Transparency isn’t taxing

Businesses need to be more transparent with their taxes, according to the campaign group the Fair Tax Foundation.

Graham Drummond, head of communications for the Foundation, says that a recent survey by the Institute of Business Ethics, which found the public believes that tax is the number one issue companies need to address, demonstrates “public unrest” on the issue of corporate taxation.

“It’s never been clearer that the British public wants business to do the right thing when it comes to tax,” writes Drummond.

“We know the vast majority of businesses quietly get on with paying their fair share and recognise they help the communities in which they operate to deliver valuable public services like education, healthcare, policing, roads and more. Unfortunately though, simply telling stakeholders that your business is doing this isn’t enough – they want proof.” Oh, yes they do.

Climate reporting proposals cause avalanche

The SEC has, by a recent count, received 14,000 letters, or responses, to its consultation on the introduction of new climate reporting proposals.

Writing for the Harvard governance blog, Lawrence Cunningham, a professor at George Washington University Law faculty, says: “By sheer number, the proposal is record-setting.”

The letters come from an “astounding” range of sources: public companies, university professors, trade bodies, environmental activists, advisory firms, investment associations, professional bodies, the climate industry and religious groups, among others.

After a brief survey of the responses, Professor Cunningham concludes: “To me, it affirms that this is a major question of public policy, not a discrete topic of investor protection. An effort like this requires much more leadership than a handful of commissioners and a staff expert in securities regulation.” Not entirely sure they won’t take that personally.

Power positions

Corporates have a financial advantage over NGOs and other campaigners when it comes to influencing the development of new regulations and standards, according to the Institute for Business and Human (IHRB) Rights.

The statement comes in a response to a consultation by a United Nations working group looking at the influence of the corporate world over the development of business and human rights principles.

IHRB writes that its own research shows the “financial power” of corporates gives them a “stronger” position when it comes to influencing the drafting of new rules.

“While this may not on its own constitute ‘undue influence’,” IHRB writes, “it must be given serious consideration, in particular, given the fact that many governments continue to disregard civil society groups, and in some cases object to their presence in policymaking processes and international negotiations, arguing that only governments are legitimate representatives of the people and the civil society has no role.” Which is legitimately bonkers.

Due diligence ‘failure’

In case you thought it had all gone quiet on the EU’s human rights due diligence directive, think again. Academics writing on the Oxford University business law blog claim it is doomed to fail.

Dutch lawyers Davine Roessingh and Dennis Horeman reckon it will fail on three fronts. The new law, which asks companies to take responsibility—and liability—for human rights throughout their supply chains, could cause companies to sell subsidiaries or focus on a small group of “clean” suppliers, rather than force improvements in members of existing supply chains.

Second, the new laws apply only to companies “in scope”; if two or more companies in a supply chain are “in scope”, it’s hard to see where the liability falls. It’s also hard to see how the costs of due diligence are shared.

Third, the new rules may confer an advantage on “out-of-scope” companies and may therefore have “certain anti-competitive effects”.

It all adds up to a lot more for the European Commission to think about.

Information shortage

Despite the importance of annual meetings to shareholders in the US, few Wall Street companies actually publish an AGM agenda.

That’s the astonishing conclusion of US academics: that companies run “hidden agendas”—not secret, just unpublished.

“Fortunately, there is a straightforward solution to this problem,” Scott Hirst and Adriana Robertson write for the Harvard governance blog. “The SEC should require that proxy statements be filed at least five days before the record date for the meeting to which they relate,” they write.

“This solution is simple, easy to implement, and superior to alternatives that would operate though either state corporate law rules or private ordering.” Seems reasonable.

Code success

Investors have been improving their act after the introduction of a new Stewardship Code in 2019, according to research from the Financial Reporting Council.

Of those polled, 96% say they’ve increased the size of their stewardship teams, while a hefty 77% say the quality of their engagement with companies has improved.

Sir Jon Thompson, chief executive of the FRC, says: “We commissioned this independent research so that we could assess the impact of the revised code on stewardship practices and it is very encouraging to see how the quality of practice and reporting have improved under its influence.” That’s a relief.