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Newsflash – Investment Association writes to Chairs of FTSE 350 companies

April 2020

The Investment Association (IA) has today written to the Chairs of all FTSE 350 companies, with guidance around the economic circumstances caused by the COVID-19 pandemic. The letter outlines IA member views in a number of areas, including approach to executive pay:

  • Engagement and communication - Shareholders will support management teams and boards where possible by allowing them to focus on the most business-critical issues to ensure their long-term sustainable future. Companies should look to maintain an open dialogue over the coming months with shareholders and stakeholders to help facilitate this.
  • AGMs - Shareholders will support companies during the AGM season by focusing on the most material issues facing businesses. Investment managers welcome the Governance Institute and City law firm guidance on how AGMs can proceed under the ‘Stay at Home’ measures, and encourage firms to consider how they can continue to engage flexibly and effectively with shareholders instead of via normal AGM meetings.
  • Dividends - Dividends are an important income stream for many savers, pensioners and institutional investors, including pension funds and charities. Shareholders ask companies to take into account the suitability and sustainability of a dividend payment in light of current uncertainties. Shareholders expect companies who do decide to suspend dividend payments to restart them as soon as it is prudent to do so. Ultimately, shareholders expect companies to be transparent about their approach to dividends, particularly, if they are seeking additional capital.
  • Executive pay - As part of shareholders’ focus on the long-term success of companies, executive pay should continue to be aligned to company performance. If a company cancels dividend payments or makes significant changes to their workforce’s pay, IA members support boards and remuneration committees that demonstrate how this should be reflected in their approach to executive pay.
  • Financial reporting - Shareholders welcome the FCA’s call for companies and auditors to take the necessary time to prepare and audit a company’s preliminary results, annual reports and accounts, allowing an additional two months to prepare accounts if needed.
  • Additional capital - Shareholders will look to support companies seeking additional capital from their shareholders during this time of crisis. Shareholders support the Pre-emption Group Guidelines on pre-emption rights and believes the current regime offers companies necessary flexibility. The industry supports efforts to speed up providing companies with this vital additional capital and welcome the Pre-emption Group’s additional flexibility.

The letter can be read in full here.
 

Regulatory resources

A joint regulators’ (FCA, FRC and PRA) statement issued on 26 March is available here.

The FRC’s guidance on Corporate Governance and Reporting can be found here and the bulletin for auditors is available here. The FRC’s other materials for auditors and companies on the impact of Covid-19 can be found here.

The FCA’s announcement on a preliminary announcements can be found here. Its letter is available here and the technical Q&As are here.

The FCA’s Primary Market Bulletin 27 – Coronavirus update can be found here.

The Government Equalities Office press release on gender pay gap deadlines is here.

Companies House has published details of how to request a delay to the filing of accounts due to Covid-19 here.
 

The Deloitte Academy

The Deloitte Academy provides support and guidance to boards, committees and individual directors, principally of the FTSE 350, through briefings and webinars on relevant board topics.

We appreciate we will all be working remotely and participation in reliable virtual communities is essential. If you have any board colleagues or contacts who would appreciate participating in the Deloitte Academy programme please ask them to contact us here to register to receive updates and webinar details.

Members receive regular publications on board governance and business matters. A dedicated members’ website www.deloitteacademy.co.uk is available for members to register for briefings and access additional relevant resources.
 

Deloitte resources

Deloitte’s Need to know on the accounting considerations relating to Covid-19 can be found here.

You can sign up for Deloitte’s weekly Responding to Covid-19 webinar here.

Our library of governance publications is available to help you at www.deloitte.co.uk/governancelibrary.

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