Views on improving the integrity of global capital markets
03 December 2015

CorpGov Roundup: Board Tenure — How Long? ESG Issues — What Should Be Reported?

Board tenure, or more specifically limits to avoid lifers, dual-class shares, and what environmental, social, and governance (ESG) issues should be reported by issuers are among corpgov news spanning the globe in November.


The issue of dual-class shares continues to be a hot corporate governance topic — this time popping up in Brazil. The Brazilian Institute of Corporate Governance recently published updated corporate governance principles (in Portuguese) in which they state that deviations from the one-share, one-vote principle should be avoided, but leaves the door open for such structures. Investors are concerned that leaving the door open for such dual-class structures may hasten their adoption by issuers, thus adversely affecting minority shareowners rights.

CFA Institute’s position on dual-class shares states: “Company rules should ensure that each share has one vote. Our rationale for this position follows:

A structure that permits one group of shareowners disproportionate votes per share creates the potential for a minority shareowner to override the wishes of the majority of owners for personal interest. Where such dual structures are legal, companies should disclose such arrangements and the situations, the manner, and the extent to which those arrangements may affect other shareowners.”


Investors in Canada are waking up to a problem with majority voting that their compatriots in the United States have been dealing with since majority voting began to be adopted — many directors who are voted off boards remain on the board.

A recent report by the Canadian law firm Davies Ward Phillips & Vineberg LLP found that 90% of directors who received less than majority support in their last election stayed on the board.

The report covers a number of broad topics concerning Canadian corporate governance and is worth a read for those itching for a better understanding of governance in Canada. The report is broken into different sections including: board composition and compensation, gender diversity initiatives and trends, shareholder issues, board risk management, changes in rights plans, takeover bid agreements, and corporate law reform.


The World Federation of Exchanges recently issued recommendations concerning which environmental, social, and governance issues should be reported by issuers. This work builds on recent guidance by the Sustainable Stock Exchanges initiative, which aims to build sustainability reporting criteria into listing standards at world stock exchanges.

The International Corporate Governance Network (ICGN) published its model stewardship code recently and is looking for comments from members to refine the code. A number of countries have adopted official stewardship codes in recent years, and ICGN hopes that its code can serve as a model for those contemplating such a code in the future.

ICGN states that the code might serve several purposes; three primary applications include the following:

  • Serve as an international “passport” for institutional investors seeking to signal their stewardship policies and practices either when investing in markets without stewardship codes or when they invest in multiple markets with differing stewardship codes. This ICGN Global Stewardship Code is intended to complement — and not supersede — other stewardship codes that are in place in different markets around the world. Rather, a commonly recognized global stewardship code could help investors to efficiently communicate fundamental stewardship standards in a global context.
  • Be a point of reference for investors on what stewardship entails and how to implement it in practical terms.
  • Help guide jurisdictions seeking to establish their own stewardship codes by providing an overarching model of stewardship that can be adapted to the individual situations of countries or regions. ICGN members can comment until 15 January. CFA Institute plans to offer comment on the code.


There has been much activity in Japan in the past few years to improve corporate governance standards, which have historically fallen behind those of other developed markets. Just recently CFA Institute partnered with the CFA Society of Japan on a comment letter sent to Japanese regulators about ways to improve corporate governance in Japan. According to a recent speech by Toshiaki Oguchi, representative director of Governance for Owners Japan KK, the efforts are unfortunately mostly a compliance exercise. In an interview with The Japan Times, Mr. Oguchi said that the governance standards will eventually bear fruit by making Japanese companies more transparent and investor friendly, but that currently issuers in Japan are focused mostly on meeting the bare minimum requirements — following the letter of the rules, but not really buying into the philosophy that corporate governance improvements can improve corporate performance. Time will tell.

United States

Huge institutional pension fund CalPERS recently made waves with a change to its corporate governance policy that would list directors as nonindependent after they have served on a board for 10 years. The thinking behind the policy is that after a decade on a board, individuals are more likely to see themselves as representatives of a company rather than the shareowner representatives they were brought on to be originally. There is currently no agreed upon standard among US companies, or in state law (mainly Delaware state law where most companies are incorporated). Such an independence standard echoes similar standards in other jurisdictions:

  • The UK Corporate Governance Code (London Rule) suggests tenure beyond nine years compromises independence.
  • The European Commission recommends limiting director tenure to 12 years.
  • Hong Kong has a nine-year maximum tenure unless shareowners separately vote for re-appointment.
  • France recommends limits to director tenure at 12 years.

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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.

4 thoughts on “CorpGov Roundup: Board Tenure — How Long? ESG Issues — What Should Be Reported?”

  1. With the move by CalPERS, we may see more proposals to reduce director entrenchment. It could certainly help the movement to get more diversity on boards as well.

  2. Matt Orsagh, CFA, CIPM says:

    Thank you for your comment Jim. It will be interesting to see if others follow the lead of CalPERS, as a similar standard exists in many other markets.

    Take care,


  3. Cristina Ungureanu says:

    Investors consider 9 years for European companies already as the upper limit. Of course, one needs to look at the context of the company and of the director individually.

    1. Matt Orsagh, CFA, CIPM says:

      Thank you for your comment. It will be interesting to see if other markets move to the standard you mention (nine years serving as the baseline for independence). So far, we mostly only see this in Europe, but will see if this evolves into an international best practice.

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