Changing investment stewardship practices post COVID-19
Perspectives shared by Deloitte and Glass Lewis
The post COVID-19 corporate governance arena is likely to present four features which bear watching.
Just as the COVID-19 pandemic has had a significant impact on society, business and public policy, it has also led to significant changes to corporate governance. Companies experienced new ways of organizing annual general meetings (“AGM”) of shareholders, in a virtual or hybrid manner. We have also seen a raft of new voting trends emerge. Concurrent to the current lockdowns and restrictions associated with the pandemic, companies are facing pressure from institutional investors who are adjusting their voting policies as part of their evolving stewardship practices which are increasingly focused on material ESG topics.
Even though the definition of stewardship can vary depending on language and culture, we see common patterns around the world. For example, the International Corporate Governance Network (ICGN) has revised its Global Stewardship Principles to create an explicit link between fiduciary duty and long-term value creation and to encourage investors to disclose more about their stewardship activities. These changes have occurred in the context of wider public initiatives around what might be called “sustainable corporate governance”. Many scholars are also encouraging implementation of the Business Roundtable (BRT) statement on corporate purpose, through which CEOs of a number of large companies committed to lead their organizations for the benefit of all stakeholders, not just shareholders.
In this publication, we highlight new and innovative investment stewardship practices, both from the perspective of institutional investors and proxy advisory firms. Given the importance of this topic, we have asked the global proxy advisory firm Glass Lewis to share their views on these renewed stewardship practices.
The post COVID-19 corporate governance arena is likely to present the following features which bear watching:
- Regulatory frameworks all around the world requiring further transparency from companies and proxy advisors and further engagement from institutional investors
- Institutional investors incorporating more and more ESG considerations in their stewardship activities
- Proxy advisors diversifying their services to further address the ESG advisory needs of institutional investors
- Corporate governance regulations being revised to embed sustainability practices and monitor ESG reporting and advisory services in a consistent manner
Considerations and leading practices for boards as they shift from in-person to virtual shareholder meetings