Simon Osborne, chief executive, ICSA: The Governance Institute
Corporate governance generally will be high on the agenda in 2017, given the UK government’s green paper on the subject. We expect there to be in-depth discussions about directors’ duties, executive pay and the composition of boardrooms, including worker representation and gender balance in executive positions.
Corporate governance in private companies is also something that we feel requires more attention.A sensible approach would be for unlisted or private companies and LLPs with greater societal impact to comply (or explain non-compliance) with an appropriate corporate governance code, and to appoint a company secretary to support the board.
There is likely to be continued focus on board appointments, with diversity and stakeholder inclusion set to be hot topics. We are working with the Investment Association to produce practical guidance to companies on how to enhance the board’s understanding of the interests of employees and other stakeholders, in accordance with their duties under section 172 of the Companies Act 2006. We are also releasing a “Future of Governance” white paper in 2017, so watch this space.
Marie-Louise Clayton, non-executive director and audit committee chair
The main issues for 2017 are firstly the impact of Brexit. By this I mean in the short term the currency effects of sentiment-based trading, which is wreaking havoc for those companies with overseas revenue or costs. Which is most [companies]!In the longer term the precise terms of any deal will be important, but I do not think this is the major issue for 2017.
The next most important issue is labour—what we pay for it and how we get it. Both of which apply equally from apprentice through to CEO.
Thirdly, I think there is a conversation bubbling under the radar, which is asking: “How come we keep getting these issues on pensions, accounting etc., if our governance model is working?” Maybe 2017 will see this surface.
Kerrie Waring, executive director, ICGN (International Corporate governance Network)
We move into the new year faced with an uncertain regulatory environment. There are calls on both sides of the Atlantic to maintain vigilance in promoting the long-term success of companies unhindered by vested interests.
The stalwart OECD governance principles of transparency, fairness, accountability and transparency remain as relevant now as they were 20 years ago. Taking these four principles into account it is difficult to determine a single priority.
From an ICGN perspective, responsibility and, more specifically, investor stewardship, remain very high on our agenda. The challenge is how we make stewardship effective in practice with the limited resources available—and on a global scale.
This is coupled with a sometimes incongruous regulatory environment which, on the one hand, calls for enhanced company and investor engagement, but on the other discourages investor collaboration. ICGN will address this and other issues as we review our “Global Governance Principles” this year alongside our “Model Mandate Initiative”—the seminal 2012 work setting out example contractual terms for asset owners and their managers on how to embed stewardship and align the interests of underlying beneficiaries.
We welcome you all to be involved and continue the dialogue.
Turid Solvang, chairman, ecoDa (European Confederation of Directors Associations)
In 2017 we will all question what good governance is, and how and by whom companies should be governed. Whether we like it or not, the fourth industrial revolution is thundering forward, at breakneck speed, impacting how we spend our time, the products and services we make and use, where we work, and how we get there. Equally, technology affects how business is done—as well as companies’ licence and freedom to operate. When anybody is your reporter, any phone is your dashboard, and everybody is at the controls, who gets to call the shots?
Transparency is the new black, and the secret code is culture. Transparency evens the playing field and enables customers and other stakeholders to make informed decisions. Informed investors, and consequently also boards, care about the company’s role in society because they know that a strong purpose, healthy values and a resilient culture are what keep companies sustainable over time.
And the winds are indeed shifting. In November, in the form of a simple conjunction, the new King IV Report presented a fundamental shift in corporate governance thinking by replacing “comply or explain” with “apply AND explain”. This month, ecoDa and ACCA set the tone, with the conference Aligning corporate governance and culture—what’s in it for the board?. Also this month, global leaders convene at the World Economic Forum in Davos, their topic being “Responsive and Responsible Leadership”.
Boards that want to be trusted and to lead long-term sustainable and profitable companies should listen and engage.
Tim Copnell, chairman, KPMG Audit Committee Institute
In 2017, corporate growth and shareholder return will still require the essentials—managing key risks, innovating and capitalising on new opportunities, and executing on strategy.
But the context for corporate performance is changing quickly—and perhaps profoundly—as advances in technology, business model disruption, heightened expectations of investors and other stakeholders, and global volatility and political shifts force companies and their boards to rethink what it will take to stay competitive in the long term, and what it means to be a corporate leader.
In particular, the role of business in society is moving from the periphery to the centre of corporate thinking and investors, customers, employees, and other stakeholders are sharpening their focus on how companies approach social and environmental issues.
Neil Stevenson, managing director – global implementation, IIRC (International Integrated Reporting Council)
Long-termism, inclusive capitalism, the true integration of finance and ESG—these are all concepts where I believe we can expect real behaviour change in 2017.
The IIRC is at the heart of these developments with integrated reporting providing the means for communication about value creation over time.
Announcements were made and projects started in 2016 that mean internationally we are at a prime moment to truly embed these concepts: from the UK corporate governance review to the FSB Climate-related Financial Disclosure Task Force; from corporate governance codes in the likes of Malaysia and the Netherlands, to ICGN’s Global Stewardship Principles.
We will continue to promote these developments, as boards broaden their understanding of value, embedding concepts such as the Sustainable Development Goals into their strategy. I believe real strides can be made in 2017 that will ultimately contribute to the financial stability and sustainable development of markets globally.