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News digest 15/07/16: Theresa May proposes governance changes

15 July 2016 by Henry Ker

Theresa May proposes governance changes - read more

The latest governance stories in the news

Theresa May proposes governance changes

Just before her position as the new British Prime Minister was confirmed, Theresa May proposed several reforms to corporate governance. The changes include allowing employee and consumer representatives to sit on company boards and making binding shareholder votes on executive pay an annual exercise.

The proposals have received a mixed response from the business community, including ICSA: The Governance Institute.

Peter Swabey, ICSA’s Policy and Research Director, commented in his recent blog: ‘some of the issues that we face are structural and not susceptible to quick and simple solutions. A fresh look at the boardroom is long overdue and although I entirely agree with the objectives that underpin Theresa May’s proposals to address the issues of executive pay and stakeholder engagement, I cannot help wondering whether these changes will have the anticipated effects. Much will depend on how they are implemented.’

ICSA offers several counter ideas to the proposal, including encouraging shareholders to make greater use of their existing rights to vote directors off the board, something that they have been rather reluctant to do, rather than introducing an annual binding vote on executive remuneration.

Read the full blog, ‘Governance is on the political agenda’.


Department for Transport criticised over VW

Volkswagen's failure to compensate UK car owners affected by the emissions scandal has been called ‘deeply unfair’ by MPs on the Transport Select Committee.

VW has offered to buy back or repair affected vehicles in the US, as well as compensate owners up to $10,000. UK owners meanwhile, have only been given the option to have their cars repaired.

The Committee said the government had been too slow in its investigation into whether VW should be prosecuted in the UK over cheating emission tests and Louise Ellman, chairing the committee, has said ‘the government has lacked the will to hold VW accountable for its actions.’


Third antitrust charge filed against Google

Google has received a third antitrust charge from the European commission, against its AdSense advertising business.

The regulator is accusing Google of abusing its dominance to benefit its own advertising business, which is the company’s main revenue stream. Google is already facing charges against its shopping service, which allegedly gets preferential treatment in search results, and faces fines up to 10% of global turnover for each case if found guilty.

Margrethe Vestager, European Competition Commissioner, said: ‘Google has come up with many innovative products that have made a difference to our lives. But that doesn’t give Google the right to deny other companies the chance to compete and innovate.’


72 financial services firms to link bonuses to senior jobs for women

A new charter, The Women in Finance Charter, which contains voluntary proposals designed to improve gender balance at financial companies, has been signed by 72 leading financial services firms. One of the proposals links bosses’ bonuses to the appointment of women in senior jobs.

The charter, based on proposals by Jayne-Anne Gadhia, the Chief Executive of Virgin Money, commits companies to:

  • Link pay packages for their top executives to gender diversity targets
  • Set internal targets for female representation in senior management
  • Publish annual progress reports against the targets
  • Make a senior executive responsible for gender diversity and inclusion.

Among those to sign up are Britain’s big four retail banks, RBS, Lloyds, HSBC and Barclays, insurers Legal & General and Prudential, and investment bank Morgan Stanley.

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