Global Trends in Corporate Governance and Reporting

Transcription

1 IFC CORPORATE GOVERNANCE PROGRAM Global Trends in Corporate Governance and Reporting NAIROBI I JULY 31 - AUGUST 2, 2017 Madren Oluoch-Olunya Consultant IFC Corporate Governance Program, East Africa

2 Recent Developments General CG Practice OECD Basel Committee for Banking (BCBS) EU developments Investor developments Transparency and Disclosure Reporting trends 2

3 CG Practice Developments Board effectiveness - composition, diversity, independence, development, evaluation, tenure, remuneration, technology Increased focus on Control environment, Risk oversight and Compliance Increased Transparency and Disclosure merging of CSR and CG into ESG, Integrated reporting, audit report reform and audit quality Governance and remuneration Increased penalties for failure, negligence or malpractice Stronger shareholder rights in RPTs and information re: beneficial ownership, stakeholder engagement 4

4 OECD New G20/OECD CG Principles, 2015 New Guidelines for state-owned entities 2015 competitive, efficient transparent enterprises o Major changes outcomes of CG o Focus on complete frameworks and monitoring and supervision of CG o Strengthening of rights and protection of investors o New chapter on role of investors and stock markets in promoting CG o Increased emphasis on board effectiveness, board committees and board role in risk, especially in presence of controlling shareholders o Update to stakeholders developments in CG Principles o Increased/fuller disclosures especially re: RPTs, responsibilities of CEO v Chair, increased audit oversight 5

5 BCBS Guidance supplementary to OECD CG Principles and focused on banking requirements and bank supervision requirements Guidance o Strengthened materials on risk governance, especially roles of board, RM teams, internal audit and control functions o Explanation of obligations in risk culture, risk appetite and oversight o Need for board collective competence and director time o Supervisors advice re; evaluation of CG and of board members and bank engagement in CG developments o Relationship between incentive systems and risk taking behaviours 6

6 EU Developments Goals and Directives to enhance transparency, for greater shareholder engagement and to support company growth and competitiveness To enhance transparency o New Accounting and Audit Directive more non-financial reporting from large companies To increase shareholder engagement Shareholder Rights Directive o Improve identification of shareholders o Strengthen transparency rules for institutional investors o Better shareholder oversight of remuneration and RPTs o Regulations of proxy advisers More to come/evolving 7

7 .Leading to a Proliferation of Codes & Guidelines OECD core but saddled by perplexing multitude of competing principles and escalating complexity of issues The CG Code of Kenya Dodd-Frank Act (2010): 2,319 pages and growing Gramm-Leach-Bliley Act (1999): 145 pages Sarbanes-Oxley Act (2002): 66 pages Interstate Banking Efficiency Act (1994): 61 pages The Glass-Steagall Act (1933): 37 pages Federal Reserve Act (1913): 31 pages 8

8 Investor Developments International Corporate Governance Network (ICGN) Global Governance Principles Investor responsibilities guidance (Stewardship Code) Model Mandate for asset manager relationships Focus on ESG issues Other developments o Stewardship Codes UK, Malaysia, Singapore, HK and others o Monitoring of stewardship o Quality of accounting profession and audit More needed.. Know who are the shareholders, voting systems 9

9 Transparency and Disclosure Sustainability and ESG reporting national initiatives A sustainability report is a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities. Trends in sustainability reporting roles of CFO, employees, models and tools Integrated reporting An integrated report is a concise communication about how an organization s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term. Audit reforms Definitions of Materiality 10

10 The Disclosure Environment Self Discipline Transparency & Disclosure Market Discipline Regulatory Discipline

11 Reporting

12 Reporting developments - content Financial Reporting o Criteria are established o Reports single focus, finance, financial statements and notes o Model is mature except re non-gaap measures o Process and controls are developed and integrated o Audited Holistic Reporting o Models are evolving o Criteria are developing o Reports encompass multiple perspectives, strategy, risk, social impact, governance, environment impact o Process and controls are developing but right now are a little ad hoc o Assurance

13 Emerging Content Trends 1 Investor and stakeholders needs Greater transparency and understanding of: o o o o o Business model Articulation of strategy and strategic objectives Risks and opportunities (short, medium and long term) in each objective Key KPIs financial and non-financial, performance to date and future targets Company positioning and future prospects

14 Emerging Content Trends 2 Reporting on governance/tone at the top evident Much more forward looking information Reporting on company relationship with the economy and wider society (CSR, CR, ESG)

15 Trends in Reporting Styles Cut the clutter materiality and conciseness Use of technology Internal contributions of compliance and investor relations External input of communications experts Visual impact and use of informatics Sound and movement technologies Social media and reporting

16 Future Practices KCBhttps://ke.kcbgroup.com/images/downloads/Integrate d_report_2016.pdf Safaricom - Fresnillo Lloyds Banking Group Novo Nordisk Bharti Airtel Infosys

17 DISCLOSURE & TRANSPARENCY TOOLKIT: BEYOND THE BALANCE SHEET Why a Toolkit for Transparency & Disclosure? Harnessing the Global Momentum for Sustainable Development - International Commitments for Climate Adaptation. - Sustainable Development Goals. - ESG Integration in Mainstream Finance. Promoting IFC s Approach to Privatesector Development and ESG 21

18 Thank You! ifc.org/corporategovernance