April 29, 2020

Corporate governance and coronavirus: IGCN issues new guidance

Corporate governance

The ICGN's governance priorities for companies include:

  • Social responsibility. Companies should treat the workforce equitably to ensure the health and wellbeing of all staff, both permanent employees and contractors.
  • Executive remuneration. Remuneration policies should seek an equitable treatment of staff such that financial sacrifice is appropriately shared between ordinary staff and senior executive management.
  • Dividends. For companies severely affected, dividend payments may require substantial reduction or complete suspension. However, companies that can pay dividends without compromising long-term stability should continue to do so.
  • AGMs and director elections. ICGN encourages companies to engage with investors to ensure questions can be properly addressed at virtual meetings. It is noted that investors will seek assurance on the competence of directors in steering through this crisis. This will require familiarity with the company's operations and long-term strategy and may call for modest extensions to director tenure to help provide stability.

Recommended governance priorities for investors include:

  • Long-term perspective. Investors should take a long-term systemic perspective on corporate governance matters. While near-term reductions in investment returns are painful, investors should be prepared to accept reductions in market valuations and dividend payments to protect financial stability through the crisis period and focus on longer-term sustainability.
  • Climate change. Shareholders should still continue to engage with boards on embedding the effects of climate change in their business models and risk management systems.
  • Comprehensive monitoring. Investors should show flexibility and support but monitor material departures from corporate governance standards. Companies facing distress should be prioritised, particularly where there is a risk of loss of value or an opportunity to add long-term value through shareholder engagement.

Click here to view the full guidance is available here.

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