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

CorpGov Roundup: VW Busted, BofA Vote Bucks Trend, and Proxy Season Planning Commences

VW is caught cheating, Bank of America shareholders vote to keep dual chairman and CEO roles, and proxy season planning is underway. These are among the headlines for September in the global corporate governance realm.


The scandal at Volkswagen (VW) is rightfully gaining all the attention in Germany, and many in the governance world are asking if the German system of governance is to blame. Some of the main issues in the VW case go beyond governance, for example an emissions testing regime in Europe has long been seen as one that could easily be gamed, if not cheated on. It took tougher emissions standards in the US to expose the fraud — so it was a stricter regulatory regime that caught VW cheating.

But is there a governance angle? Well, maybe.

Corporate governance and shareowner rights in Germany are a little different, due in part to the country’s unique dual-board structure, which consists of both a supervisory board and a management board. Shareowners have no direct influence on the management board, which oversees the operational activities of a company. Supervisory boards, meanwhile, are charged with oversight of the management board. At least half the members of the supervisory board of any German company with more than 2,000 employees must be employee representatives. This requirement makes employees of German companies more powerful stakeholders than employees in most other markets.

It turns out that some corporate governance rating firms had rated VW low relative to its peers in recent years due to power struggles at the company, corruption charges, and other red flags. At this point it is still to be determined how much of the VW emissions cheating scandal was a governance issue. We will have to wait for the facts to come out to determine who knew what, when, and what internal controls and governance issues were at play.


Corporate governance changes in Japan advance. The Financial Services agency is asking for public comments on the Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code. The deadline for submission has not yet been specified. CFA Institute will be working with the CFA Society of Japan to draft comments on the stewardship code and corporate governance code. The Council is made up of corporate issuers, investors, and academics.


The latest version of the Organisation for Economic Co-operation and Development’s (OECD’s) corporate governance principles was published in early December. The OECD principles were one of the first sets of governance principles published, and many national corporate governance codes are based on them. CFA Institute was represented on the task force that updated the principles.

The G20/OECD Principles of Corporate Governance provide recommendations for national policymakers on shareholder rights, executive remuneration, financial disclosure, the behaviour of institutional investors, and how stock markets should function.

The new code updates best practices in some areas and addresses some issues for the first time, including:

  • Cross-border voting
  • Related-party transactions
  • Financial disclosures by companies
  • The governance and action of large institutional investors
  • Conflicts of interest of proxy advisers


The OECD will hold a symposium on corporate governance in Russia in mid-October to meet with investors and discuss ways to best implement the Russian corporate governance code that was updated in 2014.

The agenda for the meeting is as follows:

  • Presentation of the new G20/OECD Corporate Governance Principles
  • Implementation and monitoring of the 2014 Russian Code of Corporate Governance
  • The corporate governance priorities of investors for the Russian market
  • Corporate governance and business integrity

United States

On 22 September, Bank of America shareholders voted to grant the company’s board the power to combine the chairman and CEO positions. At 63% support, it looks like the board may have some fence mending to do with some shareowners. (I recap the vote in this podcast, and in this video.)

For Blogs and the Enterprise site

As the vote approached, we explored the issue and asked if Bank of America was backsliding on corporate governance. The company’s board will now have to convince its shareowners that its governance policies and practices will adequately manage the inherent conflicts of interest when the chairman and CEO positions are combined.

More important, however, will be earning back the trust of the shareowners who voted against combining the positions, as the board adopted a bylaw in 2014 that would allow it to combine the positions — without consulting shareowners. It would behoove the company to step up its shareowner engagement game to earn back investor trust.

Elsewhere in the United States, Institutional Shareholder Services released the results of its client survey as planning for 2016 proxy season gets started. Highlights of the survey include support for proxy access in the United States, and a lack of support for enhanced voting rights for certain shareholders — voting rights plans that have taken hold in some European markets.

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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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