THG’s dual class sacrifice

A business week is incomplete with headlines about a chief executive and their share holdings. This week Matthew Moulding, founding CEO of the THG (The Hut Group), provided the news fodder after deciding to forgo his special voting rights in order to help win the business a premium listing in London.

There has been much coverage of THG after a capital markets day for Ingenuity, a group company, appeared to backfire. Astute governance observers will note that Moulding’s sacrifice of extra voting rights comes against the backdrop of an ongoing debate over the introduction of dual-class shares for premium listed companies.

Some argue Moulding’s decision goes some way to demonstrate dual-class shares premium listings are unnecessary: designation obviously remains attractive.

George Dallas, policy director at the International Corporate Governance Network, a long-term opponent of dual-class shares, says: “The THG example is another positive indicator and suggests a distinction between dual-class and premium listings.”

Directors ‘dislike generalist CEOs’

Chief executives are a staple of business reporting but also of academic research. One team based in the US and Australia recently looked at the preferences of independent directors to find they tend to dislike “generalist CEOs”. “This,” the researchers write, “is consistent with the notion that generalist CEOs may have incentives that are not consistent with those of shareholders, resulting in an incentive misalignment.”

Corporate emissions commitments not much COP

With COP26 looming and climate change the biggest shadow over any company’s risk register, ESG (environmental, social and governance) issues dominate governance news. And this week, MSCI, a provider of company data, issued a report claiming that that emissions from the world’s listed companies could yet drive a 3 degree rise in global temperatures above pre-industrial levels. The Paris climate accord aims to keep the rise at 2 degrees or lower.

MSCI’s research aims at tracking corporate contributions to carbon emissions. It finds only 43% of listed companies are aligned with 2 degree rise, with fewer than 10% aligned with a 1.5 degree rise.

The news will make depressing news for delegates at COP26, which is bound to produce more policy initiatives for companies. MSIC says in its report: “The world’s listed companies must act now to drive their greenhouse gas emissions to net-zero.” A 3 degree rise, it adds, “will not prevent a climate disaster”.

Diversity disclosure drive pays off

As US financial watchdogs continue their consultation on mandatory ESG reporting it seems some disclosures are improving. Research from data analysis firm Esgauge and not-for-profit The Conference Board, finds that for the first time a majority of S&P 500 companies have disclosed the ethnic composition of their boards. In a marked improvement on last year’s 24%, a hefty 59% now produce figures on boardroom ethnicity.

A report says: “Ensuring the racial (ethnic) diversity of board members will be an imperative for US public companies in the next few years, as pressure from multiple stakeholders will only rise from here.”

Expert observers expect the SEC to not only push ahead with mandatory climate reporting, probably based on the Task Force on Climate-related Financial Disclosures framework, but also with mandatory publication of key diversity and inclusion data following the Black Lives Matters protests last year.

ICGN spells out climate priorities

Companies and their boards should be committing to “science based” targets on how they will adapt to net-zero carbon emissions by 2050, according to a leading investor group.

The International Corporate Governance Network (ICGN) made the call in a letter to the COP26 president Alok Sharma and includes the policy in a list of “priorities” for the corporate world’s role in tackling climate change.

Other priorities include a role for auditors inspecting statements relating to climate change risks, a commitment from investors to impose targets on how their portfolios will change to comply with net zero, and governments to commit to action plans and funding for projects to achieve net zero.

Kerrie Waring, ICGN chief executive, writes in the letter: “As we advance towards a net-zero carbon emission economy by 2050, strong corporate governance, and investor stewardship, supported by common sustainability reporting standards, will be critical.”