Clarity call

It only takes a cursory look at the news to realise the role of governance in society is a contested area. Not so for the United Nations.

Sanda Ojiambo, chief executive of UN Global Compact, makes it clear that business has a big role in global development but that underlying governance is key.

Writing for Reuters, Ojiambo argues “illicit financial flows continue to bleed emerging economies” and at issue is “poor governance and financial opacity”.

Part of the answer is embracing sustainability reporting.

“Frameworks established by the Taskforce on Climate-related Financial Disclosures and the International Sustainability Standards Board offer investors crucial visibility into how corporations manage funds and measure impact. This transparency reduces the investment risk and attracts the long-term, responsible capital needed to scale sustainability projects.”

The model example Ojiambo highlights is IKEA which, through disclosed environment metrics, “not only drives continuous operations gains but also strengthens investor trust”.

Who knew flatpack and meatballs could teach us so much?

Your business is my business

Over at the Financial Times, they are concerned about CEO turnover. August columnist Anjli Raval notes that a “steady stream” of European listed companies—among them Rio Tinto, Novo Nordisk, Stellantis and Unilever—have been losing CEOs like Chelsea FC loses managers.

“Sometimes it’s a matter of approach,” writes Raval. “Too much challenge by the board can alienate. So can too much well-intentioned support.

“The tension fundamentally lies in a board’s need for sufficient transparency and information flow so they can adequately probe while a CEO often just wants to be left alone.”

Very true, I thought about that last bit, but then I realised I was also thinking about the latest argument with my teenaged daughter. So, there you go: teenagers and CEOs; Individuation and separation. It never goes away.

Votes of confidence

Our friends at SquareWell, the governance advisory outfit, have been look at attitudes among investors to the arrival of activist counterparts.

Broadly, 84% see poor governance as the trigger of activist demands while 71% say they are most comfortable supporting activist demands for changes to governance.

If the activism is focused on M&A, balance sheet or operational concerns, it’s much less likely to receive the support of the broad investor base. Their main worry with activism is whether the argument is “well justified”, followed by whether the activist is “overreaching” or “overly prescriptive”, and, lastly, whether demands actually fit with criticism of the company.

Ali Saribas and Andrew Brady of SquareWell conclude: “The responses from the survey indicate that companies are at risk if they rest on their laurels when it comes to investor relations.

“At a time when long-term institutional investors are increasingly more willing to engage with activists, and amongst each other, companies must have confidence in the alignment of the shareholder base with the equity story being told.”

And that is your summer food for thought. Like so many other aspects of life, it all comes down to telling a convincing story. Creative writing retreat, anyone?