20 March 2019

ICGN: Taking the long view on corporate governance

Corporate governance has taken on a much more expansive role for businesses and investors than it had just a few years ago. It should be a central consideration for long term investors and one in which broader issues such as environmental strategy and social responsibility are factored in as potential risks or opportunities, and directly impact valuations. It is the softer and more nuanced side of business building. It is doubtful that long-term investments, mergers or acquisitions can truly be successful without a careful analysis of the issues it raises.

Brexit seems to be evolving and who knows even now what its destiny is going to be. But if it does go through as scheduled Mr Dallas thinks it will have an impact on governance in Europe.

The UK has long been a thought leader in corporate governance and one of its standard bearers. Mr Dallas doesn’t think that will go away, but its influence may diminish as the EU is influencing corporate governance in Europe with greater emphasis on stakeholders and ESG issues – a so-called “Rhineland capitalism”. This strong stakeholder orientation will continue, if not broaden, particularly given the EU’s emphasis on sustainable finance as a core policy.

Europe also has different ownership structures, with controlled ownership still the assets under management are in excess of $34 trillion) are generally supportive of the European focus on sustainable finance, but ICGN is concerned that the protectionist measures that are diluting minority shareholder rights are retrograde and at odds with the goals of stewardship that come with the new Shareholder Rights Directive.

ICGN has many initiatives on the go and will provide ICGN policy commentary on a range of issues including systemic risk, engaging boards on climate change, ESG reporting, and the role of creditors in corporate governance.

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