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Crossing a line

Proxy adviser Glass Lewis has decided to school the venerable Wall Street Journal in the ways of ESG investing.

Citing an opinion article, Glass Lewis’s senior editor, Dimitri Zagoroff, says the WSJ view—that shareholder support for ESG is waning—“rests on a series of misconceptions”. The spat revolves around a drop in voting support for ESG proposals at this year’s AGMs in the USA.

While the WSJ may argue it is because investors have gone cold on ESG, Zagoroff points out that falling votes happen for all manner of reasons. In fact, he says, overall, proposals have increased, with environmental and social topics accounting for 57% of them.

But decrease in vote support could be because of rising anti-ESG sentiment, admittedly, while he also says asset managers have gone beyond pure-play ESG proposals to pursue ESG aims through director elections and say-on-pay votes. “Clear evidence that they are not ‘backtracking’ from these issues,” says Zagoroff.

He adds that support for ESG may also be decreased because proposals have become focused on “highly specific requests that lack widespread market consensus regarding the link to shareholder value, and/or submitted at companies where the topic is not financially material”.

Zagoroff also takes on a WSJ claim that asset managers have blithely “followed the direction” of proxy advisers. Research, he argues, shows that asset manager votes on ESG proposals “varied widely, demonstrating that they make their own assessments and ultimately their own voting decisions”.

ESG remains highly contentious in the US. And with November’s presidential election looming, it’s bound to get a lot more heated.

Looks like the proxy advisers, however, are still willing to stand in the ESG corner.

 

Falling short of the line

Bad news, this time from Women on Boards, the campaign body. Their research shows fewer than 1% of top four boards roles are held by women of colour, a figure that points to a concerning lack of diversity.

The study finds 13% of top jobs—chair, CEO, CFO and senior independent director (SID)—are held by women across FTSE and AIM listings. But it is AIM that stands out as the major shirkers, with only 0.3% of those jobs in the index currently held by women.

By contrast, the FTSE100 has 24% of the big four posts occupied by women, the FTSE 250, 19.6%.

Fiona Hathorn, chief executive of Women on Boards, says targets have helped improve representation but argues it is now time to focus on smaller listed companies and ensuring diversity is managed across the intersection of gender and ethnicity.

“There is persistent underrepresentation of women and especially women of colour in positions of power,” she says.

“We need firms across the FTSE SmallCap and AIM to urgently act on creating greater diversity at all levels. Measure it, report it, make it public—or the laggards will continue to simply opt out.”

 

Over the border

At this UK election time, with all the mudslinging over whether or not taxes will or won’t go up, and amid an expanding betting scandal, it’s nice to see audit reform hasn’t been completely forgotten.

Though the topic was ignored in the party manifestos published last week, accountants north of the border say audit reform must return to the political agenda post-election.

Speaking for ICAS (the Institute of Chartered Accountants of Scotland), chief executive Bruce Cartwright told the Daily Business : “We have seen an inexcusable lack of action from the UK government when it comes to audit reform and corporate governance reform.

“We urge the next government to bring forward the legislation needed to tackle this issue head on. It’s too important to wait and incur even longer delays on this crucial issue of public trust.”

Dare Board Agenda suggest it, but the government really isn’t guilty of no action at all. It took action, but only to reverse the few reforms—fresh disclosures for audit policies—that it had decided to move forward. Those went the way of all things in October.

That said, the government has also remained sensory-deprivation-chamber silent on a promised new audit and reporting regulator and the introduction of managed shared audit.

The Financial Reporting Council has reviewed the UK Corporate Governance Code, but even that didn’t meet expectations. Many proposals with an audit reform flavour jettisoned (admittedly, the internal controls reforms were largely retained. Though it has to be said, many asked for those to be in primary legislation, not in the comply-or-explain governance code).

Audit reform has been under way since the collapse of Carillion in 2018. Despite three major reviews and endless words of debate, the big ticket items remain unaddressed.

No wonder Bruce has his tartan in a twist.

 

Overboarders

News from Hong Kong: regulators in the territory plan to tackle “overboarding” by limiting directors to no more than six board seats. That’s right: six.

In a statement reported by the South China Morning Post, Hong Kong’s stock exchange said: “It is important that directors have the time and capacity to meet all of their responsibilities, including when there are unforeseen events and in times of crisis.”

And Hong Kong has had its fair share of crises in recent times. Further changes will include a mandatory board performance review every two years, and mandatory CPD for directors.

Anyway, six. Think of the lunches. Best install that home gym.

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