Corporate Governance Roundup: ASEAN Scorecard, Transparency In Brazil, Majority Voting In The U.S.

by: CFA Institute Contributors

By Matt, Orsagh, CFA, CIPM

From the development of a corporate governance scorecard in Southeast Asia and executive and board transparency in Brazil to debate over redrafting the corporate governance code in the France, it’s time to span the corporate governance globe to review important developments from the month of June.


The ASEAN Capital Markets Forum and the Asian Development Bank published a corporate governance scorecard of ASEAN issuers in June. The rankings are based on Organisation for Economic Co-operation and Development (OECD) corporate governance principles and rate issuers in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

Also, if you are even remotely interested in corporate governance in Asia, you need to take a look at a presentation by the Asian Corporate Governance Association (ACGA) titled “New Developments in Corporate Governance Reform in Asia: Northern Chills, Southern Warmth.” I was lucky enough to catch the presentation in a meeting with ACGA Secretary General Jamie Allen and left with a better understanding of governance in Asia.


In a blow against executive and board transparency in Brazil, a federal judge in Rio de Janeiro sided with companies — citing executive privacy rights in a ruling concerning a lawsuit against a 2010 pay disclosure requirement called Instruction 480. The decision bans the Brazilian Securities and Exchange Commission (CVM) from imposing the requirement, which required companies to disclose the lowest and highest individual amounts paid to directors and top management as well as the average remuneration of both management and directors. The rationale: even this disclosure, modest by global standards, violates executives’ privacy.

On the bright side in Brazil, the Mergers and Acquisitions Commission (CAF), also popularly known as the Brazilian takeover panel, is being set up after a long gestation. The idea behind the takeover panel is to create a private entity that operates on a voluntary membership basis and can become a “judging filter” of corporate operations involving publicly traded companies.

CAF is a result of the efforts of the CVM and four other market entities: the AMEC, ANBIMA (Brazilian Financial and Capital Markets Association), BM&FBOVESPA, and IBGC (Brazilian Institute of Corporate Governance). The CAF’s major goal is stated in the introduction of its Self-Regulation Code: “to ensure, among other principles, an equitable and egalitarian treatment to shareholders.”

The need for such an entity arises from the fact that, in practical terms, both the CVM and Brasilian courts have difficulty detecting and assessing some subjective characteristics of complex corporate deals. Many of these deals, while in compliance with the law, involve equity and value transfers that can jeopardize investors’ returns on capital.


The evolving redraft of the French corporate governance code is sparking debate in France. Recently the business group AFEP/MEDEF weighed in, stating that issuers should adopt advisory shareowner votes on executive compensation. The French government recently dropped plans for say-on-pay rules and pay caps.


The debate on whether say-on-pay votes should be binding continues in Germany, where the Government Commission on the German Corporate Governance Code stated its opposition to a pending law that would make a say-on-pay rule binding — as opposed to most such votes, which are advisory in nature. The Government Commission argues that a binding vote would put German firms at a competitive disadvantage.


Japanese Prime Minister Shinzo Abe plans to put forward an investor stewardship code by the end of the year. Such a code would be one of the first of its kind in Asia. Abe’s government has disappointed on governance lately; he decided against taking apart cross-shareholdings between companies and against more stringent director independence standards. .


Draft rules published by the Swiss Federal Department of Justice and Peace in June call on Swiss pension funds to vote their proxies at annual general meetings (AGMs) unless refraining would be in the interest of fund members. The rules are part of the implementation of the Minder Initiative passed in March to curb executive pay. The rule gives some relief to pension funds that objected to the burden of voting on all say-on-pay votes. According to the rule, funds would be required to publish a policy on when they won’t vote and report annually.

United Kingdom

Binding say on pay is coming to the U.K.; next proxy season (spring 2014) just got more interesting. Legislation requiring a binding say-on-pay vote in the U.K. will take effect 1 October, according to a recent government announcement.

If shareowners in the U.K. are looking to peruse company documents pertaining to a company’s AGM analysis of proxy proposals for these binging say-on-pay votes, there’s an app for that. MyShares UK was launched recently by U.K. proxy solicitorProxyCensus in order to give retail investors more information about the AGMs of the companies they own.

App users can receive analysis of proxy proposals from governance research firm Manifest.

United States

The Council of Institutional Investors is asking the New York Stock Exchange and NASDAQ to adopt a majority voting standard for directors in uncontested elections. The effort is likely aimed at smaller companies, as only a third of the Russell 3000 Index have majority voting, while about 78% of the S&P 500 require majority voting.