Views on improving the integrity of global capital markets
22 August 2017

CorpGov Roundup: Stewardship Code, ESG, Dual-Class Shares and More

In corporate governance news in July, one country launched a new stewardship code while another began tracking environmental, social, and governance (ESG) indexes for its pension investment fund. There is more on the dual-class shares debate as one exchange it will allow companies with dual-class shares to list on its exchange while one index provider has banned those companies from its high-profile indexes. Finally, one country takes a novel approach to executive pay disclosure and another puts out proposes a new premium listing regime.


The Financial Services Council (FSC) in Australia recently launched a stewardship code to provide guidance to FSC members who undertake the role of asset managers on setting and achieving best practice in fulfilling their fiduciary responsibility as custodians.

The code adopts a comply-or-explain framework and is mandatory for asset managers but can be adopted by asset owners as well.

The key principles of the code focus on

  • organization and investment approach,
  • internal governance, and
  • asset stewardship.

The principles seek to go beyond similar codes offered in other jurisdictions by calling for more disclosure around incentives, ownership, and core competencies of asset managers.


The Government Pension Investment Fund (GPIF) in Japan has jumped on the ESG bandwagon by dedicating 3% of their portfolio to tracking ESG indexes. GPIF selected three ESG indexes for Japanese equities and started passive investment tracking those indexes. Heeding ESG factors in their investments is expected to enhance risk-adjusted return over the longer term. In choosing the ESG indexes, GPIF emphasized that (1) “positive screening” that determines constituent companies based on their ESG evaluation should be adopted, (2) the evaluation should be based on public information and its method and results should be disclosed, and (3) ESG evaluators and index providers should be properly governed and their conflict of interests should be properly managed.

The three indexes track the FTSE4Good Index, the MSCI Japan ESG Select Leaders Index, and the MSCI Japan Empowering Women Index.


The Singapore stock exchange has dipped its toe in the dual-class share waters by announcing that it will allow companies with dual-class share structures with primary listings on other developed market exchanges to have secondary listings on the Singapore exchange.

The exchange is deferring the decision on whether to allow IPOs with dual-class shares to list in Singapore until later. It will be interesting to see if the recent decisions by index providers to bar or limit dual-class companies on their indexes (see United States) will influence the eminent decision in Singapore.


The Six Swiss Exchange is taking a novel approach to executive pay disclosure. The exchange is recommending that listed companies should disclose the name(s) of proxy advisers they use and the amount paid to those advisers. Other jurisdictions have usually placed the burden of disclosure on proxy advisers.

United Kingdom

The Financial Conduct Authority recently proposed a new premium listing regime for sovereign controlled companies. It is no coincidence that the proposal came prior to the planned Saudi Aramco IPO, which could bring generous listing fees and perhaps other similar sovereign companies to a London exchange.

Critics of the move say it needlessly lowers the standards of UK corporate governance. The proposed listing standard would relax certain related-party transaction and controlling shareholder rules. Comments are welcome until 13 October.

United States

Did Snap Inc. ruin the dual-class party for dual-class share companies? That is the question many may be asking after two index providers put limits on allowing dual-class companies in their indexes.

Index providers S&P Dow Jones and FTSE Russell recently provided a rebuke to the likes of Snap and other companies that look to limit the voting rights of investors. Snap famously offered shareowners zero votes per share as part of their recent IPO, the nadir of a recent trend of companies testing the limits of how low they could go in the race to the bottom on shareowner rights.

The Snap IPO caused an outcry among institutional investors, which are largely indexed and must own the market based on such indexes as S&P Dow Jones, FTSE Russell, and MSCI. In response to these investor concerns, these three index providers opened consultations asking for investor comment. The MSCI comment period is still open until the end of August, but S&P Dow Jones and FTSE have already taken action, as Morningstar and Davis Polk reported.

S&P Dow Jones took the boldest action in protection, stating that going forward they will not allow companies with dual-class share structures to be part of some of their high-profile indexes, such as the S&P 500 Index and its small cap and midcap brethren. Companies that already have dual-class share structures can be grandfathered in.


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Photo Credit: ©iStockPhoto/YingYang

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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