“Hot Governance Topics” from around the world

Friday, 14 August 2015


    What they see as the current “hot topics” in governance in their jurisdictions?

    We asked several of our internationally-based Governance Leadership Centre (GLC) Advisory Panel members, as well as policy experts from members of the Global Network of Director Institutes (GNDI), to tell us what they see as the current “hot topics” in governance in their jurisdictions.

    Some interesting common threads became apparent. In particular, data/cyber security, board composition (including diversity and succession planning), regulatory compliance, audit reform and sustainability, integrated reporting, and environmental and social governance (ESG) issues were recurring topics. Some interesting issues that were more regionally or jurisdictionally specific were also suggested.

    Please see below our compilation of the feedback that we received. We would welcome any additional feedback or input on “hot topics” from your part of the world.


    1. Director Accountability.

    2. Corruption Prevention and Compliance.

    3. Corporate Governance of SOEs (State Owned Enterprises).

    4. Launching of a comply or explain Code for Listed Companies.

    Europe (EcoDa)

    1. Comply or Explain Principle: Designing an effective framework of corporate governance.

    2. Audit Reform: The impact on Audit Committees.

    3. Boards in a Digital Economy: Managing the opportunities and risks (particularly cybersecurity). Using technology to improve a board’s own activities. Implications for the composition of boards.

    4. Trust in Corporations and their Boards: Greed, unethical behaviour, environmental scandals, harmful products. Criticism of corporations has been on the increase during the last decade. Trusting that corporations behave in a sustainable way is becoming a deciding factor when customers make a choice on what to buy and from whom.

    Global (major markets)

    1. Ethics:How to regulate this is a challenge that is going to increasingly occupy boardrooms. It is not just the ethics of directors but also looking at how practices defined in the boardroom are articulated and practiced throughout the organisation. This is increasingly a matter that not only has immediate financial consequences but potentially can have a huge impact on the long term brand and reputation of organisations.

    2. Regulatory Compliance - Banking Sector: Given the propensity for increasingly intrusive legislation and regulations in the banking sector, one of the challenges in the future may well be the ability to recruit experienced and high profile directors onto bank boards and the reluctance that many may have given the tough legislation and potential personal consequences. Again, as with ethics, it is a question of how boards look to order their affairs in a way that doesn’t emphasise compliance at the expense of value creation.

    3. Cross Border Voting: The ability to verify with accuracy the voting submitted by shareholders and the votes that are ultimately recorded at the general meeting seems to remain something of a challenge for many markets. This can be critical in markets like Australia, the US and the UK where the shareholder base is highly diversified and voting contests require accurate, reliable records. The system is badly antiquated and desperately in need of updating but the perennial question is who will bear the costs.

    4. Sustainability and Integrated Reporting – Environmental and Social Governance (EGS) Issues: The various derivatives existing and/or being proposed from different advocacy groups will be a challenge for boards as they try to decipher what matters and how to manage the sometimes competing, if not contradictory, requirements that accompany this whole area of ESG reporting. It is still an emerging issue but the landscape is incredibly confusing, if not frustrating, for most board directors.

    5. Cyber security: An obvious one - the question of IT and cyber security.

    Hong Kong

    1. ESG Reporting: This is being reviewed by the Hong Kong Stock Exchange (HKEx) for upgrade in its Corporate Governance Code.

    2. Responsible Ownership: This is being reviewed by the Financial Services and Treasury Bureau of the Hong Kong Government for policy formulation.

    3. Risk Management and Internal Control: Implementation following an upgrade in the HKEx Corporate Governance Code.

    4. Continuing Professional Development for Directors: A major thrust of the Hong Kong Institute of Directors.


    1. New Companies Bill by Companies Commission Malaysia: Implementation date is expected to be in late 2016. Key features of the Bill (of significance to directors) are: Share Capital and Maintenance, and Directors Duties - Review of Criminal, Civil and Administrative Sanctions in the Companies Act. The Directors’ Report will cover additional matters including business review, policies on internal controls, KPI of company and Corporate Responsibility (ESG).

    2. Bursa Listing Requirements: Bursa Malaysia (Stock Exchange) made several amendments to the Listing Requirements. Of significance to directors are enhancement to related party transactions requirements and foreign listing requirements.

    3. New and Revised Auditor Reporting Standards: Changes to auditor reporting will be effective for audits of financial statements for periods ending on or after 15 December 2016. The expected outcome is enhanced financial reporting in the public interest.


    1. Code of Corporate Governance: The current code was published in 2004. A new Code has been drafted but not yet finalised. As part of the process, the new Code is recommending that we move from a comply or explain process to an apply and explain process. The Code applies to all regulated and listed companies as well as Public Interest Entities (PIEs). The definition of a PIE is a hot topic because it is felt that the current definition is too wide, capturing over 600 companies, while similar jurisdictions of the same population in the EU would only capture 125 companies.

    2. Gender Diversity on Boards: According to the last World Bank Report on the Observance of Standards and Codes (ROSC), Mauritius has one of the lowest percentages of female directors on boards of listed companies. While the numbers may have increased slightly since the ROSC was done, it has not changed significantly and there is a lot of resistance to putting gender on the board agenda.

    3. Whistleblowing: The new Minister of Financial Services, Good Governance and Institutional Reform is preparing an Integrity Reporting Bill. There is not much detail yet but we understand that the Act will create a national Integrity Reporting (whistleblowing) Hotline to combat fraud and corruption.

    4. Political Party funding: Political parties in Mauritius have little accountability and many only have a legal existence a few weeks before elections. Under the Code of Corporate Governance, companies are required to report how much money they give to political parties (it can be an aggregated amount) but not all companies do this citing political retribution as an obstacle. We would like to see all political parties have to be registered as legal entities and to publish their accounts.

    5. Conflicts of Interest.

    6. Risk Management.

    7. Independence of Regulators.

    8. The Governance of Offshore Companies.

    New Zealand

    1. Health and Safety Governance: New legislation (similar to that in Australia) has just been passed and will come into effect in April 2016. Directors will have a due diligence duty (and greater ensuing liability) to ensure that the company meets its health and safety obligations.

    2. Leading in a Digital World: Including disruption and cyber risk.

    3. Regulatory Compliance: Reducing red tape/regulatory compliance and the associated costs.

    4. Talent and People: Capability, including succession planning, for both boards and management.

    5. Corporate Transparency: Growing influence of consumer values, interest in societal purpose, product traceability etc.

    North America (Canada and USA)

    1. Shareholder Activism: Activist investors in the US ran over 300 campaigns in 2014 and are operating at the same pace in 2015. They have some $200bn in investible funds and form "wolf-packs" of otherwise passive investors raising their potential to over a trillion - a dramatic new discipline in the market place for company performance.

    2. Proxy Access: For investors who own about 3% of a company's stock for about 3 years (depends upon the company or the investor) - these investors have a "right" to propose directors to the Board and to ultimately put forward a slate of directors larger than the number to be appointed.

    3. Cyber Security: Number of breaches exponentiating and all company boards must become much more aware of the risks and their remediation. In the US boards will be pursued by a government agency for not doing enough to eliminate the risk of breaches, and Institutional Shareholder Services (ISS) recommended voting against the board of Home Depot following their breach because the board was not aware enough of the cyber risks.


    1. Board Composition: Including gender and other forms of diversity and succession planning.

    2. Remuneration & Transparency: Remuneration policies and their transparency.

    3. Shareholder Activism: Including short selling attacks.

    4. Financial Reporting and Accounting/Audit changes: Including the enhanced audit report.

    5. Sustainability and Integrated Reporting: EGS Issues.

    United Kingdom

    1. Regulation/Regulators: Working with regulators and the listing authority in the UK to improve the governance arrangements of the Alternative Investment Market (AIM), in particular looking at the role of the London Stock Exchange.

    2. Director Training: Placing a greater emphasis on the importance of the training and development of NEDS, in particular in the FTSE 1000.

    3. Culture:The UK government has placed a great deal of emphasis on the importance of boards and culture of the organisation. With a new body in the UK established to focus on standards in banks, the issue of culture will be a big topic over the next year or so.

    4. Cyber Security: It will be important that boards get to grips with the potential risks of cyber-attacks. It has until now remained in the background in the UK; but with institutional investors demanding that boards explain how they will be addressing and managing the risks associated with cyber, it will be a key governance topic for boards going forward.

    5. Long Termism: Government and regulators will continue to look at ways to encourage investors to take a longer term view in respect of their investments. In the UK we have had a major review into this topic but little appears to have changed. This is likely to be looked at again in the context of stewardship.


    1. "High Road" Leadership: Due to a desire for better ethics and greater innovation for the long term.

    2. Balance Sheet / Capital Allocation: Due to the disruptive power of extreme financial events, weather and cyber-attack events that often cross the globe. Need for supply chain awareness.

    3. Global Finance, Climate, and Cyber events: Due to the disruptive power of extreme financial events, weather and cyber-attack events that often cross the globe. Need for supply chain awareness.

    4. Time Management for the Board: Due to higher director awareness of more issues; need for effective agendas, discussions, review materials.

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