Views on improving the integrity of global capital markets
09 February 2017

CorpGov Roundup: Integrated Reporting, Proxies, Stewardship Codes, and More

The new year kicked off with some good movement in the corporate governance world. Integrated reporting is a big step closer to being the norm in corporate reporting. A roundtable in France previewed the upcoming proxy season, and executive compensation remains a key issue. Corporate governance in North Asia and English-language disclosures were topics covered at a recent conference in Asia. Asset managers are putting pressure on companies in Mexico to improve their governance to better serve investors. A recently published report evaluates corporate governance developments in the United Kingdom and notes that full compliance with the UK corporate governance code has increased. Finally, for the United States, proxy access and a newly released framework for stewardship and governance are the big news for January.


Integrated reporting gained a key endorsement in January when the International Federation of Accountants (IFAC) endorsed the International Integrated Reporting Council’s (IIRC) integrated reporting framework as a way to achieve more coherent corporate reporting systems, fulfilling a need for a single report that provides a fuller picture of organizations’ ability to create value over time.

The IFAC stated that it “believes that the integrated report can be used as an ‘umbrella’ report for an organization’s broad suite of reports and communications, enabling greater interconnectedness between different reports and recognizing that there is a range of different frameworks and regulations available and under development.”


A preview of the proxy season in France was the highlight of a corporate governance roundtable in late January that brings together representatives from leading proxy advisers operating in France.

Executive compensation will remain a key issue in the 2017 proxy season, especially with the legislation that was passed last year concerning executive compensation, making France the latest test ground for compensation legislation. French companies and their investors will have to navigate a binding ex-ante vote on compensation for companies listed on regulated markets. The objective of the law is for shareholders to give their explicit approval of fixed, variable, and exceptional sums that may be granted to corporate officers going forward.

During the meeting, there was concern that many foreign holders of French shares do not share the concerns of French investors concerning executive pay, which could allow poor pay practices to continue, even if French investors voice their disapproval with “no” votes.

Japan (with a Little Bit of Norway News)

The Asian Corporate Governance Association recently posted a summary of its annual conference that took place in November 2016. The conference included extremely informative sessions on corporate governance in North Asia and recent developments in corporate governance in Japan. There were also discussions about whether comply-or-explain disclosures on corporate governance could work in North Asia, workshops on board culture and engagement sustainability issues, and a Q&A with the Japanese governance pension fund.

In one presentation, Norges Bank Investment Management (NBIM) from Norway talked about its program to grade the quality of English-language disclosures of 120 Japanese issuers. NBIM will announce later this year which ones it finds to be the best. A Tokyo Stock Exchange report published 16 January 2017 says about 70% of issuers in Japan now comply with the call for English-language reporting in Japan’s Corporate Governance Code.


A number of asset managers are pushing Mexican companies to make governance changes to improve investor rights in the country (subscription required). Aberdeen Asset Management, Franklin Templeton Investment, Cartica Management, and others are pressuring Mexican listed companies to give at least one month’s notice of shareholder meetings and remove bylaws that may compromise the rights of minority shareowners. The funds argue that improved corporate governance standards will help Mexican companies attract capital.

Currently, Mexican companies have to give only a two week notice to shareholders of an annual meeting. Recently, a number of companies have added provisions to their bylaws that require any shareholder who names a board member to receive board approval. Shareholders have the right to name a board member if they own 10% of a company’s shares, but requiring board approval makes this right relatively meaningless.

United Kingdom

The Financial Reporting Council (FRC) recently published the report Developments in Corporate Governance and Stewardship 2016. The report’s aim is to evaluate corporate governance and stewardship in the United Kingdom, to report on the quality of compliance with UK governance and stewardship codes, to assess the quality of engagement between companies and shareholders, and to determine where improvements in governance and reporting can be made.

The report also offers summaries and comments on other relevant changes over the past 12 months, including on the implications of the focus on corporate governance by the government and Business, Energy, and Industrial Strategy Committee. The detailed assessment in the report draws on new and publicly available research and surveys supplemented by the FRC’s reviews of annual reports and UK Stewardship Code statements. They also held meetings with many investors, companies, and other interested parties.

Compliance with the UK Corporate Governance Code remains high, with 90% of FTSE 350 Index companies reporting compliance with all, or all but 1 or 2 of its 54 provisions. Full compliance has risen from 57% to 62% in 2016, according to the report. The provision for at least half the board, excluding the chairman, to be independent non-executive directors is the provision most frequently not complied with (although non-compliance is down from 42 FTSE 350 companies in 2015 to 26 in 2016).

Analysis of the 2016 annual general meeting season showed generally reduced investor support for remuneration resolutions, with concern noted about a lack of transparency around the link between executive pay and performance.  Of FTSE 350 companies, 91% now having some form of malus and/or clawback provisions on the annual bonus and 78% on long-term plans, with others expected to introduce such arrangements when their remuneration policies next go to shareholders for approval.

United States

Proxy access in the United States has reached a milestone. A recent report noted that some form of proxy access has now been adopted by 51% of S&P 500 Index companies. In 2016, 77 proxy access proposals were voted on, with 52% passing (average support of 51%). In 2015, there were 91 proposals voted on and only 55 passed. Tara Bhandari of the US SEC reported in a separate paper that firms that have adopted proxy access generally outperform their peers.

On the last day of January, the Framework for U.S. Stewardship and Governance was launched by The Investor Stewardship Group (ISG). The ISG is a collective of some of the largest US-based institutional investors and global asset managers as well as other institutional partners. The founding members are a group of 16 US and international institutional investors that, in aggregate, invest more than $17 trillion in the US equity markets. The ISG is led by each member’s senior corporate governance practitioners.

The Framework goes into effect 1 January 2018 to give US companies time to adjust to the standards in advance of the 2018 proxy season. The corporate governance Framework includes six principles for institutional investors and six principles for US-listed companies.


Principle A: Institutional investors are accountable to those whose money they invest.

Principle B: Institutional investors should demonstrate how they evaluate corporate governance factors with respect to the companies in which they invest.

Principle C: Institutional investors should disclose, in general terms, how they manage potential conflicts of interest that may arise in their proxy voting and engagement activities.

Principle D: Institutional investors are responsible for proxy voting decisions and should monitor the relevant activities and policies of third parties that advise them on those decisions.

Principle E: Institutional investors should address and attempt to resolve differences with companies in a constructive and pragmatic manner.

Principle F: Institutional investors should work together, where appropriate, to encourage the adoption and implementation of the Corporate Governance and Stewardship principles.


Principle 1: Boards are accountable to shareholders.

Principle 2: Shareholders should be entitled to voting rights in proportion to their economic interest.

Principle 3: Boards should be responsive to shareholders and be proactive in order to understand their perspectives.

Principle 4: Boards should have a strong, independent leadership structure.

Principle 5: Boards should adopt structures and practices that enhance their effectiveness.

Principle 6: Boards should develop management incentive structures that are aligned with the long-term strategy of the company.

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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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