Good Vibes

Our annual awards were a great success and celebrated talent within the profession

In the words of Kool and the Gang, “Let’s all celebrate and have a good time!” I am writing this article in a slightly euphoric haze after the great success of our annual awards last week, with some 450 people joining us for dinner at the London Hilton on Park Lane bringing together the profession and key stakeholders to recognise and celebrate achievement across a range of awards, promoting the value and impact of good governance.

After the challenges of the last year this was a particularly welcome networking opportunity for governance professionals from all sectors and I lost count of the number of people who said to me how great it was to be back seeing – and meeting – others again, and in person rather than via the intermediation of Teams or Zoom (other virtual meeting products are available). It was clear to me throughout the evening that people were coming together to celebrate and our host, Dan Walker – who I understand is currently in a television programme about dancing! – entered into the spirit of the evening, encouraging us all to do so.

And we had some outstanding achievements to celebrate. Every year at awards time I feel humbled by the energy, passion and innovation that some of our colleagues have put into the work that we are able to recognise and I know that a number of the award winners will be featured in forthcoming editions of this journal. But it was not just about the winners – we had a record number of nominations and being shortlisted was a real achievement in itself.

I was particularly interested in the reporting awards. I sat in as an observer on all but one of the judging meetings and I was struck once again by the high-quality reporting that some companies deliver. Granted, we were looking at shortlists of the better reporters and granted that even then we still saw some evidence of ‘boilerplate’ text that if you deleted the name could have applied to almost any company, but one of the strengths of reporting this year seems to have been a focus on clarity and ease of reading – on a number of occasions the judges commented that a report had been ‘a good read’ and some were even ‘enjoyable’. There was generally less use of acronyms than in previous years and where these, or technical concepts, were necessary they were generally well explained. There was also a noticeable focus on the future and on the social consequences of business. We are also beginning to see some insightful reporting on the outcome of stakeholder engagement and a clear focus from many companies on stakeholders, on sustainability, and on the way in which the company had dealt with the challenges of the last year. Business models were generally improved – although we did still see a few that had been overengineered – and there was greater clarity on purpose. There were also some really good chair letters. I will be writing more about some of the specific categories in future editions and we are planning another series of reporting webinars to share insights from some of the winning entries.

Next week we have the ProShare awards and I must admit that I am looking forward to those as well. As the voice of employee share ownership and a part of the professional body for governance we place high value on promoting the value

and impact of employee share ownership. The annual awards ceremony enables us to bring together the profession and key stakeholders to recognise and celebrate achievement across a range of awards. After the challenges of the last year this will be a particularly welcome networking opportunity for employee share ownership professionals from all sectors. If your company offers employee share plans and is not a member of ProShare, perhaps you should join us – will be happy to have a conversation with you.

As I write, the Financial Reporting Council (FRC) has published a new document on the implementation of the Stewardship Code – ‘Effective Stewardship Reporting: Examples from 2021 and expectations for 2022’ which analyses reports from the first signatories to the revised Code published in September 2021. The FRC reports that “There continues to be high quality of disclosures in the areas of governance, resourcing, and the integration of stewardship and ESG factors with investment. However, there is still room for improvement in explaining how they manage stewardship-related conflicts of interest, how managers review and assure their stewardship activities, and how they monitor and hold to account service providers operating on their behalf.”

Reading the report, I was struck by the way in which the FRC is pressing investors to raise their game in terms of engagement with investee companies. In some ways, I would argue that this is unfair to some – there are investors who have regularly engaged with companies and whose feedback has been much appreciated – but there are other investors who are not so pro-active in their stewardship activities and I am concerned that we are beginning to see a gap develop between those investors who see themselves as owners – the stewardship investors – and those whose interest is purely financial, investing in a company they believe to be under-priced. This will be an area to which I will return in a future article.

But certainly the FRC are enthusiastic about stewardship. As Mark Babington, Executive Director Regulatory Standards, commented in the accompanying press release, “Stewardship plays a crucial role in ensuring that investments are responsibly managed to create long-term value for savers and pensioners, and wider benefits for the economy, the environment and society. The pandemic and climate crisis have highlighted the importance of investors using the rights and opportunities available to them to engage with companies on their performance and especially environmental, social and corporate governance issues. In this report the FRC outlines how quality stewardship reporting results into better transparency for pensioners, savers and investors about how their hard-earned money is being managed for better long-term outcomes.”

But it is not just the regulator that is pressing investors – there has been some corporate disquiet about the announcement from Legal and General Investment Management that, henceforth, it will reduce engagement on executive pay issues and refer companies to its policy document when they seek information on its approach to executive pay. And in the press this week Tim Martin, chairman of JD Wetherspoon, criticised one of the company’s biggest investors, Fidelity, for voting against longstanding directors on grounds of tenure arguing that its own board does not necessarily practice what it preaches.

There are clearly strong views on both sides, but for me much of this boils down to a failure to grasp the principle of ‘comply or explain’ – with some investors (not necessarily these examples) or their advisers being perceived by some companies as too willing to apply red lines without giving due weight to a company’s explanation and some companies being perceived by investors as too prone to rely on a glib and unsatisfactory explanation and then complain that it has not been given due weight. Our experience of annual reports certainly suggested that some (although by no means all) explanations owe more to spin than to deep thought about the governance issue at stake.

Communication and engagement remain essential and it will be important for the governance professional to act as a bridge between the company and its investors where necessary.

As Sara said in her CEO’s introduction to the evening, “In many ways this past year and a half has been a huge opportunity for governance professionals. An opportunity to demonstrate your adaptability, your innovation, your flexibility, and your problem-solving skills in pro-actively responding to the challenges of COVID ... Your governance skills have been central to organisations being effectively led by their boards, working under great pressure in the service of your organisation, in the service of your community, and in some cases in both. We even had a breakout governance media star in Jackie Weaver. And I do think that is something in which we can all take pride; the way in which so many of our colleagues have innovated and adapted to develop and deliver pragmatic solutions to the governance challenges posed by the pandemic.”

On pages 44 and 45, you will find a flavour of the latest of our Boardroom Bellwether surveys, carried out in conjunction with the Financial Times. In many ways, some of these findings reflect that innovation and pride in our work, together with the radical changes in the way that we work to which we have all become used over the last eighteen months – well, I am still sometimes on ‘mute’ but you know what I mean. The fact that 96% of FTSE 350 respondents predict an improvement in global economic conditions is great news for us all, but I was more struck by some of the changes around how boards work and the subjects under discussion. It is no surprise that 100% of FTSE 350 companies have discussed corporate culture in the last year, or that 96% of FTSE 350 companies have discussed climate change at least once in the last year, but when we last ran the Bellwether survey two years ago it would have been a significant surprise were 69% of FTSE 350 respondents to have published plans to tackle climate change or were 57% aiming to be net zero. Climate change is one of the key issues facing us all, and we are beginning to scope work on how the governance professional can most effectively respond to this challenge.

Finally, I just have room to take this opportunity to thank Sonia for all that she has done as editor of our magazine over the last three years – including teaching me what a hashtag is! – and wish her well for the future.

Peter Swabey FCG is Policy and Research Director at the Chartered Governance Institute UK & Ireland

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