Consultant Russell Reynolds Associates opens this report on 2020 corporate governance trends by observing that, “[f]or the first time, in 2020, we see the focus on the ‘E’ and the ‘S’ of environment, social and governance (ESG) as the leading trend globally, including in the United States, where it traditionally has not received as much attention by boards.” That conclusion—that sustainability has now ascended to the forefront of corporate governance trends—is reinforced by this year’s annual letter to CEOs from BlackRock CEO, Laurence Fink, announcing initiatives to put “sustainability at the center of [BlackRock’s] investment approach,” as well as the Business Roundtable’s new Statement on the Purpose of a Corporation, which outlined a “modern standard for corporate responsibility” that makes a commitment to all stakeholders. (See this PubCo post and this PubCo post.) For its report, RRA interviewed over 40 governance professionals, including institutional and activist investors, pension fund managers and proxy advisors to “identify the corporate governance trends that will impact boards and directors in 2020.” Those trends are summarized below.
As a general matter, SEC rules do not mandate companies to disclose details about the composition or location of their workforces; Reg S-K requires disclosure of only the number of employees, but no information about them. And the vast majority of companies provide little detail voluntarily. But now, as this article in the WSJ reports, companies are beginning to disclose more information about their workforces overseas, and the impetus for that disclosure is the new pay-ratio rule—all at a time when issues of overseas versus domestic employment are especially fraught.
For 2018, BlackRock has identified human capital management as one of its engagement priorities, echoing the exhortation from BlackRock CEO Laurence Fink in his 2018 annual letter to public companies: with governments seeming to fall short, it is up to the private sector to “respond to broader societal challenges”; companies must look to benefit their broader communities and all of their stakeholders, including employees, and that involves investment in efforts to create a diverse workforce, to develop retraining programs for employees in an increasingly automated world and to help prepare workers for retirement. (See this PubCo post.) With that mission in mind, in this post on The Harvard Law School Forum on Corporate Governance and Financial Regulation, Michelle Edkins, Managing Director and Global Head of Investment Stewardship at BlackRock, discusses Blackrock’s approach to engagement with companies on the topic of HCM. While, as an investor concern, HCM may not have the high profile of board diversity, climate change or executive comp, it may well be on its way.
Notwithstanding the deregulatory emphasis of the current administration, two campaigns are currently being waged to convince the SEC to adopt new regulations mandating more disclosure—one related to human capital management and the other related to a frequent target, corporate political spending. Are these just pipe dreams? Is it time for a reality check? Or might there be some basis for believing that this SEC might act on these requests?
by Cydney Posner Asset management firm BlackRock (reportedly the largest, with $5.1 trillion under management) has identified its “Investment Stewardship” priorities for 2017-2018, intended to help companies prepare for engaging with BlackRock. Among the hot topics are governance (including board composition and diversity), corporate strategy for long-term value creation in […]