Views on improving the integrity of global capital markets
18 July 2017

CorpGov Roundup: A New Index, Say on Pay, Potential Changes to Listing Rules, and More

A new index was released that tracks the performance of non-state-owned companies Brazil, and Novo Mercado issuers vote for stronger governance standards. Germany has seen an increase in no votes for say on pay. Hong Kong and London are considering changes to their listing rules that are not considered good governance. India is making good on adding more women on boards, and Japan’s updated stewardship code requires greater disclosure from asset managers. Finally, a new tool released in the United States will help investors identify problems in companies they invest in.


B3 (the new name of the Brazilian Stock exchange formerly known as BOVESPA) and S&P Dow Jones Indices recently released an index of non-state-owned companies. The goal is for the marketplace to be able to measure the independently operated and publicly traded companies at the forefront of Brazil’s economy.

It remains to be seen whether an index of non-state-owned companies can outperform state-owned companies in Brazil, but our recent study showed that companies with dual-class shares in Brazil (many of which are state owned) underperformed over the long term.

Novo Mercado issuers on B3’s good governance segment voted for stronger standards, such as more independent directors and mandatory audit committees, according to results posted 23 Jun. But they rejected a 50% vote threshold to delist in favor of a 33% one, an option opposed by such investor groups as AMEC because it leaves too much power in the hands of controlling shareholders. Issuers on B3’s Level 2 segment rejected similar reforms, putting more distance between them and the Novo Mercado firms.


Say on pay in Germany is getting serious. A recent article notes that investors have rejected more than a third of pay plans at German companies so far this year. Handelsblatt, which published the story, points to an increase in the use of proxy advisers by institutional investors as a reason for the increase in “no” say on pay votes.

Hong Kong

Hong Kong Exchanges and Clearing Limited (HKEX) and its subsidiary, the Stock Exchange of Hong Kong Limited (the Exchange), recently launched a consultation to seek public feedback on a package of proposals. The proposals open the door for HKEX to allow dual-class shares, a position they had resisted before. The HKEX was applauded by supporters of strong shareowners rights last year when they rejected a proposal to allow such shares. But competitive pressures from other markets, especially Singapore, which is considering allowing dual-class shares in order to attract companies that insist on the management friendly share structure.

According to the HKEX announcement, the proposals contained in the New Board Concept Paper are designed to enhance Hong Kong’s ability to attract companies from new economy sectors with one or more of the following characteristics that currently prohibit them from listing in Hong Kong:

  1. pre-profit companies;
  2. companies with non-standard governance features; and
  3. Mainland Chinese companies that want to list on the Exchange as a secondary listing venue.

The Exchange invites broad market feedback on the proposals contained in the two papers. The public comment period for both papers is two months and the deadline for responses is 18 August 2017.


There were concerns in 2014 that a law requiring more women on company boards in India would simply result in token appointments. This has reassuringly not been the case according to a recent report. The report by Institutional Investor Advisory Services India finds women representation on Indian boards at a level of 13%, up 8% from 2012.


The final rule revisions of Japan’s stewardship code will require Japanese asset managers to disclose how they vote at issuer annual general meetings. The changes to the code are meant to increase the accountability of asset managers. The current code only calls for aggregate vote disclosure. Asset managers will also be required to disclose conflicts of interest in voting and engagement and how they will be addressed as well as publish “regular” self-evaluations on how they are implementing all of the code principles.

United Kingdom

The HKEX is not the only one considering changes to its listing rules. The London Stock Exchange (LSE) is contemplating whether it should relax its requirement that public companies must sell at least 25% of their stock in order to attract the IPO of Saudi Aramco, which plans to part with only 5% of its shares when it files its IPO. The UK Investment Association stated the that the 25% minimum “should be preserved at all costs to protect the integrity and standard of the UK premium listing.”

United States

US-based voting giant Broadridge has rolled out Proxy Policies and Insights, which offers governance information and annual general meeting voting data to all investors (environmental and social information will be added in the future). The idea is to let investors customize their voting preferences so that they can identify problems in the companies in which they invest.

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Photo Credit: ©Getty Images/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.

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