Views on improving the integrity of global capital markets
07 August 2015

Corp Gov Roundup: Post-Petrobras Scandal Reforms, “Clawbacks” of Exec Bonuses

It’s time to span the corporate governance globe to review important developments in July.


The Brazilian Stock Market (BM&FBOVESPA) published proposed new governance guidelines for State-Run Companies in early July that are meant to tighten up corporate governance at such firms in the wake of recent scandals at state-run oil giant Petrobras.

The measures have been divided into “mandatory” and “optional,” covering areas of transparency, internal controls, and management. Some of the mandatory measures include an integrated sustainability report (transparency), a risk management and related-party transactions policy (internal controls), and 30% independent directors (management).

Final rules will be adopted after a 60-day comment period that ends in early September.


Canada may be moving one step closer to having one national securities regulator. On 24 July the government’s Council of Ministers named a chair to the Capital Markets Regulatory Authority.

The Council of Ministers also established the Capital Markets Authority Implementation Organization, which will assist in the transition to the Capital Markets Regulatory Authority.

The Council of Ministers stated that it intends to issue revised consultation draft provincial/territorial and federal legislation, along with draft initial regulations, for public comment this summer regarding the powers and duties of the Capital Markets Regulatory Authority.

European Union

The European Parliament voted in July on a number of current revisions to the Shareholder Rights Directive. The European Commission originally decided to revise the Shareholder Rights Directive in April 2014 to overcome perceived shortcomings in the corporate governance of European listed companies.

The issues addressed in the text of the proposed changes to the Shareholder Rights Directive include:

  • Insufficient engagement of institutional investors and asset managers
  • Insufficient link between executive pay and performance
  • Lack of shareholder oversight on related-party transactions
  • Inadequate transparency of proxy advisers
  • Difficult and costly exercise of rights flowing from securities for investors

The proposed changes, still winding their way through the European Parliament were listed as follows:

  1. Mandatory transparency of institutional investors and asset managers on their voting and engagement and certain aspects of asset management arrangements
  2. Disclosure of the executive remuneration policy and individual remunerations, combined with a shareholder vote
  3. Additional transparency and an independent opinion on more important related-party transactions and submission of the most substantial transactions to shareholder approval
  4. Binding disclosure requirements on the methodology and conflicts of interests of proxy advisers
  5. Creating a framework to allow listed companies to identify their shareholders and requiring intermediaries to rapidly transmit information related to shareholders and to facilitate the exercise of shareholder rights

The most recent draft of the proposal was voted on at the plenary session of the European Parliament on 8 July. The plenary approved the proposal but rejected some of the amendments to the original text of the Commission. Some of the highlights are below:

  • An emphasis on long-­term shareholding has been taken out of the draft, perhaps quieting some calls for the adoption of dual-class share structures that benefit long-term shareholders,
  • A comply-or-explain option for engagement and investment strategy for asset managers was maintained in the draft. This simply means that asset managers are encouraged to develop and publish an engagement policy.
  • An employee vote on executive “say on pay” is no longer in the draft.
  • Member States can endorse shareholders’ vote on the executive remuneration policy, but such votes are to be merely advisory, not binding, unless the Member State wishes to make such votes binding.

Watch this space for more information on future developments in the Shareholder Rights Directive.

Middle East and North Africa

The Department of Economic Development (DED) in Dubai and the Institute of Corporate Governance (Hawkamah), have set up an Islamic Management and Governance Centre in Dubai. The Centre will develop best practices for Islamic financial institutions, along with implementation and monitoring mechanisms, and training and education on governance.

New Zealand

The New Zealand Corporate Governance Forum was launched in July to promote good corporate governance in New Zealand companies. Forum members include New Zealand-based institutional investors who collectively hold more than 15% of the total New Zealand equity market.

The forum has produced a set of corporate governance guidelines for New Zealand investors and companies. The forum supports the principles and guidelines developed by the Financial Markets Authority (FMA), published in its Corporate Governance in New Zealand Handbook for Directors. The FMA principles apply to a wide range of entities including unlisted, listed, governmental, and not-for-profit organisations. The FMA guidelines form the basis for the Forum’s Guidelines.

United States

The Securities and Exchange Commission (SEC) recently proposed tougher clawback rules on executive bonuses than those currently on the books. The newly proposed clawback rules will call on national securities exchanges to establish listing standards requiring companies to adopt and disclose policies that require executive officers to pay back certain incentive compensation that was awarded erroneously. The proposed rule looks back over three years of compensation awarded in error. Current rules only call for clawbacks in instances of executive malfeasance, such as fraud. The new rules — if adopted as proposed — would also claw back some incentive compensation awarded due to accounting restatements and other errors.

CFA Institute is currently reviewing the proposed rule and will submit comments to the SEC.

The public comment period ends 14 September.

If you liked this post, consider subscribing to Market Integrity Insights.

Image Credit: 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.

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.