Institutional investors

Address the growing use of stewardship codes as a tool to encourage shareholder engagement and increase disclosure requirements for institutional investors.

 III.A. The corporate governance framework should facilitate and support institutional investors’ engagement with their investee companies. Institutional investors acting in a fiduciary capacity should disclose their policies for corporate governance and voting with respect to their investments, including the procedures that they have in place for deciding on the use of their voting rights. Stewardship codes may offer a complementary mechanism to encourage such engagement.

Increase disclosure and minimise conflicts of interests of proxy advisors, ESG rating and data providers as well as index providers.

 III.D. The corporate governance framework should require that entities and professionals that provide analysis or advice relevant to decisions by investors, such as proxy advisors, analysts, brokers, ESG rating and data providers, credit rating agencies and index providers, where regulated, disclose and minimise conflicts of interest that might compromise the integrity of their analysis or advice. The methodologies used by ESG rating and data providers, credit rating agencies, index providers and proxy advisors should be transparent and publicly available.

Boards responsibilities and duties (I)

Recommend boards’ consideration of stakeholder interests when making business decisions in the interest of the company’s long-term success and performance and in the interest of its shareholders.

 V. […] In addition, boards are expected to take account of, and deal fairly with, stakeholder interests including those of the workforce, creditors, customers, suppliers and affected communities.

 Reflect the growing use of board committees while emphasising flexibility in their establishment and recalling the full responsibility of the board in the decision-making process.

 V.E.2. Boards should consider setting up specialised committees to support the full board in performing its functions, in particular the audit committee – or equivalent body – for overseeing disclosure, internal controls and audit-related matters. Other committees, such as remuneration, nomination or risk management, may provide support to the board depending upon the company’s size, structure, complexity and risk profile.[…]

Emphasise risk management, including crisis management.

 V.D. The board should fulfill certain key functions, including:

V.D.2. Reviewing and assessing risk management policies and procedures.

Boards responsibilities and duties (II)

Reflect increasing diversity considerations in board composition and senior management, as well as boards’ responsibilities in talent development and succession planning, board nomination and election, and board evaluation.

 Recommend the use of safe harbours for management and board member actions (such as the business judgement rule) as well as safe harbours for the disclosure of information.

 V.A.1. Board members should be protected against litigation if a decision was made in good faith with due diligence.

Provide additional provisions on remuneration, including the use of sustainability indicators in executive remuneration.

 V.E.4. (Annotation) […] … support boards to consider if they collectively possess the right mix of background and competences. This may be based on diversity criteria such as gender, age or other demographic characteristics, as well as on experience and expertise, […].  IV.A.6. The use of sustainability indicators in remuneration may also warrant disclosure that allows investors to assess whether indicators are linked to material sustainability risks and opportunities and incentivise a long-term view.