Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. Print
December 14, 1998 12:00 AM

CORPORATE GOVERNANCE IS KEY: INVESTORS' DEMANDS LEAD TO INCREASED CHANGES WORLDWIDE

Bruce Kelly
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    NEWTON, Mass. -- The fight to attract global capital -- and please international investors -- has led to a sea change in corporate governance over the past year, says the author of a recent report on trends in global corporate governance.

    "This has been a tidal wave year for corporate governance around the world," said Stephen Davis, author of the report and president of Davis Global Advisors.

    The wave "culminated a couple of weeks ago with the G7 saying there need to be international standards of corporate governance," he said in an interview. He added corporate governance is now considered "a pillar of global economic recovery." The report, titled "Corporate Governance 1998: An International Comparison" ranks -- from best to worst -- the United Kingdom, the United States, France, Germany and Japan based on "leading corporate governance indicators." The indicators include such issues as nonexecutive directors, splitting the chairman and chief executive officer, and executive pay disclosure.

    "The report is hard to do because governance is different in each country," Mr. Davis conceded. "But we're looking for common measurements and as objective a criteria as possible. We're looking to compare apples to apples."

    The report ranks and critiques the world's leading economies based on events from the last quarter of 1997 through the first half of 1998.

    Germany has been a long-time "laggard" in corporate governance, Mr. Davis said. But it created last spring landmark legislation to authorize share option schemes and buybacks, curbed voting rights and restrictions and takeover defenses, and allowed companies to embrace non-German accounting standards, according to the report.

    In France, the government endorsed share buyback legislation and promised wide-ranging company law reform.

    The U.S. Council of Institutional Investors adopted in April a code of best practice, representing the first time U.S. shareholders have reached consensus on wide-ranging corporate governance standards for the country.

    Also in 1998, the United Kingdom went through a process of updating its corporate principles, forming the Combined Code in the process, he said. And the code is linked to London Stock Exchange listing rules, he said.

    "Companies have to disclose whether they're complying with it or not."

    Japan got its first code of best practice during the year, according to the report. But Mr. Davis added a push for corporate governance in Japan is practically "dead in the water."

    And it's not just members of Mr. Davis' "Big 5" that are changing corporate governance rules. "Dutch pension funds have begun voting their shares. The Australians have new rules about executive pay. The Irish are talking more about pay disclosure. There's been a huge acceleration in corporate governance and making companies accountable to owners."

    And global financial institutions are part of the push. The World Bank and International Monetary Fund have made corporate governance a "critical factor in the global economy," he said. Also on the "macro level," the Organization for Economic Cooperation and Development is preparing global standards of corporate governance.

    Others agreed with Mr. Davis' findings. "I think there's a lot of exciting things going on in corporate governance" in Europe, said Richard Koppes, a Sacramento, Calif.-based consultant for the law firm Jones Day Reavis & Pogue.

    Mr. Koppes said he saw a change in Europe in 1997 when he was making a speech to a group of leading French politicians and executives. Executives at major companies such as Alcatel Alsthom understand the importance of corporate governance, he said.

    And the changes, in large part, come from investors' demands for greater transparency, Mr. Davis said.

    Although the speed varies from country to country, he said, recent events and research that covered the final quarter of 1997 and the first half of this year show "there is clear momentum on the part of European companies to become more shareholder friendly. There's pressure from foreign investors and, on the eve of the European Monetary Union, they need capital to grow and compete.

    "They have to play by the rules of the capital markets, and the rule is accountability and transparency."

    Recent deals such as the merger of Germany's Daimler-Benz AG and Detroit's Chrysler Corp. have forced changes in corporate governance, he said.

    "As German companies show increasing demand for equity capital, they're going to have to speed up corporate reform. The thin edge of the wedge on this is the DaimlerChrysler merger," he said.

    "Under German law, large companies have supervisory boards, with half of the members elected by shareholders and the other half elected by employees. It's worked all right when it's an insular, parochial economy, and only German employees get to make appointments."

    Merging with a company outside of Germany has forced a change -- albeit a slight one -- to the new DaimlerChrysler's supervisory board. He estimated thirty to forty percent of the company is Chrysler, but "those employees have no say."

    So German workers have given one of their 10 seats to a representative of the United Auto Workers. It's a change, but it still does not adequately represent the U.S. shareholders' point of view, he said.

    Also, it is "not required for German companies to disclose executive pay details," he said, adding companies report an aggregate pay of board members. That kind of position might be unsustainable because shareholders put a premium on disclosure.

    Recent proposed legislation in France has pushed its stalled efforts at overhauling corporate governance, he said.

    The French government has proposed "splitting the chairman and the CEO. This is a real radical departure from the tradition of the imperial CEO," he said, adding this person is usually very powerful because the rest of the board is customarily not active. Splitting the post will lead to a greater balance of power on boards.

    Expected French legislation could lead to revealing amounts of the top two best paid executives in a company, he said.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    The Future of Infrastructure: Building a Better Tomorrow
    Fulcrum Issues: Equity Returns and Inflation — Choose Your Own Adventure
    What Matters Most in Considering a Private Debt Strategy
    Why pursue direct lending in the core middle market?
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing