The International Corporate Governance Network (ICGN), an investor led organisation which aims to promote good corporate governance for listed companies, has published an open letter setting out its take on governance priorities during the COVID-19 pandemic.
As noted in our recent article, companies of all sizes are being pulled in a number of different directions by the pandemic. The aim of the ICGN statement is to provide a common agenda for implementing effective standards of corporate governance. Whilst the guidance is principally aimed at listed companies, the principles can be usefully applied across a range of corporate entities and sectors.
The ICGN have noted the following key priorities:
- Annual general meetings: The ICGN have encouraged engagement with investors to ensure that questions can be properly addressed during the pandemic. The same principle can be applied across all companies by ensuring stakeholder engagement and involvement throughout the pandemic and beyond in order to instil confidence and trust in the company’s approach.
- Corporate reporting: Demonstrating resilience is a new priority and companies are encouraged to disclose how they are dealing with the pandemic, preferably in their annual report. Cash flow statements and risk planning/stress testing are of primary importance to auditors and investors.
- Executive remuneration: Remuneration policies should seek an equitable treatment of staff so that any financial sacrifice is appropriately shared. Companies should seek to preserve the company’s long term financial health.
- Social responsibility: Companies should treat their workforce equitably to ensure the health and well-being of all staff.
- Companies which pay out dividends: For companies severely affected, dividend payments may require substantial reduction or complete suspension. However, companies that are in a position to pay dividends without compromising long-term stability are encouraged to continue to do so.
- Capital raising: Where a company seeks to raise additional capital to sustain operations, the ICGN supports regulatory efforts to enable a more efficient approach to fundraising, albeit that its preference would be for capital raisings to be offered firstly to existing shareholders on a pre-emptive basis to minimise dilution to shareholdings.
As emphasised by the ICGN, ensuring the financial stability of companies is key. It should be remembered, however, that this is only part of the picture and entities should be looking to achieve good corporate governance by ensuring engagement and transparency with all stakeholders across their areas of operation at this time.