Amity Insight reports Corporate Governance 11 Apr 2016
Esmé van Herwijnen
Responsible Investment Analyst
Corporate governance is the framework by which companies are directed and controlled for the long-term benefit of shareholders. It concerns the arrangements for appointing and remunerating directors and auditors and for ensuring an appropriate balance
of independent non-executives is in place.
A strong corporate governance regime should reassure investors that the companies they invest in are managed by directors in the long-term interests of their shareholders. Shareholders, in turn, have a stewardship role in holding companies to account
via informed exercising of their voting rights and through constructive long-term engagement.
The frequency of corporate scandals, from misspelling of financial products to market manipulation and accounting fraud, suggests that confidence in corporate governance may be at an all-time low. The architecture itself has been subject to almost constant
review and refinement as investors and companies try to find a perfect form of governance that will prevent potential and actual malfeasance and improve corporate performance. This is unlikely, but as we argue in this Amity Insight, since 1992
when the world’s first Corporate Governance Code was published, most jurisdictions have introduced rules and guidance for the governance of companies. This alone suggests the importance placed upon companies operating in accordance with market
best practice, or being required to explain if they divert from it.
We strongly believe corporate governance represents a partnership in which active, informed shareholders exercise stewardship; engaging with companies over poor governance and voting to oppose boards where proposals are not in shareholder interests. In
this Insight we look at areas of conflict such as remuneration, new areas of thinking such as auditors and diversity, and how EdenTree exercises its votes transparently on behalf of clients.
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As always, we hope you enjoy this Amity Insight, and we welcome your comments and feedback.