One topic that directors were asked about in the PwC 2020 Annual Corporate Directors Survey was environmental, social and corporate governance (ESG). Although 55% of directors surveyed considered ESG issues to be a part of the board's enterprise risk management discussions, 49% saw a link between ESG issues and the company's strategy and 51% recognised that ESG issues were important to shareholders, directors were not convinced that they are connected to the company's bottom line.
Legislation (eg, California's board racial and ethnic and gender diversity mandates) is not the only route that diversity advocates are employing to diversify the ranks of corporate directors. Moral suasion, together with implicit or explicit voting pressure, is another avenue that some groups are pursuing. One group following this path is the Russell 3000 Board Diversity Disclosure Initiative, which sent a letter to companies on the Russell 3000, urging that they all disclose board racial, ethnic and gender data.
CEO pay attracts a lot of attention in ordinary times, but in times of severe economic distress when corporate performance and stock prices plummet and companies engage in substantial lay-offs, furloughs and pay cuts for employees, CEO pay can attract intense scrutiny. In those circumstances, paying the same or greater levels of CEO compensation can seem unfair to employees and invite shareholder and public criticism. How have boards addressed this issue?
The Financial Reporting Council recently published an updated version of its guidance for companies on corporate governance and reporting during the COVID-19 crisis to include new sections on exceptional or similar items and alternative performance measures.
While company managements have long engaged with shareholders at annual meetings and investor presentations, the notion of director engagement with shareholders is a more recent development. But why is shareholder engagement increasingly being added to corporate director job descriptions? This article posits several theories for the trend and identifies the most common engagement topics, provides data on the frequency of engagement and highlights emerging practices relating to director engagement.