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News & Events
Welcome to our Governance & Stewardship News & Events page. Here you will find regular updates on what the team has been doing to promote governance & stewardship, and also comments on topical issues.
International Corporate Governance Network and International Integrated Reporting Council Joint Conference
Alison Kennedy attended the International Corporate Governance Network (ICGN) and International Integrated Reporting Council joint conference in London. The focus of the event was the progress and future challenges of Integrated Reporting. Standard Life Investments are supportive of the Integrated Reporting framework and it was encouraging to hear about the process that some jurisdictions and companies have made in improving their reporting. Alison also took part in a panel as part of a stewardship workshop arranged ahead of the conference by the ICGN and the FRC. This provided a forum for signatories to the UK Stewardship Code to pass on their views on implementation of the Code.
All Party Parliamentary Corporate Governance Group (APPCGG)
Mike Everett attended a meeting of the APPCGG at which Margot James MP, minister responsible for corporate governance, provided her thoughts on corporate governance in the UK and the Government’s Green Paper seeking input on possible improvements to the corporate governance regime in the UK. This was a useful opportunity to hear directly from the minister on a topic which we believe is important to our clients and our work in the ESG Investment team. We will engage further on this topic and will be providing our own written input to the Green Paper.
Asian Corporate Governance Association Conference
Alison Kennedy attended the Asian Corporate Governance Association Conference in Tokyo. This was very well attended by both local and international investors. The conference focused on the significant improvements that have taken place in the Japanese governance and stewardship framework in recent years and the implications of these for both investors and companies. In conjunction with the conference, meetings were arranged with a number of other organisations including the Financial Services Agency, the Japanese Stewardship Forum and the Government Pension Investment Fund.
International Investors’ Conference
Alison also attended the International Investors’ Conference in Wiesbaden arranged by DSW, the German retail shareholders' association. She participated in a panel on 'What Investors can expect from Supervisory Board Members'. This panel debated the changing expectations of investors regarding engagement with Supervisory Boards, particularly the Chairman. Historically, there has been limited direct engagement with the Board Chairman but this is changing. The panel debated the form that this engagement might take and the potential limitations in the German context.
Engagement with EY Independent Non-Executives (INEs)
Mike Everett attended a dinner held by the EY INEs in order to share views with a number of UK asset managers and asset owners. We see the work done by auditors as a key mechanism by through which we, as investors, can get comfort over the reporting by companies as well as an important aspect by which non-executive directors of companies can oversee the activities of executive management. Therefore engaging and holding to account those who are responsible for the oversight of audit firm’s forms part of our stewardship engagement activities. The audit firm governance code which came into place in 2010 instigated the creation of the INE role and the need for them to engage with investors and the code has been updated in 2016. The updates to the code are designed to raise its profile and to increase the levels of engagement between INEs and investors. Events such as this are designed to improve the contact between INEs and investors and it provided an opportunity to raise any current concerns that we may have in relation to EY specifically and the audit environment in general.
Deloitte INE meeting
Mike Everett met with Sir Michael Peat who is an INE at Deloitte and chair of their public interest oversight committee. As with the dinner held by EY this meeting was part of our engagement with INEs at audit firms and provided a good opportunity to share our views on various aspects in relation to audit.
Provision of oral evidence to the Business, Energy and Industrial Strategy (BEIS) Select Committee
The BEIS Select Committee issued a call for evidence in relation to a number of questions covering aspects of corporate governance. Standard Life provided written evidence that can be found here. In addition we were asked to provide oral evidence to the committee which was done as part of a panel on 15th November. A transcript of the meeting can be found here.
Alison Kennedy hosted an event at Standard Life Investments’ London office marking the 5th anniversary of the 100% Club. The 100% Club is a body which offers women working in ESG, and in the wider financial services industry, networking opportunities, often including high profile women speakers. We have been supportive of this initiative since it was founded and were delighted to be able to host this event which was attended by around 100 women.
Council of Institutional Investors Conference
Nick Duncan attended the Council of Institutional Investors (CII) conference in Chicago, where speakers were discussing topics ranging from executive compensation to climate change. There were more than 400 CII members attending the conference, this included investment professionals, regulators and governance experts. There were a number of high profile speakers including Microsoft Chairman John Thompson, Vice Chancellor of the Delaware Court of Chancery J. Travis Laster and Jeffrey Smith, CEO of Starboard Value.
Investor Forum Framework Launch
Mike Everett attended the launch of the Investor Forum collective engagement framework. We are members of the Investor Forum and have taken part in a number of collective engagements through them and we see their work as being important for the ongoing development of successful engagement between companies and their shareholders. The Investor Forum engagements focus on the promotion of long term investment and encouraging companies to seek success over the long term. The framework sets an important standard for the management of collective engagement in the UK.
European Commission meetings
Mike Everett met with the European Commission (EC) to discuss their current work on developing policy in relation to encouraging sustainable finance, the use of environmental, social and governance (ESG) factors by investors and the role of investors in transitioning to low carbon economies. The meetings were useful to understand the possible direction of policy development and also to share our views and practices in relation to the use of ESG factors when investing on behalf of clients and the development of products that may help transition to a low carbon economy.
'Big 4' Audit firm presentation
The investment teams within Standard Life Investments received a presentation from representatives of EY, KPMG, Deloitte and PwC about the methods used for providing assurance over annual reports and expectations that could be placed on this assurance. This was a useful interaction between our investment teams, who are users of annual reports relying heavily on the assurance of auditors, and those who undertake this assurance. We continue to engage with audit firms in order to provide our thoughts in relation to the standards of reporting and assurance and will seek to further develop these interactions in order to ensure the continued improvements in corporate reporting.
Sport Direct AGM
Euan Stirling attended the AGM at the company’s premises in Shirebrook and gave a statement to express our views on governance practice at the company. We welcomed the publication of the company’s Working Practices Report however asked the board to commit to a full and independent review of governance at the company along with a commitment to publish and act on its conclusions and recommendations.
The Evolving Governance Landscape
Alison Kennedy attended an event on ‘The Evolving Governance Landscape’ organised in Dublin by Davy Group. This was attended by a number of Irish corporates and included presentations by the FRC on its recent report on culture, and the proxy advisors ISS and Glass Lewis. Alison took part in a panel discussing what investors expect of the companies that they invest in.
Financial Reporting Council (FRC) - Culture to Capital: aligning corporate behaviour with long term performance
Mike Everett attended an FRC conference to present their report entitled ‘Corporate Culture and the Role of Boards’. This report provided detail of their analysis of the role played by boards in defining and managing culture within a company. The conference provided an opportunity to hear the views of senior non-executives, senior executives from accounting firms, executive managers and the FRC on corporate culture and particularly the board’s role in creating it. We believe that the creation of an appropriate culture is a key role of boards and so this work is very important in defining standards and expectations in this area.
Joint Investor Forum and EY roundtable discussion on long term strategic value
Mike Everett attended a roundtable discussion jointly hosted by the Investor Forum and EY. The discussion centred on the current long term value disconnect between investors and management and sought to develop a framework for measuring long-term value. EY have been concerned about the future relevance of financial reporting and their role as an auditor because of the increase in the level of intangibles in the valuation of companies. The role of shareholders in promoting the long term success of companies is a key focus at this time and so we feel it is important to be involved in discussions such as this.
Financial Reporting Council
We are participating in the FRC’s Financial Reporting Lab project on business model reporting. The objective is to help companies understand what investors are looking for in terms of business model reporting and how they use this information. Alison Kennedy took part in a workshop which brought together companies and investors to discuss various aspects of good practice including specific examples of how companies are currently reporting on their business models.
Executive Remuneration Working Group’s Final Report
Nick Duncan attended the publication of the Executive Remuneration Working Group’s final report. The working group was set up in 2015 to "bring forward proposals for a radical simplification of executive pay". The final report, which follows a consultation of more than 360 investors, asset owners and company employees, outlined ten recommendations for all boards. The main recommendations include proposals to simplify pay structures for executives and also to give companies more flexibility to choose a pay structure which works for them and their shareholders.
Euan Stirling attended the AGM in London and gave a statement providing our views on succession planning for CEO Sir Martin Sorrell and our concerns regarding his remuneration arrangements. This action followed our statement at the 2015 AGM, and subsequent engagement on these topics. At the AGM, together with 33.5% of shareholders, we voted against WPP’s remuneration report. Euan said WPP’s current remuneration plan could hand Sorrell more than 15 times his £1.15m salary. “We expect that is more than would be required to recruit, retain or motivate even someone with the redoubtable talents of Mr Sorrell.”A copy of our statement can be found here
Audit Committee Communications with Investors
Mike Everett attended a seminar organised by the Audit Committee Chairmen's Independent Forum (ACCIF) to discuss communications between audit committees and investors. This provided an opportunity to share the views of audit committee chairs and investors regarding the current engagement practices. It was clear from the seminar that meetings between investors and audit committee chairs is not commonplace and tend to be focused on specific issues. Standard Life Investments do engage with audit committee chairs and would agree that these meetings do tend to focus on companies where we have the largest holdings and where there may be particular audit issues we wish to discuss such as auditor tendering.
Sustainable and Long Term Investment European Parliament Even
Mike Everett attended and spoke at an event at the European Parliament to discuss current investors practices and and the European Commission views on sustainable and long term investment and the use of Environmental, Social and Governance (ESG) factors by investors. The European Commission are undertaking research and developing possible policy actions to encourage more long term investing and the use of ESG factors. This event provided Standard Life Investments with the opportunity to provide information on the practices they currently use in order to provide some insight to policy makers on current industry practices.
Institute of Chartered Accountants for Scotland (ICAS) presentation by Executive Director of the Group of 30
Standard Life Investments supported a presentation, arranged by ICAS, by Stuart Mackintosh the Executive Director of the Group of 30 which is an international think tank of the most senior figures in global banking and economics. Mike Everett introduced Stuart Mackintosh who presented views on the impact of the global financial crisis in creating a paradigm shift in the policies applying to banks in particular and increasing to financial services as a whole. As an investor in banks, the presentation by Mr Mackintosh and the questions from the floor were of interest to us in terms of the impact of changes thus far and possible changes in the future. Standard Life Investments were happy to support this event which provided the opportunity to hear from a significant thought leader in the banking world.
The Role of the Nomination Committee
Mike Everett attended the launch of the report on the role of the nomination committee published jointly by EY and ICSA the Governance Institute. The launch included presentations by Sir Win Bischoff, the Chairman of the Financial Reporting Council, and a panel discussion including non-executive directors from large UK companies. The report and the launch event gave insight into the current views on the role of the nomination committee in ensuring adequate succession and board composition. We view nomination committees as important in ensuring the ongoing smooth management that is required to deliver successful companies over the long term.
Executive Remuneration Working Group
Mike Everett attended a round table discussion to provide feedback on the interim report issued by the executive remuneration working group. This provided an opportunity for major shareholders to give their views on the report and the suggestions it makes in relation to executive remuneration. We will continue to monitor the work of the working group with a view to looking to provide views on solutions to some of the current issues relation to remuneration.
Financial Reporting Council
Alison Kennedy attended a meeting with the FRC to discuss their Financial Reporting Lab project on business model reporting. They are interested in understanding how investors use the information which companies provide on their business model and what good reporting looks like. We provided a number of examples of good and bad reporting from our perspective. The aim of the project is to provide some guidance to companies on what investors are looking for and how best to provide this.
Organisation for Economic Co-operation and Development (OECD) Corporate Governance Committee
Mike Everett was part of a delegation of the Business and Industry Advisory Committee (BIAC) that presented to the OECD Corporate Governance Committee. The presentation focused on providing input to the methodology for the assessment of the implementation of the OECD Corporate Governance Guidelines by countries around the world. In addition input was provided on the role of bond holders in holding companies to account for standards of corporate governance.
European Confederation of Directors Associations (ecoDa) – Trust in Boards
Standard Life Investments sponsored an ecoDa dinner in Brussels at which ‘Trust in Boards’ was debated. The members of ecoDa represent associations of board directors from across Europe and this dinner provided an opportunity to give our views, as shareholders, on the role of the board in defining and overseeing culture and the importance of trust in the creation of long term success. The financial crisis and various recent events relating to corporate governance and other non-financial risks have significantly impacted the levels of trust in business. We encourage boards and directors to take active steps to define and oversee values and business practices which we believe will help improve trust.
European Corporate Governance Institute (ECGI)
The 2016 Standard Life Investments Prize for the Best Paper in the ECGI Finance Working Paper Series was awarded on Friday 22 April, at the London School of Economics, to Professor Karl Lins (University of Utah), Professor Henri Servaes (London Business School), and Ane Tamayo (London School of Economics) for their paper on “Social Capital, Trust, and Firm Performance during the Financial Crisis”. Standard Life Investments’ support of academic research in the area of Environmental, Social and Governance (ESG) impact on companies is important to help develop our use of such factors in our investment process and helps raise the standards of companies’ management of ESG matters.
International Corporate Governance Network
Alison Kennedy took part in the International Corporate Governance Network conference in Frankfurt which was attended by around 200 investment managers, asset owners, auditing firms, regulatory bodies and proxy agents. The theme of the conference was German corporate governance in the context of global capital markets. There was an interesting and informative discussion of the German supervisory board structure and the similarities and differences with other board structures around the world. The conference also debated the importance of culture. Alison participated in a panel on the Shareholder Rights Directive and its likely implications for investors.
Chartered Financial Analyst (CFA) Institute Workshop on Corporate Governance
Mike Everett attended the CFA workshop on the EU corporate governance landscape. This workshop was an opportunity to provide input, from an investors perspective, on key corporate governance issues in Europe and to hear the views of others on these issues. This input will be used by the CFA to publish a paper articulating the investor vision on European corporate governance in the context of the EU policy framework. We believe that it is important to represent what we believe to be our clients’ best interests in discussions such as this.
All Party Parliamentary Corporate Governance Group (APPCGG)
Mike Everett attended an APPCGG event at the House of Lords where Baroness Bowles made a speech on the development of financial services regulation in Europe since the financial crisis. Baroness Bowles had previously been an MEP and Chair of the Economic and Monetary Affairs Committee of the European Parliament. Her speech provided an opportunity to further understand the role of Europe in developing financial services regulation and the subsequent discussions and questions from members of both houses of the UK parliament also provided an insight to the views and possible direction of policy in the UK.
Local Authority Pension Scheme workshop on pension fund pooling
Mike Everett attend a workshop organised by Robbins Geller Rudman and Dowd (RGRD) to discuss the impact of the pooling of local authority pension schemes in the UK. This was an opportunity to meet with the representatives of local authority schemes to share view on items relating to governance and stewardship including engagement with investee companies and the decision making process for voting at company meetings. The pooling process and possible future structures are still under development and so these discussions provided an opportunity to understand the concerns of local authorities and also to share our thoughts on possible impacts.
Investment Association (IA) Productivity Action Plan
Mike Everett attended the launch of the IA productivity action plan. SLI had been signatories of a letter to the Chancellor of the Exchequer committing to develop a plan for asset managers to influence the improvement of UK productivity and were represented on the steering committee responsible for the development of the action plan. The launch event provided an opportunity to hear the views of government representatives, senior members of the asset management industry and companies regarding the work to be done in influencing improvements in UK productivity.
Guy Jubb, Standard Life Investments’ Head of Governance & Stewardship Retires
As previously announced, Guy Jubb retired from his role as Head of Governance & Stewardship on 31st March. Guy was responsible for creating Standard Life Investments’ governance and stewardship function in 1992 and since then has been influential in the development of stewardship and the role of investors in holding boards and companies to account in the UK and overseas. Under Guy’s influence SLI have become a leader in this area providing clients with an investment process that integrates corporate governance and stewardship.
Euan Stirling took up the newly created role of Head of Stewardship and ESG Investment on the 1st of April. The creation of this role reflects the importance that Standard Life Investments and their clients attach to this significant part of their investment process across all asset classes. Euan will be responsible for the Governance & Stewardship and Responsible Investment teams, bringing further alignment to the work of these two teams to integrate environmental, social and governance (ESG) factors into Standard Life Investments’ investment process.
Governance Progress in India
Guy Jubb and Mike Everett held meetings in Mumbai with representatives from the investment community, search firms , the major audit firms, the British High Commission and companies involved with the India UK Financial Partnership (IUKFP). The meetings provided us with an opportunity to assess the progress made in India in relation to governance and stewardship matters particularly since the changes to company law and the listing agreement. The impression we got from our meetings was that there continues to be progress with ongoing focus on reducing bribery and corruption, increasingly professional board directors and the required spend in relation to Corporate, Social Responsibility (CSR) matters being used positively. There also appeared to be continued willingness to develop partnerships and raise standards through exercises such as IUKFP.
The Institute of Chartered Accountants of Scotland
Alison Kennedy attended an ICAS event, hosted by PwC and chaired by ICAS President, Jim Pettigrew, to debate the key developments and challenges in the area of assurance. This included presentations on the impact of the fair, balanced and understandable requirement on corporate reporting and assurance in the UK and the assurance of non-financial information, such as KPIs.
FRC Investor Roundtable
Mike Everett attended an investor roundtable as part of the FRC’s stakeholder engagement relating to their project on the boardroom’s approach to corporate culture. This provided an opportunity to share our views on corporate culture and the board’s role in setting and overseeing a company’s values and business practices. We believe that a board should acknowledge in the annual report its responsibility for determining and maintaining the company’s values, and ensuring that they are reflected in the company’s business practices. It should provide an explanatory and meaningful account of how it has fulfilled these responsibilities.
Industry and Parliamentary Trust (IPT) Discussion
The IPT is an independent, non-lobbying, non-partisan charity that provides a trusted platform of engagement between Parliament and UK business. Mike Everett attended a dinner discussion hosted by the IPT on a values-based approach to business at which the General Manager of the Kellogg Company in UK and Ireland was the guest speaker. This gave an opportunity to take part in a discussion on a company’s use of values and its role in creating trust and long term success.
Institute of Chartered Secretaries and Administrators (ICSA) Awards 2015
Guy Jubb was presented with the Outstanding Achievement Award in Corporate Governance at the Institute of Chartered Secretaries and Administrators Awards dinner in London. The citation for Guy's Outstanding Achievement Award said, 'As one of the best-known voices of active and engaged investment, Guy is never afraid to state Standard Life Investments' clearly thought out position to companies. He is one of relatively few fund managers willing to attend and speak at AGMs when he believes it is important that the voice of a major investor be heard.'
Institute of Chartered Secretaries and Administrators (ICSA) Awards 2015
Standard Life Investments was short listed for Best Investor Engagement at the 2015 ICSA Awards. The shortlist was determined by votes from the company secretaries of all FTSE 350 companies, who had been asked to nominate the investor or investment manager who was responsible for the most constructive stewardship engagement with the company during the past year. Although we did not win the award, which went to Legal & General Investment Management, we were pleased to be recognised in the shortlist for the engagement activities which we undertake on behalf of our clients.
Asian Corporate Governance Association (ACGA) Annual Conference
Two members of the team attended the ACGA conference in Kuala Lumpur. This conference provided the opportunity to better understand the development of governance and stewardship practices in countries across the Asian region. There were presentations and round tables involving regulators and practitioners across the region providing good insights into current practices and possible future developments. Our involvement also provided opportunities to input our views into the discussions.
In addition we had an opportunity to visit Bursa Malaysia, the Malaysian stock exchange, to hear how they are promoting governance and environmental and social considerations through their FTSE4Good index and the Association of South East Asian Nations (ASEAN) governance index. We also received presentations from shipping and palm oil companies about their handling of ESG issues in their industries and had the opportunity to visit a palm oil plantation.
The visit was useful to hear about developments and to engage directly with those involved in developing ESG practices. This will help us as we continue to increase our own engagement in the region.
Organisation for Economic and Corporate Development (OECD) Corporate Governance Committee
Mike Everett attended the OECD Corporate Governance Committee as a member of the Business and Industry Advisory (BIAC) representation. The OECD have recently issued update corporate governance guidelines for use by countries around the world and these have been endorsed by G20 finance ministers as an important part of improving global economies. The presentation by BIAC, of which Mike provided a section, focused on suggested future activities for the OECD committee.
Pensions and Lifetime Savings Association (PLSA) Stewardship and Accountability Forum
SLI presented to pension trustees attending this forum on the company’s governance and stewardship and responsible investment activities. The presentation was made by Keith Skeoch, CEO, Amanda Young, Head of Responsible Investing, and Mike Everett, Governance & Stewardship Director. This gave an opportunity to highlight the importance we place on the integration of ESG factors in our investment process and to enter into a dialogue with trustees on the matters of importance to them.
Institute of Directors (IOD) and Shareaction Roundtable
This Roundtable was organised by the IOD and Shareaction involving asset management firms and others involved in the stewardship environment in the UK such as the Financial Reporting Council (FRC), the Department of Business Innovation and Skills (BIS) and the Institute of Business Ethics (IBE). Shareaction, the FRC and BIS presented details of their current activities to further develop stewardship and the UK code and there was an opportunity for us and other asset managers to discuss their views on these activities and possible other mechanisms to further improve adherence to the Stewardship Code in the UK. We have been supporters of the Code and have been involved in its development over time and this Roundtable helped to involve us in the debate over its further development.
Washington DC Reflections
In early November Guy Jubb concluded a trip to Northern America with a visit to Washington to attend a meeting of the Standing Advisory Group (‘SAG’) of the Public Company Accounting Oversight Board (‘PCAOB’), the US audit regulator. Guy is a member of the SAG and the agenda for its meeting, which spanned two days, focussed on audit quality indicators. Emerging issues that could affect the PCAOB and the use of specialists in audits also featured. The discussions about audit quality considered what audit quality indicators should be used and whether or not they should be disclosed to shareholders. The emerging consensus in terms of the advice of SAG members to the PCAOB was that it would be better to take a principled rather than a prescriptive approach to which indicators should be used, recognising that the benefits of a case by case approach. Also, many SAG members highlighted the importance of qualitative indicators, not least professional judgement, when it comes to audit quality. Regarding disclosure, Guy encouraged the PCAOB to consider mandating disclosure by the auditors of whether or not audit quality indicators had been discussed and agreed with the audit committee.
Whilst in Washington Guy also attended an informal meeting of senior figures in the US audit field to discuss current and emerging issues. The audit implications of cyber security was discussed and yielded some useful insights, not least in respect of the boundaries of responsibility for auditors in this regard. In addition, Guy met the Executive Director of the Group of Thirty for an introductory discussion about the Group, in general, and its role in promoting improved culture in the global banking sector, in particular.
Chartered Institute of Internal Audit
Alison Kennedy attended the Chartered Institute of Internal Audit annual conference in London. This conference provided an opportunity to learn more about the changing role of internal audit and how internal audit interacts with the board. Internal audit is now playing a broader role, for example, in monitoring risk appetite & risk culture and in measuring strategic risk, and is increasingly seen as the 'eyes and ears of the board'. The conference highlighted some areas that we may wish to probe when we engage with companies.
Council of Institutional Investors (CII) Conference
We were represented at the Fall Conference of the CII in Boston and took part in debates that considered a wide variety of topics that presently dominate the governance agenda in the USA. Together with colleagues from the Boston office, we hosted a dinner moderated by Stephen Davis of Harvard University that addressed the subject of governance and its relation to shareholder value. Our guests included senior representatives from a number of US and Canadian institutional investors including SBA Florida, Ontario Teachers, Wisconsin SWIB and the Canada Pension Plan Investment Board. The evening provided a lively exchange of views and allowed Standard Life Investments to promote its governance expertise in front of an influential audience.
PwC Investor Event
Jonathan Cobb and Mike Everett attended a PwC investor event. All of the major audit firms now hold such events which we find useful to obtain information regarding the current views and development in the audit industry, hear the views of others at the event on topics relating to auditors and their interaction with investors and companies and also to provide our views on important issues relating to audit. Mike Everett spoke on a panel, which included an Audit Committee Chairman and Audit Partner, that debated the degree of dialogue between audit committees and investors. This provided an opportunity to highlight the importance we place on such a dialogue and to give our views about the current practice in this area.
IMD – The Role of the Asset Manager Presentation
Guy Jubb presented the role of the asset manager to a delegation of non-executive directors of leading Chinese banks at IMD, the leading international business school in Lausanne, Switzerland. Guy’s presentation, which can be found here, provided historical context to the evolution of modern day corporate governance and stewardship in the UK, insights as to the role of governance and stewardship in asset managers drawing on its role within Standard Life investments, and views on the evolving global governance scene. It helped to give the delegation an understanding of the role of global asset managers in engaging with companies and holding their boards to account.
International Corporate Governance Network (ICGN) – Fall Conference, Boston, USA
Jonathan Cobb and Guy Jubb represented Standard Life Investments, which is a long-standing and supportive member of the ICGN. The Conference, which attracted over 150 delegates from around the world, focussed on regional priorities for corporate governance reform. Guy spoke on a panel moderated by Dr Stephen Davis of the Harvard Law School; it focussed on the case for corporate governance and stewardship codes in the United States, which currently has no such codes. Guy drew attention to the benefits and limitations of governance and stewardship codes in the UK and highlighted that they are ‘living’ codes that are reviewed every two years to keep them up-to-date and relevant. Gratifyingly, when the audience was polled a clear majority agreed that confidence in US securities markets would be enhanced if the United States had codes. Guy also spoke on a panel arranged by the Center for Audit Quality to address improvements in audit committee reporting. Guy referred to the improvements which have been made in recent years in the UK and the increased engagement that is taking place between investors and audit committee chairs. He commended the Global Disclosure Guidelines for Audit Committee Reports, which were developed by the investor-led Enhanced Disclosure Working Group. These Guidelines can be found here.
Jonathan Cobb was asked to moderate a discussion held at the invitation of international law firm Nabarro in the City of London. The subject was the alignment of incentives to corporate performance and it attracted a number of non-executive directors from listed companies across the size-spectrum. The debate encompassed the many challenges faced by REMCO’s in aligning executives with the risks that boards wished to take and suggested a number of alternative models. All were agreed that equity should remain a cornerstone of executive remuneration.
All Party Parliamentary Corporate Governance Group (APPCGG) Annual Dinner
Guy Jubb made a speech at the APPCGG annual dinner held at the Houses of Parliament. The dinner was attended by a number of members of the House of Commons and the House of Lords. The speech gave some detail of our recent governance and stewardship activities and focused on specific concerns of Standard Life Investments in relation to remuneration and holding auditors to account. Guy highlighted some policy developments which may assist to address the concerns he raised. A copy of Guy’s speech can be found here.
Audit Quality Inspections Annual Report
We have assessed the Audit Quality Inspections Annual Report which was recently published by the Financial Reporting Council. This outlined the work which the FRC had undertaken to monitor the quality of audits completed by the major audit firms in the UK. It helped identify areas of audit weakness and establish priorities for improvement. The report is useful in informing our engagement with companies and their audit committees on audit matters.
Deloitte Annual Forum
Mike Everett took part in a panel discussion at the Deloitte Annual Forum. The attendees were corporate governance leaders from Deloitte’s offices around the world. The panel included other representatives from the investment industry and a non-executive director and discussed current trends in corporate governance. It was a good opportunity to share our views on various corporate governance topics and also to hear views from others in the industry and the wider Deloitte advisory network.
International Corporate Governance Network (ICGN) 20th Anniversary Annual Conference
Joanna McNeill and Guy Jubb, together with other colleagues from Standard Life Investments attended this conference, which was held in the magnificent and historic Guildhall in the City of London. Standard Life Investments was pleased to be one of the major sponsors of the event, not least because of the leading role taken by the ICGN in promoting and developing best practice in international corporate governance and investor stewardship. The Conference covered a wide range of contemporary topics and issues, many of them relating to environmental and social aspects of corporate governance. Guy Jubb made a speech at the Gala Dinner which reflected on the progress the ICGN has achieved and its potential for the future. At the conclusion of his speech, Guy proposed the toast ‘The ICGN – Past Present and Future’. A copy of his speech can be found here.
Guy Jubb attended the AGM in London and spoke to congratulate the WPP team for what they have achieved during WPP’s first 30 years. Also, he highlighted our concerns about the perception that Sir Martin Sorrell, WPP’s CEO, has the potential to dominate the Board’s decision taking, and we sought a commitment to ensure shareowners are given a clear and concise explanation of how WPP’s Board is managing CEO succession. A copy of our statement can be found here.
Human Business at Edinburgh Initiative – Credit and Inequality in Contemporary US – Lecture by Professor Bruce G Carruthers, Professor of Sociology, Northwestern University, Chicago
Professor Carruthers is Director of the Buffett Institute for Global Studies, and he gave an enlightening lecture at the University of Edinburgh Business School that shone light on the social and financial consequences of credit inequality. Although his focus was on evidence from the United States, his views and conclusions had relevance for many economies, especially those with widespread personal credit and sophisticated instructional capital markets. Guy Jubb, who attended the lecture, was struck by the Professor’s conclusions relating to the barriers and limitations to access to credit, especially when considered in a demographic context and economies which are increasingly reliant on household credit to function efficiently.
European Corporate Governance Institute (ECGI) – Standard Life Prize for Best Finance Paper Presented
Guy Jubb attended the ECGI’s Annual Assembly, which this year was held in Oslo. Guy presented the Standard Life Investments Prize for the best paper in the ECGI’s Finance Working Paper series to:
- Dr Alexander Borisov of the University of Cincinnati
- Professor Eitan Goldman of the Kelley School of Business at Indiana University and an ECGI Research Member
- Professor Nandini Gupta also of the Kelley School of Business at Indiana University
for their paper "The Corporate Value of (Corrupt) Lobbying".
On making the award Guy commented on the innovative research approach used and the relevance of the subject to corporate governance around the globe.
The European Commission's 16th European Corporate Governance Conference
Guy Jubb attended the EC Corporate Governance Conference, which was hosted by the Latvian Ministry of Justice and held at the University of Latvia in Riga. Guy spoke on a panel which provided an investors perspective on contemporary corporate governance issues in Europe. Some 220 people registered from 20 countries and the Conference hosted a live broadcast to another 600 delegates.
Activist Investing in Europe
This London conference drew together a large number of representatives from the global hedge fund and activist community. Jonathan Cobb was invited to speak on a panel of four to give the UK institutional investor perspective of developments in this marketplace. He contrasted the differences that can be observed in the European and US markets and commented on the ways by which SLI evaluated activist proposals. The ways in which the boards of European companies deal with an approach by activists was also discussed.
European Confederation of Director Associations (EcoDa) 10th Anniversary
Standard Life Investments sponsored EcoDa’s 10th anniversary conference in Brussels entitled ‘ The Professionalism of Directors - Key to European competitiveness’. This conference included speakers and panellists from the European Parliament, the European Commission, European companies and various director associations from across Europe. Mike Everett represented Standard Life Investments on a panel discussing the challenges for the next 10 years in relation to the professionalism of directors. The event provided an opportunity for us to be seen in support of the development of professional directors and also to raise our profile with companies and associations across Europe. Improvement in corporate governance standards and engagement with companies outwith the UK will further enhance our ability to manage governance related risks within our clients’ portfolios.
CII Spring Conference – Washington
Jonathan Cobb attended the 30th Annual Spring Conference of the CII in the USA. This is one of the biggest gatherings of asset owners in North America and included representatives of a number of clients of Standard Life Investments. The meeting provided a forum for the discussion of a number of “hot topics” concerning corporate governance at US companies. Among the issues discussed were proxy access (by which process independent shareholders nominate board candidates for the stockholder ballot), the evolution of corporate law in respect of shareholder rights and human capital management. The conference was attended by over 500 delegates and also provided an opportunity to discuss governance concerns with some of the biggest corporate issuers in the USA.
Non-Executive Director Awards
Once again, Standard Life Investments were delighted to sponsor the annual NON-EXECUTIVE DIRECTOR AWARDS, now in its ninth year. This event recognises the contribution of non-executive directors to UK business success and the fostering of high standards of business practice and corporate values . In front of an audience of over 450 which included a number of clients of Standard Life Investments, Jonathan Cobb presented the Lifetime Achievement Award to Sir John Parker in recognition of his successful service to a wide range of companies, most listed today in the FTSE 100 Index. The event reinforced the commitment of Standard Life Investments to the promotion of good governance in both listed and un-listed companies
European Accounting Association Congress
Guy Jubb spoke on a Symposium Panel at the 38th European Accounting Association Congress, which was held in Glasgow at the end of April. The Symposium , which was hosted by the Institute of Chartered Accountants of Scotland (ICAS), focused on the initial findings of a paper entitled ‘Professional Investors and the objectives of financial reporting’, which is to be published by Professor Mark Clatworthy of the University of Bristol and Professor Joachim Gassen of the Humbolt-University of Berlin, who presented their initial findings. The Panel was chaired by Dr Allister Wilson, Convenor of the ICAS Research Committee and a Partner at EY. Guy’s fellow panellist was Jim Pettigrew, who is ICAS president and Chairman of the Edinburgh Investment Trust. Guy’s comments focussed on the importance of differentiating the different user categories included in the sample used by the researchers, particularly with regard to the different uses to which they might put the financial information they receive. Also, Guy was critical about the absence of any reference in the Conceptual Framework of the International Accounting Standards Board to stewardship as one of the primary purposes of financial statements.
Alison Kennedy was in Japan along with a number of other global investors and asset owners to meet with Japanese companies, investors and regulators. The focus of the trip was the changing nature of corporate governance in Japan, particularly the implications of the new Governance Code. The group was also following up on earlier engagement with companies on the need for increased board independence.
Visit to India
Guy Jubb and Mike Everett visited Mumbai in order to assess and provide input to the current development of corporate governance standards at Indian companies. Over the last couple of years a new Companies Act and listing requirements have been introduced that create new corporate governance requirements for Indian companies. This was a good time to meet with various individuals and companies involved with the implementation of the new requirements including investors, those involved with executive search and board evaluations, external auditors, regulators and issuers. The meetings held provided a good feel for how the new requirements were changing the standards of corporate governance and particularly highlighted the spectrum of those companies that truly met the spirit of good governance through meaningful governance improvements and those that were simply concerned with demonstrating compliance. This will provide good input to our governance and stewardship activities as our investment increases in countries such as India.
German Governance Code Commission
We submitted a response to the German Governance Code Commission"s consultation on proposed changes to the Governance Code. Our comments were generally supportive although we suggested that there was scope for further clarification of the role of the Supervisory Board in succession planning and for improved transparency around the nominations process. Our letter was supported by a number of other global investors and asset owners.
KPMG's Audit Committee Institute
Guy Jubb spoke at a breakfast briefing of KPMG's Audit Committee Institute in London. The briefing was attended by the audit committee chairs of some of the UK's largest listed companies. It provided an opportunity for Guy to share and discuss views on a number of key audit issues including the evolution of the auditor's report and the benefits accruing to investors from the enhanced disclosures by auditors in the UK, the importance of effective audit planning, and our willingness to have constructive conversations with audit committee chairmen in order to contribute to the success of the audit tendering process.
Brussels Shareholder Rights Events
Mike Everett attended and sat on a panel at a seminar organised by the ACCA, Ecoda, European Issuers and Business Europe covering the proposed amendments to the shareholder rights directive (SRD2). The event included speeches by Jeroen Hooijer of the EU Commission, who was responsible for the proposed SRD 2, and Cecilia Wikstrom, a Swedish MEP, followed by two panels, the first covering the remuneration and related party transactions requirements of SRD 2, on which Mike sat, and the second covering the complexities of shareholder identification requirements in SRD 2. The Deputy State Secretary for Latvia, who chairs the Council working group dealing with SRD closed the seminar. The event provided an opportunity to get the up to date views of policy makers and to provide our own view along with those of corporate issuers, proxy advisers and service providers from across Europe. As the proposed changes to the directive proceed further through the legislative process it is important to continue to represent our views and assess the possible direction of travel as further amendments are introduced.
Finance Watch Long Term Financing Conference
Mike Everett attended a seminar in Brussels designed to discuss the Capital Markets Union (CMU), good securitisation, the ubiquitous role of collateral and alternative paths to jobs and growth. There was a broad range of speakers from the European Commission, the financial services industry, consumer representatives, academia and the press. Finance Watch are a group representing users of financial services and have a particular interest in how financial services can become involved in the creation of jobs and growth. Asset managers could play a key role in the delivering many of the aspects of the CMU and this seminar was a good opportunity to assess and discuss the role of asset managers in developing structures that will help deliver improved economic growth.
City of London Corporation visit to the European Parliament
Mike Everett took part in a meeting with UK Labour MEPs organised by the City of London Corporation. The meeting was held to provide information about the financial services industry and the importance of financial services to the regions of the UK and to discuss various aspects of EU legislative developments that impact the industry.
OECD Business and Industry Advisory Committee (BIAC)
Mike Everett took part in the presentation by BIAC to the OECD Committee reviewing the OECD Corporate Governance Guidelines. BIAC is one of two groups that are charged with providing input to the work of the OECD committees. The other group involved is the Trade Union Advisory Committee (TUAC). The OECD Guidelines provide governments around the world with a template for good legislation relating to Corporate Governance. The OECD have been asked by the G20 Finance Ministers to review the guidelines and the impact they can have in improving economic growth and delivering investment and jobs. We are aware that countries which are developing corporate governance and stewardship codes do refer to the OECD guidelines to inform their work. As part of our role to influence governance change this involvement with BIAC allows us to provide input in the development of regulatory templates.
Governance & Stewardship Annual Review for 2014
Standard Life Investments has released its Governance & Stewardship Annual Review for 2014. The report provides an account of its engagement and voting activities during the year as well as insights into Standard Life Investments' views on some of the key developments in governance & stewardship - past, present and future, both in the UK and globally. A key development during 2014 was the publication of new Regional Voting Guidelines, which assist Standard Life Investments, which now operates in 17 countries, when voting clients' shares at meetings around the world.
Japanese Governance Code
We submitted a response to the Council of Experts in Japan who are currently consulting on the proposed Japanese Governance Code. This is the first time there has been a Governance Code for Japanese companies and we expressed our support in principle while making some specific suggestions with regard to the role of the Chairman, the role of the Audit Committee and the need to provide good quality explanations under the ‘comply or explain’ regime.
ISS Annual Conference
Jonathan Cobb attended the 30th ISS Annual Conference which brought together a number of investors in US markets. The main theme was the increasing prominence of “activist” investors and the various ways in which corporate boards respond to them. There was also discussion about the forthcoming voting season and the prominence that is likely to be given to the issue of “proxy access”. The meeting provided an opportunity to discuss the approach to governance taken by SLI with senior investment officers of a number of US asset owners that included SBA Florida, The State of North Carolina and the NYC Pension Scheme.
Hearing on Shareholder Rights Directive
Mike Everett attended a public hearing in the European Parliament in relation to the proposed changes to the Shareholder Rights Directive. Presentations were made by the rapporteur for the directive, Mr Cofferatti - MEP and five industry speakers from industry associations, representing corporate issuers and asset managers, and asset management firm and a proxy voting firm. Attending this hearing was useful to gauge the possible direction that the parliament may take with Mr Cofferatti as the rapporteur and understanding the views of our peers and other stakeholders.
Standard Life Investments Hosts a dinner to discuss the Shareholder Rights Directive
Standard Life Investments hosted a dinner in Brussels attended by representatives from the European parliament and other EU and member state legislative entities and industry bodies representing corporate issuers and asset managers. Guy Jubb made a speech at the dinner presenting SLI’s views on the proposed changes to the directive and attendees were provided with a publication detailing these views. There was a lively debate amongst the attendees on the various views that were represented. The dinner provided a good opportunity to disseminate the company’s views on the directive and to interact with important representatives in Brussels on this important topic. The relationships built through such events will be useful in our ongoing work in Brussels on various policy aspects relating to governance and stewardship.
Industry and Parliament Trust (IPT) - Standards and Conduct in Financial Services
Mike Everett attended an IPT event at the House of Commons at which Dame Colette Bowe, Chairman of the Banking Standards Review Council, presented on her new role relating to raising the standard of conduct in UK banks. The event also included an opportunity for a broader debate on conduct in financial services amongst the attendees which included members of the House of Commons and the House of Lords as well as representatives from financial services firms and other stakeholders. As an investor in banks this event was a good opportunity to gain further understanding of the Banking Standards Review Council and to provide our views on conduct in financial services.
Shareholder Rights in Europe 2020 Conference
Alison Kennedy attended a conference in Wiesbaden, Germany arranged by the German Retail Shareholders Association, DSW, and Better Finance For All. The theme of the event was ‘Shareholder Rights in Europe 2020’ and, as well as sessions on cross border voting, say on pay and the Shareholder Rights Directive, there was a panel discussion on supervisory board elections to which Alison contributed. Along with other global investors, Standard Life Investments has been encouraging the German Corporate Governance Code Commission to improve transparency around the process of board elections and this conference provided a good opportunity to put forward our views on this issue.
The Conference Board
Jonathan Cobb attended the annual meeting of The Conference Board in New York. This brings together representatives of corporate USA, asset owners and managers in order to discuss issues of corporate governance and to foster dialogue between companies and their stock holders. US companies and asset owners that were represented included AMEX, Goldman Sachs, Merck, the AFL-CIO and CalSTRS. The meeting discussed the value generated by shareholder activism and engagement, board evaluation and director tenure and the governance of M&A. The meeting gave us the opportunity to bring a UK perspective to the debate and to showcase our credentials in corporate governance.
Practical Law 3rd Annual Company Secretary Forum
Alison Kennedy attended the Practical Law 3rd Annual Company Secretary Forum held in London. This was attended by over 200 company secretarial representatives and focused on current governance and reporting topics. Along with Edward Legget, one of Standard Life Investments’ UK fund managers, Alison took part in a panel discussion on the changing nature of engagement.
The Kangaroo Group
The Kangaroo Group hosted a discussion dinner at the European Parliament in Brussels for MEPs and representatives of business, investor and professional groups. Mike Everett and Guy Jubb represented Standard Life Investments. The focus of the discussions was the proposed revisions to the Shareholder Rights Directive. Guy Jubb was one of the guest speakers and he highlighted our broad support for the proposed revised Directive. His views were echoed by a number of speakers, who drew attention to the wider benefits that would accrue from implementing the Directive to restoring public trust in the European fund management industry.
Public Company Accounting Oversight Board’s Eighth International Auditor Regulatory Institute
Guy Jubb was in Washington DC to participate on an investor panel on the concluding day of the Public Company Accounting Oversight Board’s Eighth International Auditor Regulatory Institute. The Institute was attended by about 100 representatives of independent audit regulators from around the world. Guy addressed the need for enhanced auditor reports, drawing on the encouraging experience with such reports in the UK over the last year, the need for improved audit firm governance, and the need to address the dominance of the Big 4 global audit networks. With reference to the latter he called on the Financial Stability Board to co-ordinate regulatory action to understand and address the risks to audit quality and capital market stability. A summary of Guy’s comments can be found on our website using the following link.
Asian Corporate Governance Association (ACGA) Annual Conference
Guy Jubb and Mike Everett attended the ACGA Annual Conference held this year in Hong Kong. The event was well attended by asset owners and managers from around the world and Asia. The ACGA's bi-annual review of the state of Corporate Governance in Asian countries was launched at the conference and it provided a useful backdrop to discussions with other members of the ACGA on including governance aspects in investment activities. It gave a useful opportunity to get more information on particular governance and investment issues in the region and to share practices with others.
Corporate Governance, Value Creation and Growth Conference
Alison Kennedy attended a conference organised by the Italian presidency of the EU in Milan to discuss Corporate Governance, Value Creation and Growth. A particular theme was the implications of the EU Commission's proposals contained in the Shareholder Rights Directive. Alison took part in a panel discussion on these proposals and commented on how shareholder engagement may be enhanced as a result.
Standing Advisory Group Meeting
Guy Jubb attended a meeting of the Public Company Accounting Oversight Board's Standing Advisory Group (SAG) in Washington DC. The PCAOB is the US audit regulator and Guy was appointed to the SAG in a personal capacity at the beginning of the year. The focus of the meeting was on issues associated with auditing fair values, which is an aspect of accounting that often involves significant judgements and can be critical to the amounts included in audited financial statements. The discussions highlighted the challenges faced by auditors. In particular the audit risks associated with the use of third party pricing service providers to generate the values, who often use a ‘black box' to which the auditor has, at best, restricted access. Guy commented during the meeting on the need for auditors to audit the total disclosures relating to fair value - not just the numbers. He pointed out that the narrative disclosures can provide an effective vehicle for companies to explain the basis and context of the reported fair values.
PWC Investor Exchange
PWC hosted their 2014 Investor Exchange in Boston. Guy Jubb attended this all-day event. It provided useful and practical insights to the interaction between audit committees and auditors in the US. Also, it was interesting to listen in to discussions about trends in corporate/investor engagement in the US, especially in an environment where shareholder activism has become a big issue.
Financial Reporting Lab
The Financial Reporting Council held a stakeholder event in London to review the activities of its Financial Reporting Lab. We were not wholly convinced about the benefits accruing from the Lab when it was launched several years ago but we have now come to appreciate the usefulness of its pronouncements. Guy Jubb represented Standard Life Investments at the meeting, which provided a helpful account of the various projects the Lab has commissioned, ranging from the impact of digital reporting to the reporting of distributable reserves. In the Q& A session Guy drew attention to the inefficiencies and other issues arising from the relentless trend of companies to adopt December 31 year ends - not unsurprisingly there no easy solutions on offer.
Mazars Business in Society Roundtable
Guy Jubb participated in Mazars Business in Society Roundtable, which was held in London. Peter Montagnon, an Associate at the Institute of Business Ethics, which co-hosted the event, led the discussion. Other participants included representatives of both listed and private companies and there was a wide ranging discussion about how ethical values could and should be embedded in businesses. In its latest Governance & Stewardship Principles and Policy Guidelines Standard Life Investments included a new section on values and business practices, which Guy was able to draw on during the discussions.
BIS & FRC Stakeholder Meeting
Guy Jubb represented Standard life Investments at a Stakeholder Meeting convened in London by the Department of Business Innovation and Science (BIS) and the Financial Reporting Council (FRC). The purpose of the meeting was to assist BIS and the FRC in developing consultation proposals seeking to address significant potential changes that will impact on the statutory audit in the UK. Guy highlighted some of the unintended and unwelcome consequences of audit tendering, and called for the Caparo judgement, which makes it difficult for individual shareholders to sue auditors, to be included within the scope and substance of the proposed consultations.
ICAS Breakfast Briefing
Guy Jubb was present at a Breakfast Briefing hosted by the Institute of Chartered Accountants of Scotland (ICAS) at which Andrew Miller, a member of ICAS and the Chief Executive of the Guardian Media Group (GMG), gave an engaging and entertaining briefing about the challenges and opportunities to businesses, in general, and to GMG, in particular, arising from developments in digital communications. As well as demonstrating the global reach and feedback which GMG achieves from pursuing its digital strategy, he also explained convincingly the benefits of partnering with others who bring complementary skills and perceptions to the party. All in all, it was a breakfast that gave Guy plenty food for thought.
NAPF Responsible Ownership Seminar
Mike Everett attended the NAPF Responsible Ownership Seminar which included presentations from Sir Win Bischoff, the Chairman of the Financial Reporting Council (FRC), Jeroen Hooijer, responsible for the Shareholder Rights Directive at the European Commission and David Hertzell of the Law Commission. This was an opportunity to hear the views from key players in the industry relating to changes in the Corporate Governance Code, the Shareholder Rights Directive and Trustee Responsibilities. There were also presentations from industry peers on their activities in relation to responsible ownership against which we can assess our own methods.
ISS Roundtable Discussion
Alison Kennedy attended a roundtable discussion in Edinburgh hosted by Proxy Advisers ISS. This was arranged to give ISS an opportunity to update their clients on forthcoming policy changes and also to allow them to seek client views on emerging policy issues.
Centre for the Study of Financial Innovation (CSFI) Corporate Culture Roundtable
Mike Everett was one of a panel of speakers at a roundtable event organised by the CSFI to discuss Corporate Culture and the board's role in driving cultural change. The speakers included representatives from the accountancy profession, academia and Mike presenting the view of Standard Life Investments as an investor. We believe that it is an important part of a board's role to determine the company's values in a thoughtful manner so that they are specific to the company and capable of implementation and monitoring by the board at regular intervals. Our Governance & Stewardship Principles and Policy Guidelines include reference to this role and the CSFI roundtable provided a good opportunity for us to present our views in this area.
Institutional Investors Committee (IIC) Proxy Adviser Roundtable
Mike Everett attended a roundtable of institutional investors to discuss how proxy advisory services are used. The role played by proxy advisers has become a focus for policy makers in both Europe and the US and this meeting provided an opportunity for us to share and compare our views with other investors. We make significant use of proxy adviser services to create a scalable process for the analysis of company voting resolutions and so the impact of policies on sourcing these services is important to us. The roundtable also discussed views on the impact of proposals to change the EU Shareholder Rights Directive on proxy advisory services.
Long Termism, Stewardship and Growth
Alison Kennedy attended a conference organised by the FRC on the theme of ‘Long-termism, Stewardship and Growth'. This included discussion on what steps could be taken to engender a more long term focus by companies and investors and whether the UK Corporate Governance Code was still relevant as we look to the future. There was also an update on the work which the European Commission is undertaking in this area.
ICGN Annual Conference
Alison Kennedy attended the International Corporate Governance Network annual conference in Amsterdam. This was attended by over 400 investment professionals and provided a good opportunity for an update on governance developments and trends around the world. The European Commission's Shareholder Rights Directive was a particular area of focus as was the work of proxy advisors. There was an opportunity to hear how investors approach the challenges of engaging on governance issues with controlled companies - this has relevance to Standard Life Investments as we expand our governance activities globally.
Tomorrow's Finance Lecture
Guy Jubb presented the Tomorrow's Finance lecture to over 50 invited guests in London. It was entitled ‘'Comply or explain': can it survive in a global market place?' Guy summarised the history of ‘comply or explain', commented on its current status - questioning whether codes had become too easy to comply with, and then considered the future for ‘comply or explain' - and in doing so made three recommendations to enable its survival in a global market place. These focussed on AGM resolutions, making asset managers more accountable to asset owners, and harnessing technology to make AGMs a better experience than is currently the case.
Impact of EU Audit Reform
Mike Everett spoke at an event jointly organised by the Institute of Chartered Accountants of Scotland (ICAS) and the Faculty of Actuaries Student Society (FASS). The event was held to highlight the key EU audit reforms and to identify the significant implications for auditors and investors. Mike provided Standard Life Investments' view of the reforms and their perceived impact.
Accountancy Ethics Roundtable
Mike Everett attended a roundtable organised by the International Ethics Standards Board for Accountants (IESBA) to receive input on their project “Responding to Non-Compliance with Laws and Regulations (NOCLAR)”. The event was designed to get views on the proposed standards relating to the responsibility of accountants when non-compliance with laws and regulations has been identified. We were invited to provide the view of an institutional investor. The roundtable was one of three to be held around the globe and gave an opportunity for IESBA to obtain input from European accountants, regulators and investors.
One Share One Vote
Mike Everett represented Standard Life Investments on a panel at a conference on the “Governance and Ownership of Listed Companies”, organised jointly by the Financial Reporting Council, the London Business School's Centre for Corporate Governance and the Coller Institute of Private Equity. The conference considered two main issues: the “dispersed versus block ownership model”, and the “one share, one vote” principle. The conference was held at the London Business School and was well attended by academics, companies, investors and commentators. Mike provided views on the panel to discuss the one share, one vote principle.
CII Conference - Washington
We attended the Council of Institutional Investors spring conference in Washington. This influential body brings together representatives of the largest public authority and union sponsored pension schemes in the USA, a number of whom are now clients of Standard Life Investments (CalPERS and Illinois). The theme of the meeting was “Building Momentum” behind some of the undoubted governance improvements in the corporate landscape over the past two years. The conference heard from a number of speakers, including Commissioner Kara Stein of the SEC and Ed Garden of the Trian Fund, which is well known for the activist strategies of the so-called “corporate raider” Nelson Peltz. Jonathan Cobb spoke about the UK approach to shareholder activism and the perspective of international investors on the US voting process.
Conference Board Investor Summit
Jonathan Cobb and Guy Jubb participated in the Conference Board's Investor Summit, which took place on May 7 in Washington DC. It provided an opportunity for major global investors and US corporations to debate emerging US corporate governance issues in a robust but non-confrontational way. The topics covered included board accountability, the effectiveness of individual directors, and the increasingly hot topic of political donations by corporations. Guy was a nominated ‘provocateur' and advocated the adoption more widely of board evaluations that would enable the contribution and style of individual non-executive directors to be assessed. Also, the Conference Board's recent published Task Force Report on Corporate/Investor Engagement was a focal point of discussion. It was clear that attitudes towards such engagement are steadily becoming more positive, especially from the US corporate community.
Annual Review 2013 Webinar
Alison Kennedy and Mike Everett presented a webinar covering the role of the Governance & Stewardship team and our Annual Review of 2013.
Finance Watch Symposium
Mike Everett attended a Finance Watch symposium entitled ‘From ESG corporate communication to non-financial performance indicators'. Finance Watch are a non-profit members association based in Brussels that promotes public interest in financial regulation. This symposium was attended by a number of entities with interests in the reporting and measuring of ESG factors and non-financial performance. It provided us with a good opportunity to take part in the debate and to make connections with and understand the views of the other parties involved.
Non-Executive Director Awards
For the third-year running, Standard Life Investments co-sponsored the NED of the Year Awards which recognises outstanding achievement by non- executive directors in the quoted and unquoted sectors. This year, Jonathan Cobb presented the award for the FTSE 100 to Mike Turner CBE for his contribution as Chairman of Babcock International, the support services group. This prestigious event was held at Claridges Hotel in London and was attended by a number of our clients as guests.
Barclays Bank AGM Statement
On 24 April, Alison Kennedy attended and spoke at the Barclays Bank AGM. In light of the decision to increase the bonus pool in the investment banking division in a year when the bank had not performed well, we instructed our proxy to vote against the Remuneration Report.
Active Passive Investor Summit
Guy Jubb went to New York to speak at the 5th Annual Active Passive investor Summit, which was focussing on the interaction of corporate governance with shareholder activism. It took place at an interesting time insofar as a number of influential voices in the US are starting to question whether shareholder rights, when in the hands of activists, are consistent with the best long-term interests of corporations. Unsurprisingly, these views were given short shrift at the Summit, given that the vast majority of the delegates were ardent supporters of activism, which is undoubtedly alive and kicking in the USA. Guy spoke on a panel alongside Ralph Whitworth of Relational Investors, and provided a European perspective to the discussions. The legendary Carl Icahn was another speaker at the Summit.
European Corporate Governance Institute
Mike Everett presented the annual Standard Life Investments prize in the European Corporate Governance Institute's (ECGI) finance working paper series. The prize was presented to Rui Albuquerque, of Boston University - School of Management, Art Durnev, of the University of Iowa - Tippie College of Business and Yrjo Koskinen, of Boston University - School of Management for their paper entitled Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence. This prize is part of our ongoing support of the ECGI and the academic research its members undertake.
Shareholder Rights Directive
Mike Everett visited Brussels during which he had meetings with key contacts at the European Commission, Finance Watch and European issuers. These meetings provided opportunities to discuss the proposed changes to the Shareholder Rights Directive recently issued by the Commission. These proposals may have a significant impact on the activities of Standard Life Investments' clients and Standard Life Investments itself, and so is a key policy development being monitored by the Governance & Stewardship team. These meetings were productive and allowed us to share our initial views on the proposals and to understand the views of others involved in the debate.
European Confederation of Directors Associations Annual Conference
Mike Everett attended the European Confederation of Directors' Associations' (ecoDa) annual conference in Brussels focusing on the board selection process. He also took part in a panel session, representing the views of a shareholder in the nomination process. The conference provided an opportunity to share the views of companies, shareholders, regulators and search firms from across Europe about the processes followed in identifying and selecting board members.
Audit Forum of Firms
Mike Everett spoke at the audit Forum of Firms meeting in London. He presented an assessment of the current policy developments in the Governance and Stewardship arena in the UK, Europe and more widely around the globe with a particular focus on changes to audit regulations. This provided a good opportunity to share views on the significant developments in relation to audit regulations and to demonstrate the interest that investors have in audit matters.
National Association of Pension Funds Investment Conference - Edinburgh
Jonathan Cobb was invited to speak at the annual NAPF Investment Conference where he shared a platform with Mark Fawcett, Chief Executive of NEST. NEST was set up by the UK government to act as a catalyst in the nationwide process of auto-enrolment of employees in pension savings schemes. In light of the recent Law Commission Review of fiduciary duty in the investment chain, the panel discussion centred on the provision of stewardship services to these savings schemes and the duties of providers to scheme beneficiaries. The session was well-attended by delegates to the Conference and gave an opportunity for Standard Life Investments to show-case its credentials in this space.
Guy Jubb and Alison Kennedy attended a seminar on forensic accounting which highlighted some of the accounting techniques which companies may employ in order to present their financial statements in a more positive light. It also covered some of the ways in which these techniques may be spotted.
Corporate Governance in Germany
Alison Kennedy attended a meeting with the German Governance Code Commission to discuss investor views on some areas of potential improvement in the Code, specifically the need for improved transparency around the nominations process for Supervisory Board elections.
Conference Board European Corporate Governance Council
Guy Jubb attended and Co-Chaired the Conference Board's European Corporate Governance Council meeting, which was held in London. The first day was a joint meeting with the Conference Board's European Sustainability Council, and particular focus was given to the changing requirements and expectations for sustainability issues by European companies. Amanda Young, our Head of Responsible Investment, presented our views of investor expectations in this regard. The joint meeting served to highlight how sustainability and corporate governance are becoming increasingly integrated, not least because of the changing role of business in the community, which brings both risks and opportunities to companies. The second day provided a forum for the Council's members to discuss audit tendering, in general, and the process aspects, in particular. Audit tendering is becoming increasingly important to both companies and investors. We are keen to ensure that investors are involved to an appropriate degree in the process and are not side-lined.
Asian Corporate Governance Association India Delegation
Guy Jubb and Mike Everett took part in the Asian Corporate Governance Association's (ACGA) delegation to India. This visit provided an opportunity to meet Indian companies, government departments and industry consultants to discuss the newly enacted and soon to be implemented companies act and listing agreement regulations. The visit was found to be very informative and allowed us to be involved in developing the practices that companies and investors will put in place to meet the new requirements. India is an important market for Standard Life due to the joint venture companies in which it has interests and as an investment opportunity for our clients' funds.
Guy Jubb was a guest speaker at the Indepens Forum, which was held in the City of London on January 14. The Forum was addressing the role of governance in regulated utility companies. Guy's comments focussed on the need for investors to have confidence in not only the stability of the regulatory environment when investing, especially over the long-term, but also the governance of regulated utility companies, noting that the role of business in society is changing. A lively debate ensued, covering a range of topics including executive pay, the importance of values and gender diversity.
International Accounting Standards Board Conceptual Framework
We submitted a comment letter on January 13 to the International Accounting Standards Board concerning its review of the Conceptual Framework. We were critical of a number of aspects of the proposals and we encouraged the IASB to re-instate the concept of prudence and recognise the term ‘stewardship'.
Remuneration in the New Era
Guy Jubb provided the investor voice on a panel at a seminar hosted by Slaughter & May, the leading City law firm, on January 23. The seminar focussed on remuneration reports having particular regard to the new disclosure requirements in the UK that are associated with the binding vote on remuneration policy and the advisory vote on its implementation. The seminar provided Guy to share his views on a number of emerging issues, including the use of discretion and the policy implementation, drawing on his experience as Co-Chair of the GC100 Investor Group, which published in 2013 influential guidelines regarding remuneration disclosures in the new era.
Ernst & Young - A Dialogue with Investors
Jonathan Cobb attended a symposium organised by Ernst & Young, one of the “Big 4” accounting networks, at their London Headquarters. The purpose of the event was to explore the new corporate reporting requirements and the evolving role of auditors and company Audit Committees. The themes that were discussed included the significant judgements intrinsic to audit and the ways in which the quality of a company audit can be assessed. There was also thought-provoking discussion about the growing importance of corporate cyber security and how this relates to risk and the accuracy of the audit process.
Japan Ministry of Economy, Trade and Industry Consultation
We submitted a response to the consultation in Japan on ‘Competitiveness and Incentives for Sustainable Growth: Building Favourable Relationships between Companies and Investors'. This consultation is being conducted by the Ministry of Economy, Trade and Industry. The focus is on similar issues to the Kay Review in the UK i.e. factors and incentive structures which hinder management and capital markets from enhancing long-term value creation and improving disclosure and engagement practices between companies and investors. This comes at an important time in Japan when there are signs of gradual improvement in governance arrangements and a greater debate about governance issues including the possibility of a Stewardship Code.
Governance & Stewardship in Europe
Mike Everett visited Brussels in early December to meet with a number of entities to discuss the current Governance and Stewardship developments in Europe and to brief them on Standard Life Investments activities in this area. These included Finance Watch, who present the consumer's view in the various EU legislative developments, and the European Confederation of Directors Associations (ecoDa), who are an independent voice advocating good corporate governance. Both of these entities are useful contacts in our ongoing work to be a positive influence on the development of new corporate governance legislation in Europe. In addition to these meetings Mike took part in a delegation representing Scottish Financial Enterprise at meetings with a number of MEPs and UK representatives in Brussels.
Corporate Governance in the FTSE-350
Guy Jubb attended a breakfast discussion in London held to launch Grant Thornton's annual review of the corporate governance of FTSE-350 companies. Although the review revealed an increase in the level of compliance with the UK Corporate Governance Code, it highlighted that early trends for chairmen to emphasise the importance of values and culture as the cornerstone of governance has stalled, which is potentially concerning. The panel discussion welcomed the improvements in compliance but a number of panellists stressed there is now a need to consolidate recent changes to the Code rather than embark on a range of new initiatives. This was echoed in several questions and comments from the floor.
Governance & Stewardship Principles & Policy Guidelines
We launched our new Governance & Stewardship Principles & Policy Guidelines. These will assist our investment team to evaluate the governance of companies around the world in which we invest or might invest. They replace our previous Guidelines and include a new section about values and business practices, emphasising the importance we attach to boards providing a meaningful account of how the company's values are maintained and reflected in its business practices. The Scotsman, referring to this new section in an editorial commentary, stated ‘If we are ever to move away from a culture of short-termism in business, all other shareholders should do likewise and make their voices heard'.
German Corporate Governance
We were instrumental in coordinating a group of global investors in signing a letter to the German Governance Code Commission, the Regierungskommission. This letter encouraged improvements to the German Governance Code regarding the transparency of the selection process for Supervisory Board members e.g. the greater use of formal search procedures. The Commission Chairman has subsequently contacted us regarding a possible meeting.
IAASB Exposure Draft: Reporting on Audited Financial Statements
Guy Jubb wrote a letter to the International Auditing and Assurance Standards Board (IAASB) giving Standard Life Investments' view on their exposure draft: Reporting on Audited Financial Statements. In the letter we provided views on the specific items highlighted by the IAASB. We also confirmed that we were pleased the IAASB was taking active steps to enhance the communicative value of the auditor's report, and improve communications between the auditor and those charged with governance.
ACGA Annual Conference
Mike Everett attended the Asian Corporate Governance Association (ACGA) annual conference held in Seoul, South Korea. The conference focused on the standards of corporate governance in North Asia and provided a good opportunity to better understand the current developments and the direction of travel of new requirements in the North Asian markets. It was also a good opportunity to assess the opportunities for engagement with Asian companies and to get further information on the activities being undertaken by our peers across Asia. The visit also included meetings with key Korean companies including Posco and Samsung.
Conference Board South Asia CGRM
Mike Everett presented at the Conference Board's South Asia Corporate Governance and Risk Management Council (CGRM) in Mumbai, India. The council meeting focused on the legislative changes in relation to corporate governance taking place in India. Mike presented on the UK Stewardship Code and led a discussion on whether a similar code could work in India. The council meeting was attended by representatives from a spectrum of Indian companies who were all involved in dealing with the new Indian legislation. As an investor in Indian companies, it provided a good opportunity to present to them on the practices we use in the UK and to debate how we could apply similar techniques to investments in India.
Practical Law Company Secretary 2013 Forum
Guy Jubb spoke at the Practical Law Company Secretary 2013 Forum, which was held at the Marriott Hotel in Grosvenor Square, London. The Forum was attended by several hundred company secretaries and professional advisers. Guy gave an investor's perspective on the new executive pay legislation and regulation in the UK, drawing on his experience as Co-Chair of the GC100 Investor Group. The delegates were particularly interested in Guy's views on the practical aspects of consulting institutional investors ahead of the forthcoming round of binding votes on remuneration policy.
Conference Board Council on Compensation & Benefits
Alison Kennedy presented to the Conference Board Council on Compensation & Benefits on the subject of executive reward, governance and the institutional investor's view. The Conference Board is a global business membership and research association which aims to provide its members with a source of practical knowledge to improve business performance. The members of the Council on Compensation & Benefits include HR and Reward professionals from a number of global businesses.
The Cadbury Committee
Guy Jubb was privileged to attend an invitation-only event held at The Institute of Chartered Accountants of England & Wales to celebrate the publication of The Cadbury Committee: A History by Laura F. Spira and Judy Slinn (Oxford University Press). The book follows the history of the Committee and discusses how it came to publish the Cadbury Report and Code of Best Practice in 1992. Drawing on the papers in the Cadbury Archive at the Judge Business School, Cambridge and interviews with Committee members, it records from the origins of the Committee to its conclusion, its working processes and the responses to its Report. The Cadbury Committee was the watershed that launched corporate governance principles and the ‘comply or explain' approach into Britain's boardrooms. Sir Adrian Cadbury enthralled the audience by sharing his personal memories of the Committee. Also, Laura Spira, on behalf of the authors, gave an engaging account of how they approached their research - challenged by the mysterious disappearance of the Committee's minutes! The book can be obtained via the following link: http://ukcatalogue.oup.com/product/9780199592197.do
Audit Committee Reporting
Alison Kennedy attended a meeting to discuss audit committee reporting organised by the FRC's Financial Reporting Lab. The meeting discussed what investors and corporates would like to see following recent changes to the UK's Corporate Governance Code which require improved reporting on issues such as the significant issues considered by the Audit Committee and how the Committee judged the effectiveness of the audit process.
Council of Institutional Investors Conference
Standard Life Investments was represented at the autumn conference of the Council of Institutional Investors in Chicago. This is a twice-yearly event attended by representatives of the largest public employee and union retirement funds in the USA, including clients of Standard Life Investments. Amongst the main platform speakers was Mary Jo White, the recently appointed Chairman of the SEC who laid out her priorities for maintaining the integrity of US public markets. The event provided an opportunity to communicate our views on audit quality, the evolution of best practice in executive compensation and the application of the principles of good stewardship by investors.
International Financial Reporting Standards
Guy Jubb wrote to Mr Philippe Maystadt following his invitation to provide input to his draft report on IFRS standards. Mr Maystadt had been appointed as a Special Adviser by the European Commissioner for Internal Markets and Services, Michel Barnier, to reinforce the EU's contribution to International Financial Reporting Standards (IFRS), and to improve the governance of the institutions developing these standards. Guy met with Mr Maystadt during July to provide verbal input and was then invited to provide written feedback to the draft report issued to a number of entities. We welcomed the opportunity to provide input to the draft report as it covers an important area which we believe could be improved.
Transparency and Trust Discussion Paper
The Department for Business Innovation and Skills (BIS) issued a discussion paper entitled “Transparency and Trust: Enhancing the transparency of UK company ownership and increasing trust in UK business.” We welcomed the opportunity to comment on the discussion paper and as some of the points raised were important to Standard Life Investments and its clients we provided input to the feedback issued by Standard Life Plc. The main points that we highlighted concerned amendments to the responsibilities of directors on bank boards, which we felt were already covered adequately in the Companies Act. We believe that the proposed alteration to create a primary duty to promote financial stability over the interests of shareholders added confusion rather than clarification and that under the Companies Act, Directors' responsibility is already well defined, requiring consideration of items including, long term consequences, suppliers, clients, the environment and society.
Public Funds Forum 2013
Guy Jubb participated in a panel at the 2013 Public Funds Forum at Pelican Hill in California. There were over 100 invited delegates, who were addressing The Future of Corporate Reform. A number of important themes emerged from discussions at the Forum, not least the importance of accountability. Guy's panel addressed international developments outside of the US, and his comments focussed on developments in Europe, in particular.
Competition Commission - UK Audit Market
Standard Life Plc and Standard Life Investments (SLI) provided feedback to the Competition Commissions' provisional decision on remedies to address the adverse effect on competition that they identified in the UK audit market. Although supportive of the need to improve competition in the audit market the feedback was not supportive of the remedies suggested by the Competition Commission. In general it was felt that changes to address audit issues had already been introduced by the Financial Reporting Council (FRC) and these appeared to be causing positive behavioural changes and these should be given further time to develop improvements. The feedback is available on the Standard Life Investments website.
We responded to the International Integrated Reporting Council consultation on the Draft Framework for Integrated Reporting. Standard Life Investments are supportive of the principles behind Integrated Reporting which offers the opportunity to improve corporate reporting and provide shareholders and other stakeholders with a clearer picture of how a company creates value over time.
New Process & Controls Manager
Nicola Robertson has joined the team as Process & Controls Manager. She will be responsible for managing and improving the team's processes and for oversight of team controls. Nicola previously worked for Standard Life Investments in Risk & Compliance.
Standard Life Investments hosted a dinner for MEPs and a number of key industry bodies and associations to discuss governance and stewardship and long term investing matters. Keith Skeoch, Guy Jubb and Mike Everett represented Standard Life Investments at the dinner. Keith Skeoch made a speech giving his views and details of Standard Life Investments' current activities in these areas after which there was a good debate around the table with a broad range of views being presented and discussed. It was felt that the dinner had given a good opportunity for Standard Life Investments to share its views and current activities while also gaining an insight into the wide ranging views of the attendees.
Mike Everett spoke briefly at a meeting of the Kangaroo Group in the European Parliament held to discuss the European Commission's recently announced plans for European Long Term Investment Funds (ELTIF). Other speakers at the event were representatives from the European Commission and the European Fund and Asset Management Association (EFAMA). The attendees at the Kangaroo Group included MEPs and a variety of public affairs and industry representatives. The opportunity to speak allowed us to present some of our views detailed in our reply to the European Commission's Green Paper on Long Term Financing in which the idea of ELTIFs was first raised.
National Association of Pension Funds
Guy Jubb was a guest speaker at a NAPF Corporate Governance PensionsConnect breakfast in London which was reviewing the 2013 AGM season. Guy commented on some of the factors that influenced the voting outcomes, which included the buoyant stock market and the constructive responses by many companies to the dissent that was reflected in voting at a number of significant AGMs in 2012. Also, he emphasised the benefits that could accrue if asset owners were more effective in holding their investment managers to account on governance and stewardship issues.
International Corporate Governance Network Annual Conference
Guy Jubb, Mike Everett and Alison Kennedy attended the International Corporate Governance Network annual conference in New York. Standard Life Investments were one of the sponsors of this event which attracted over 500 delegates from around the globe. The theme of the conference was 'Challenging the Accepted Orthodoxy' and contributors included Indra Nooyi, Chairman & CEO of PepsiCo, Michael O'Neill, Chairman of Citigroup, and Professor Arnold Schilder, Chairman of the International Auditing & Assurance Standards Board. Key themes emerging from the event were the challenges of governance engagement on a global basis and shareholder demands for greater transparency and accountability on auditing matters.
Institute of Chartered Secretaries and Administrators
Alison Kennedy presented at the ICSA Scotland conference on the theme of shareholder engagement and what shareholders are looking for from investee companies.
European Commission Green Paper on Long-Term Financing
The Standard Life Group has provided feedback on the European Commission's Green Paper on Long-Term Financing of the European Economy. The Green Paper poses a number of wide ranging questions regarding long-term financing and the reply provided by the Standard Life Group includes a number of answers specific to the provision of asset management services by Standard Life Investments. The Standard Life reply will be made available on the Standard Life Investments website. We will continue to play our part in the debate to find solutions for the provision of long-term financing in the UK and the European Union.
Conference Board - Council on Corporate Governance
Standard Life Investments co-hosted this event with RBS and it attracted representatives from the company secretariats of a number of large European corporations. These included Statoil, Nestle, Unilever, GlaxoSmithkline, Alcatel, Holcim, CRH and Credit Suisse. The forum addressed the issues of governance oversight and control of JV's and subsidiaries and also heard a paper on the assurance processes followed by RBS in the wake of the financial crisis. The forum also received an update of the governance agenda of the EU Commission and listened to a paper presented by Professor Binder of the University of St Gallen on the recent Swiss referendum on the issue of executive pay. Sir Sandy Crombie, who sits on the board of RBS, gave an insightful talk on the role of the Senior Independent Director.