Essential Corporate News – Week ending August 18, 2017

Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.

On August 15, 2017 the Financial Reporting Council (FRC) published a consultation on draft amendments to its Guidance on the Strategic Report. The proposed amendments reflect changes to the strategic report requirements made by the Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016, which apply to companies and qualifying partnerships beginning on or after January 1, 2017.

The consultation encourages companies to provide better information on how they have fulfilled their duties to promote the long-term success of the company, as set out in section 172 of the Companies Act 2006 (CA 2006), to improve accountability to shareholders and other stakeholders.

The proposed amendments include (amongst other things) the following:

• Section 4 (purpose) – changes to strengthen the link between the purpose of the strategic report and the directors’ obligations under section 172 CA 2006.
• Section 5 (materiality)– changes to enhance the focus on non-financial information and long-term value, and to clarify the scope of the derogation from the general requirements to disclose material information.
• Section 6 (communication principles)– changes to encourage entities to better integrate related information in their reports and to communicate information that will allow shareholders to assess any factors that may impact upon the long-term success of the business.
• Section 7 (content elements)– changes to encourage companies to focus on the broader matters that may impact the value of the company over the longer term and to place greater emphasis on the notion of value creation.

Next steps

The FRC has asked for all comments and feedback to be submitted by October 24, 2017.

(FRC, Draft amendments, 15.08.17)

On August 16, 2017 the Investment Association (IA) published a press release containing an analysis of voting data from the 2017 AGM season.

When compared to voting data from the 2016 AGM season, the IA notes that:

• FTSE100 companies have listened to shareholders and acted on 2016 investor concerns regarding remuneration reports, with a 35 per cent decrease in 2017 remuneration resolutions that received over 20 per cent dissent (down from 14 in 2016 to nine in 2017);
• Meanwhile, FTSE250 companies witnessed a 100 per cent increase in companies getting 20 per cent or more of votes against their remuneration resolutions compared to 2016 (with 29 companies affected this year, up from 15 in 2016);
• Overall, FTSE350 companies saw a 400 per cent increase in votes against a director re-election (from four directors in 2016 to 21 directors in 2017); and
• Six FTSE350 companies withdrew resolutions on pay ahead of the company AGMs to avoid a shareholder rebellion.

(IA, Shareholders flex their muscles in 2017 AGM season to reduce FTSE pay, 16.08.17)