Shareholders Call for improved corporate governance

The International Corporate Governance Network is today delighted to be launching its revised Global Corporate Governance Principles. These build on the lessons learned by the ICGN's members through the years since the last version of the Principles were published in 2005, and particularly the lessons learned in the financial crisis.

The revised Principles include a number of significant steps forward:

- The central development is a shift from a focus principally on structures to a focus more on culture and behaviours. This is seen most clearly in the board segment: before any discussion about structures and independence, the Principles highlight the need for appropriate board behaviours, and outline what this means in practice. This is entirely new in any governance code but is vital because the behaviours are what the structures are aiming to promote - the structures are not ends in themselves. "The behaviours are what will help boards make better decisions and so create most value," said Christianna Wood, Chairman of ICGN.

- The revised Principles include two entirely new sections, responding to the financial crisis. One is on risk management and how ICGN members expect companies to address risk and report publicly on it. The other is on corporate culture, which is a crucial way for companies to create and preserve value and to which the ICGN expects boards to pay close attention. As part of this focus on culture and behaviours, the Principles call on boards and remuneration committees to have some oversight of pay throughout the organisation. "Only by carrying out this oversight effectively will boards assure themselves and their investors that pay structures align the interests of their staff with those of their shareholders by promoting the right culture and behaviour," said Paul Lee, Chairman of ICGN Global Corporate Governance Principles Committee:

- There is a greater emphasis on the responsibilities of shareholders. Reflecting the ICGN's own response to the crisis, which acknowledged investors' failings as a contributory factor, the revised Principles have a much more developed segment on shareholder responsibilities. "These are a necessary adjunct to better corporate behaviour and value creation, and an integral part of the overall corporate governance process," said Christianna Wood, Chairman of ICGN.

The aim of these Principles is to assert standards of corporate governance to which ICGN believes all companies should aspire. By seeking to live up to high quality corporate governance standards, companies will be better able to make the decisions which will protect and enhance value for their long-term shareholders. Boards with high standards of corporate governance will be better able to make robust strategic decisions, to challenge and promote the effectiveness of management's operational oversight of the business and to oversee the approach to risk management. This process enhances value creation and investor returns over time.

The ICGN strongly believes that dialogue between shareholders on the one hand and senior executives and board members (both executive and non-executive) on the other is a necessary part of effective corporate governance and we will continue to encourage steps towards more effective dialogue, particularly in those markets when it is not well developed. Such dialogue will start from a more productive base where companies make public disclosures which are substantive and company-specific rather than boilerplate.

The revised Principles are the ICGN's overarching set of Principles. Under them sit a variety of other best practice guidelines; these are cross-referenced within the document (and are highlighted in the notes to editors below).

The Principles are intended to be of general application around the world, irrespective of legislative background or listing rules. As global guidelines, they need to be read with an understanding that local rules and structures may lead to different approaches to these concepts. The ICGN will also seek change to legislation, regulation or guidance in particular markets where we believe that this will be helpful to generating corporate governance improvements and particularly where such change will facilitate dialogue and accountability.

The ICGN Global Corporate Governance Principles: Revised (2009) has been developed by the ICGN Global Corporate Governance Principles Committee in consultation with ICGN members. The first draft was published on 5th June 2009 and a consultation paper on the subject was sent to ICGN members for comment. A wide range of responses were received and contributed toward the final draft.

The publication will be launched at the ICGN Mid-year Meeting the 18th of November at the JW Marriott, Washington D.C., at the ICGN conference entitled 'A New Era for Shareholder and Board Engagement’. For more information about the conference and to register, visit the ICGN website at www.icgn.org

The ICGN is a not-for-profit body founded in 1995, that has evolved into a global membership organisation of more than 450 leaders in corporate governance. ICGN members are based in over 45 countries and support the ICGN mission to exchange information and raise standards of corporate governance internationally. ICGN members are largely institutional investors who collectively represent funds under management in excess of US$9.5 trillion. The breadth and expertise of ICGN members from investment, business, the professions and policy-making extends across capital markets enabling the ICGN to actively engage cross- border to positively impact the corporate governance reform agenda, particularly in the midst of this global financial crisis.