of such an influential fund will have an effect on the votes of others.

United Kingdom

Compliance with the UK Corporate Governance Code continues to grow, according to a recent report from Britain’s Financial Reporting Council reviews compliance with the U.K. Corporate Governance Code. Key findings from the FRC’s 2014 review include:

  • Compliance with the UK Corporate Governance Code have increased with full compliance by the FTSE 350 now at 61.2%, and 93.5% complying with all but one or two provisions.
  • Progress on reporting on diversity policies in the FTSE 100 — 85% now have a clear policy
  • The UK is on course to reach a target of 25% FTSE 100 female directors in 2015, with 22.8% of directorships now held by women.

United States

In a surprise announcement on 16 January, the SEC Division of Corporation Finance reconsidered a controversial December decision that allowed Whole Foods Market Inc. to exclude a resolution for proxy access from its upcoming shareholders meeting because it conflicted with Whole Foods’ own proxy access proposal.

The SEC rule at the heart of the issue allows a company to exclude a shareholder proposal if the shareholder proposal “directly conflicts with one of the company’s own proposals to be submitted to shareholders at the same meeting.”

Previously the SEC had allowed companies to exclude shareowner proposals for proxy access from the corporate proxy when companies offered their own similar proposals for proxy access — but with stricter ownership thresholds — and asked the SEC to exclude shareowner proposals that were in “conflict” with the company proposal

On 16 January, SEC Chair Mary Jo White told the staff to reconsider a decision to allow Whole Foods to exclude a shareowner proposal on proxy access in favor of a company alternative with much higher thresholds. The staff rescinded its December decision and said it would not decide on similar requests until the review is completed.

This leaves the field wide open for what to expect from proxy access this spring in the United States. Companies who have received proxy access proposals from shareowners and had followed the Whole Foods’ model generally have four choices:

  1. Put both proposals on the ballot.
  2. Put only the shareowner proposal on the ballot.
  3. Put only the company-sponsored proxy access proposal on the ballot.
  4. Put no proposal on the ballot.

It remains to be seen what would happen if a company puts its own proposal on the ballot and ignores a similar proposal from shareowners now that the SEC has essentially stepped out of the debate — leaving many companies with no “cover” if they chose to omit a competing shareowner proposal.

One proxy adviser — Glass Lewis — has stated that it will evaluate the nearly 100 cases of proxy access currently planned this proxy season on a case-by-case basis. Watch this space for updates on the issue. It should be an interesting proxy season in the US.

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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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