How will latest changes to Volcker Rule affect non-US banks?
Kathleen A. Scott discusses the final Volcker Rule, focusing on some of the issues raised by non-US banks in their comments.
Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.
On July 30 2018, Institutional Shareholder Services Inc. (ISS) launched its annual global policy survey for 2018, a key component of their annual global policy development process, looking at potential changes for 2019.
The 2018 survey (as was the 2017 survey) is conducted in two parts, beginning with a high-level ISS Governance Principles Survey covering some global high-profile governance topics including auditors, audit committees, director accountability, gender diversity in the boardroom and the “one-share, one-vote” principle.
The second part of the survey follows on and is a more in-depth portion of the survey, broken down by region, containing an expansive and detailed set of questions. Several questions which form the second part of the questionnaire relate to Europe, and focus largely on LTIPs and non-executive director pay.
A question in the EMEA region questionnaire seeks information on Chair's Responsibility in Contentious Executive Pay Situations, focusing specifically on the UK.
ISS notes that there have been recent examples of relatively high dissenting shareholder votes against chairs in such situations, often accompanied by high dissenting votes against remuneration committee members. In some cases, the chair was not a member of the remuneration committee. ISS asks for views as to:
ISS proposes a public comment period on the final changes.
On July 31, 2018 the Financial Reporting Council (FRC) published revised guidance on the strategic report (Guidance) which encourages companies to consider wider stakeholders and broader matters that impact performance over the longer term. The Guidance is for directors and is intended as best practice for all entities preparing strategic reports. The FRC also published a statement summarising feedback received on the related consultation paper issued in August 2017.
The feedback was generally positive and showed that the 2014 Guidance was helpful. The FRC, therefore, did not undertake a fundamental review, and just made a small number of amendments to the 2014 Guidance.
The FRC has developed the revised Guidance that aims to be: principles based; mindful of recent developments in narrative reporting best practice; and is aligned with requirements in the UK Corporate Governance Code.
The revised Guidance places a greater focus on the directors’ section 172 Companies Act 2006 (section 172) duty to promote the success of the company. Briefly, the revised document:
Encourages best practice reporting with the inclusion of both financial and non-financial information in the strategic report. This follows 93 per cent of respondents indicating support for integrating non-financial information into the strategic report. The FRC believes that the strategic report should be a cohesive document containing all relevant information.
Clarifies throughout that the primary audience of a strategic report remains the shareholders. The FRC, nevertheless, continues to encourage companies to consider the interests of wider stakeholders when running their businesses as part of their section 172 duty.
On August 2, 2018 the House of Commons Business, Energy and Industrial Strategy Committee (BEIS Committee) published a report on gender pay gap reporting. This report is the first output to the BEIS Committee’s inquiry into aspects of pay in the private sector, which was launched in March 2018. The BEIS Committee states that the UK has one of the highest gender pay gaps in Europe and pay gap reporting is only one step in closing it. The Report would like to see a widening of the companies that are required to report with companies required to publish action plans and narrative reports on what they are doing to close the gap. It is noted that only about half the members of the UK workforce are expected to be covered by the current reporting requirements.
The report makes several proposals for company boards to increase transparency and improve fairness, including:
The BEIS Committee will continue with the second strand of its inquiry, examining the progress of reforms relating to executive pay levels and structure, in the Autumn 2018.
OFAC published a final rule that modifies the Cuban Assets Control Regulations to revoke the so-called "U-turn" authorization.