We’ve seen a distinct increase in client interest in Governance over the last couple of months – probably as a result of the increased market volatility and risk. Looking at the pick up from a high level, we’re seeing four topic areas being requested and expanded – and they are requested by pension funds, by hedge funds trying to comply with their investor’s requirements and by companies wanting to remain on top of the investment communities requirements for their industry. The four areas are:
Corporate Governance: executive compensation, shareholder rights, board independence, proxy fights, and anti-takeover measures / by-laws changes.
Market Regulation: rule proposals and disclosures from the SEC, FASB, FINRA, NASDAQ, Department of the Treasury (US), and Internal Market and Services Commission (EU).
Regulatory Comment: from pensions, trade groups, financial firms, subject corporations, large investors, hedge funds and university endowments.
Environmental and Social Responsibility (ESR): United Nations Principles for Responsible Investment (UNPRI), country- and market-level environmental, social and governance oversight standards, and ethical divestiture risks.
All four are areas where we build out many topics (precision filters to serve up only the most relevant documents), research sources and continuously enrich the subject matter we pick up as the categories change in public opinion.
In addition, with the dramatic changes and exits at the top of the US banks, and the presidential candidates apparent outrage at the “excesses of executive compensation”, there is a great deal of focus on this area. And since I chair one compensation committee (RMBS) and sit on another (JDSU) it’s an area I personally pay a lot of attention to. The pundits are of course piling on – Gerald McEntee ‘s “Fundamentally Wrong” and RiskMetrics Group’s post have views from senators, lawyers, and governance advocates. My favorite callout is from an un-named Washington attorney calling the bailout terms “good governance coming through the federal backdoor.”
We’ve already see prior scandals like Enron and WorldCom leading to Sarbanes-Oxley and its ramifications for company governance. It seems unlikely this time around, with much broader repercussions, that today’s events won’t drive an ever more aggressive regulatory agenda from governments and shareholders, whomever gets elected.