Corporate governance - Vigil

A key part of ISS’ annual global benchmark policy formulation process is a survey which is open to institutional investors, corporate executives, board members and any other interested constituencies. For the 2017-2018 policy cycle, the survey was in two parts: (1) a short, high-level Governance Principles Survey covering a limited number of topical corporate governance areas and (2) a longer, more detailed supplemental survey allowing respondents to drill down into a wider set of key issues at market and regional levels. This document summarizes the findings of the Governance Principles Survey, which closed on August 31. The supplemental survey will remain open until October 6, 2017, at 5 PM (ET).

CEO pay continues to be a widely debated topic in the media, in the boardroom, and among investors and proxy advisors. As the U.S. was in the heart of the 2008-2009 financial crisis, CEO total direct compensation (TDC; base salary + actual bonus paid + value of long-term incentives [LTI]) dropped for 2 consecutive years. As the U.S. stock market sharply rebounded and the economy started to slowly grow again, CEO pay also rebounded. Large pay increases occurred in 2010, primarily in the form of larger LTI grants. Since then, year-over-year increases have been fairly moderate — in the 2% to 6% range for 2011-2016.

The board of directors forms an integral part of a firm’s governance mechanisms. Yet, how boards perform their dual role of supervisor and advisor of corporate management is difficult to observe from outside of the company. To open this black box, we survey 130 non-executive directors in various emerging markets to obtain detailed information about the inner workings of boards. We document substantial variation in the structure and conduct of boards as well as in directors’ perceptions about the local legal environment. Further analysis indicates that directors who feel adequately empowered by local legislation are less likely to vote against board proposals. They also form boards that play a stronger role in the company’s strategic decision making. This suggests that a supportive legal environment allows directors to focus more on their advisory as opposed to their monitoring role.

TSR comparison to peer group and S&P 500 continues to be a key factor in ISS evaluation.

Not so long ago, many business leaders thought “digital” was just about mobile phones and other electronic tools. Very quickly, we’ve learned that it’s an enormous, global shift on a par with the Industrial Revolution: Digital is fundamentally changing the habits of individuals, society and businesses, the likes of which few have seen.

Corporate culture can no longer be considered as a soft issue by management and boards. Its strength or weakness has a lasting impact on organizational performance and reputation. The oversight of culture must be a key board responsibility, as it is inextricably linked with strategy, CEO selection, and risk oversight. The <em>NACD Blue Ribbon Commission Report on Culture as a Corporate Asset </em>explores how boards can strengthen their oversight of corporate culture. The report provides 10 practical recommendations that boards can adopt to better assess the health of the corporate culture and use existing board responsibilities, such as executive compensation design and CEO evaluation, to drive the right behaviors.

On September 7, Equifax, one of the three major credit agencies, publicly announced that it had suffered a major data breach. The company disclosed that unidentified hackers exploited a vulnerability in their website software to gain unauthorized access to company data and exfiltrated it from May through July of this year, impacting as many as 143 million consumers. [1]

The Ascendancy of Finance (link) by Joseph Vogl, explains the dramatic transfer of power to  the financial sector that occurred over centuries but accelerated during the recent financial crisis. Traditionally, markets limited state power and were, in turn, restrained by the nation states. As Vogel notes, “In this theoretical myth, spaces of freedom are weighed against concerns of security…” Finance, once a mediator of capital, now threatens to rule both industry and politics.

In the summer of 2017, Stanford Graduate School of Business and The Rock Center for Corporate Governance surveyed 113 directors of Fortune 250 companies and 18 prominent executive recruiters and compensation consultants that advise these companies to understand their views on the labor market for top CEO talent.

The Center for Audit Quality (CAQ) is an autonomous public policy organization dedicated to enhancing investor confidence and public trust in the global capital markets. 

The recent Equifax data breach focuses attention on the necessity of adequate disclosure by public companies of material cybersecurity-related events. Both SEC Chair Jay Clayton and Stephanie Avakian, the Co-Director of the Division of Enforcement, have made clear that they would “like to see better disclosure around [cybersecurity]” [1] and could “absolutely” bring a cybersecurity disclosure enforcement action. [2] In addition, the SEC’s recent disclosures of its own breach will likely increase focus within the agency on its external enforcement efforts.

BOSTON (Reuters) - Several activist investor funds with a fraction of the assets of their bigger rivals are posting strong returns, as they win board seats and drive change at companies, an analysis of their performance shows.

The risk landscape is changing fast. Every day’s headlines bring new reminders that the future is on its way, and sometimes it feels like new risks and response strategies are around every corner. The outlines of new opportunities and new challenges for risk leaders— indeed, all organizational leaders— are already visible.

Powerful technologies are generating new risks and opportunities that are transforming businesses, and even entire sectors. As companies explore a world being reshaped by exponential change, boards have a critical role to play by advising and guiding management through this transformation. Moreover, in their roles as strategic advisors, directors are ideally positioned to challenge basic assumptions to help build a healthy transformation and keep the business evolving.